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(R)
DISCIPLINED SMALL AND MID CAP EQUITY FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2007
(Prospectus also enclosed)
RIVERSOURCE DISCIPLINED SMALL AND
MID CAP EQUITY FUND SEEKS TO
PROVIDE SHAREHOLDERS WITH
LONG-TERM CAPITAL GROWTH.
This annual report includes a prospectus that
describes in detail the Fund's objective,
investment strategy, risks, sales charges, fees
and other matters of interest. Please read the
prospectus carefully before you invest or send
money.
TABLE OF CONTENTS
<Table>
Fund Snapshot....................... 3
Performance Summary................. 5
Questions & Answers
with Portfolio Management........ 7
The Fund's Long-term Performance ... 12
Fund Expenses Example............... 14
Investments in Securities........... 16
Financial Statements................ 24
Notes to Financial Statements....... 28
Report of Independent Registered
Public Accounting Firm........... 46
Federal Income Tax Information...... 47
Board Members and Officers.......... 49
Approval of Investment Management
Services Agreement............... 53
Proxy Voting........................ 55
Change in Independent Registered
Public Accounting Firm........... 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.
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2 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2007
FUND OBJECTIVE
RiverSource Disciplined Small and Mid Cap Equity Fund seeks to provide
shareholders with long-term capital growth.
SECTOR BREAKDOWN*
Percentage of portfolio assets
(PIE CHART)
<Table>
CONSUMER DISCRETIONARY 20.0%
FINANCIALS 14.9%
INDUSTRIALS 14.6%
INFORMATION TECHNOLOGY 13.1%
MATERIALS 10.4%
ENERGY 9.3%
OTHER(1) 17.7%
</Table>
* Sectors can be comprised of several industries. Please refer to the section
entitled "Investments in Securities" for a complete listing. No single
industry exceeds 25% of portfolio assets.
(1) Includes Health Care 8.1%, Consumer Staples 4.3%, Utilities 1.9%,
Telecommunication Services 1.8% and Cash & Cash Equivalents 1.6%.
TOP TEN HOLDINGS
Percentage of portfolio assets
<Table>
First American 0.9%
PMI Group 0.9%
Fidelity Natl Financial Cl A 0.9%
Avnet 0.9%
Goodyear Tire & Rubber 0.8%
Ashland 0.8%
Arrow Electronics 0.8%
Western Digital 0.8%
Commercial Metals 0.8%
Intuitive Surgical 0.8%
</Table>
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
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 -- 2007 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2007
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 generally
invests.
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 serves 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.
PORTFOLIO MANAGERS
<Table>
<Caption>
YEARS IN INDUSTRY
Dimitris Bertsimas, Ph.D. 14
Gina Mourtzinou, Ph.D. 11
Steve Kokkotos, Ph.D. 9
</Table>
FUND FACTS
<Table>
<Caption>
TICKER SYMBOL INCEPTION DATE
Class A -- 05/18/06
Class B -- 05/18/06
Class C -- 05/18/06
Class I RDSIX 05/18/06
Class R4(1) -- 05/18/06
Class W RSEWX 12/01/06
(1) Effective Dec. 11, 2006, Class Y was renamed Class
R4.
Total net assets $115.8 million
Number of holdings 400
</Table>
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4 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the year ended July 31, 2007
(BAR CHART)
<Table>
RiverSource Disciplined Small and Mid Cap Equity
Fund Class A (excluding sales charge) +7.12%
Russell 2500 Index (unmanaged) +15.55%
Lipper Mid-Cap Core Funds Index +18.28%
</Table>
(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 bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
<Table>
<Caption>
TOTAL NET EXPENSES(A)
Class A 1.67% 1.32%
Class B 2.12% 2.08%
Class C 2.16% 2.08%
Class I 0.96% 0.92%
Class R4(b) 1.74% 1.19%
Class W(c) 1.60% 1.37%
</Table>
(a) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until July 31, 2008,
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 0.04%), will not exceed 1.36% for Class A, 2.12% for
Class B, 2.12% for Class C, 0.96% for Class I, 1.23% for Class R4 and 1.41%
for Class W.
(b) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(c) Inception date for Class W was Dec. 1, 2006.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 5
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
AT JULY 31, 2007
SINCE
WITHOUT SALES CHARGE 1 YEAR INCEPTION
Class A (inception 5/18/06) +7.12% +0.94%
Class B (inception 5/18/06) +6.43% +0.21%
Class C (inception 5/18/06) +6.37% +0.16%
Class I (inception 5/18/06) +7.48% +1.23%
Class R4* (inception 5/18/06) +7.30% +1.08%
Class W (inception 12/1/06) N/A -2.06%**
WITH SALES CHARGE
Class A (inception 5/18/06) +0.96% -3.90%
Class B (inception 5/18/06) +1.43% -3.12%
Class C (inception 5/18/06) +5.37% +0.16%
</Table>
<Table>
<Caption>
AT JUNE 30, 2007
SINCE
WITHOUT SALES CHARGE 1 YEAR INCEPTION
Class A (inception 5/18/06) +10.94% +9.11%
Class B (inception 5/18/06) +10.17% +8.33%
Class C (inception 5/18/06) +10.11% +8.28%
Class I (inception 5/18/06) +11.41% +9.52%
Class R4* (inception 5/18/06) +11.12% +9.27%
Class W (inception 12/1/06) N/A +6.87%**
WITH SALES CHARGE
Class A (inception 5/18/06) +4.56% +3.49%
Class B (inception 5/18/06) +5.17% +4.78%
Class C (inception 5/18/06) +9.11% +8.28%
</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.
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
** Not annualized.
- --------------------------------------------------------------------------------
6 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, portfolio managers Dimitris Bertsimas, Gina Mourtzinou and Steve Kokkotos
discuss RiverSource Disciplined Small and Mid Cap Equity Fund's positioning and
results for the 12-month period ended July 31, 2007.
At July 31, 2007, approximately 34% 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 33.
Q: How did RiverSource Disciplined Small and Mid Cap Equity Fund perform for the
annual period?
A: RiverSource Disciplined Small and Mid Cap Equity Fund's Class A shares
(excluding sales charge) returned 7.12% for the 12-month period ended July
31, 2007. The Fund underperformed its benchmark, the Russell 2500(TM) Index
(Russell Index), which returned 15.55%, as well as the Lipper Mid-Cap Core
Funds Index, representing the Fund's peer group, which returned 18.28%, for
the same period.
DURING THE REPORTING PERIOD, ALL THREE QUANTITATIVE INVESTMENT MODELS
UNDERPERFORMED THE RUSSELL INDEX.
Q: What factors most significantly affected the Fund's performance?
A: The Fund's underperformance resulted from the three quantitative investment
models -- momentum, value and quality-adjusted value -- we employ in
selecting stocks for the Fund's portfolio. The momentum model singles out
groups of companies that appear to be having improving prospects based on the
pattern of stock returns observed over history. The value model selects
undervalued stocks based on proprietary estimates of future corporate
earnings. The quality-adjusted value model selects undervalued securities by
adjusting the valuations of stocks to take into account each stock's
historical earnings
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 7
QUESTIONS & ANSWERS
stability and debt load. Under the Fund's investment process, the three
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 reporting period, all three quantitative investment models
underperformed the Russell Index. The quality-adjusted value model performed
worst, followed by value and then momentum. While the Fund may experience
underperformance in the short term, our research has indicated that the style
diversification provided by the three very different quantitative models is a
significant investment advantage, which may lead to long-term outperformance.
The Fund's greater-than-Russell Index positions in energy and materials and
its lesser-than-Russell Index allocation to utilities contributed most
positively to its results relative to the Russell Index for the annual
period. To a more moderate degree, the Fund's significant exposure to the
consumer discretionary and consumer staples sectors and its modest position
in health care also helped. Moving from a sizable exposure to financials to a
modest position in the sector over the period proved prudent as well. From a
sector allocation perspective, the only detractors were the Fund's modest
exposure to the strongly-performing information technology and industrials
sectors.
Because of our investment process, most of the Fund's underperformance was
the result of stock selection. In the telecommunication services and consumer
staples sectors, stock selection helped performance. However, these positives
were not enough to offset our selections within financials, consumer
discretionary, industrials and health care, which detracted from Fund
performance. Among individual holdings, the stocks that detracted most from
the Fund's results were in the financials sectors. These included American
Home Mtge Investment (selected by the value and quality-adjusted value
models), W Holding (value and quality-adjusted value models), Radian Group
(value and quality-adjusted value models), PMI Group (quality-adjusted value
and value models) and People's United Financial (momentum model).
On the positive side, stocks that contributed favorably to the Fund's return
included financial commercial services and supply company Deluxe (selected by
the value model), materials companies CF Industries Holdings (value and
quality-adjusted value models) and Quanex (quality-adjusted value and value
- --------------------------------------------------------------------------------
8 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
QUESTIONS & ANSWERS
models) and food and staples retailer Supervalu (quality-adjusted value and
value models).
At the end of July, the Fund's largest individual stock holdings included
several financial companies, including PMI Group, First American (selected by
quality-adjusted value and value models), Fidelity National Financial
(quality-adjusted value and value models) and Radian Group. Another top
holding at the end of the period was information technology company Avnet
(all three models).
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 to reduce the expected risk of the portfolio and to avoid
large deviations from the Index.
Q: What changes did you make to the Fund's portfolio during the period?
A: Based on an extensive look we took at our quantitative models, in March 2007,
we expanded and improved the valuation measures we use in our value model.
Also, because diversification is an effective element of risk management, we
increased the number of holdings in the portfolio over the annual period from
310 to 400. Finally, as a result of quantitative models-driven stock
selection during the period, the portfolio's sector allocations changed
somewhat. For example, as indicated, the Fund's exposure to financials
relative to the Russell Index decreased. Conversely, the Fund's relative
position in energy increased. Overall portfolio turnover was 84% for the 12
months.
WE BELIEVE OUR USE OF MULTIPLE INVESTMENT DISCIPLINES SERVES THE FUND WELL
IN ALL INVESTMENT ENVIRONMENTS OVER THE LONG TERM, AND THE DIVERSIFIED
PORTFOLIO MAY BE WELL POSITIONED FOR ANY POTENTIAL MARKET CONDITIONS.
Q: How do you intend to manage the Fund in the coming months?
A: 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 any potential market conditions. Whether there is a
surge in
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 9
QUESTIONS & ANSWERS
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 equally convinced of the merit of our multifaceted,
disciplined approach to managing risk in the portfolio. We believe this
combination of style diversification and rigorous risk control will allow us
to maintain the high quality of the Fund's portfolio in whatever market
conditions lie ahead.
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 -- 2007 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 7/31/07)* 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, Russell 3000 Index and
Lipper peer group data is from June 1, 2006.
COMPARATIVE RESULTS
<Table>
<Caption>
SINCE
Results at July 31, 2007 1 YEAR INCEPTION(3)
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND (INCLUDES
SALES CHARGE)
Class A Cumulative value of $10,000 $10,096 $9,533
Average annual total return +0.96% -3.90%
RUSSELL 2500 INDEX(1)
Cumulative value of $10,000 $11,555 $11,197
Average annual total return +15.55% +10.18%
LIPPER MID-CAP CORE FUNDS INDEX(2)
Cumulative value of $10,000 $11,828 $11,564
Average annual total return +18.28% +13.27%
</Table>
Results for other share classes can be found on page 6.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
(VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED AND MID
CAP EQUITY FUND LINE GRAPH)
<Table>
<Caption>
RIVERSOURCE DISCIPLINED
SMALL AND MID CAP EQUITY
FUND CLASS A (INCLUDES SALES RUSSELL 2500 INDEX(1) LIPPER MID-CAP CORE
CHARGE) ($9,533) ($11,197) FUNDS INDEX(2) ($11,564)
---------------------------- --------------------- ------------------------
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
</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, Russell 3000 Index and
Lipper peer group data is from June 1, 2006.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 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 acquired funds expense ratio as of the 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, 2007.
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 -- 2007 ANNUAL REPORT
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class A
Actual(b) $1,000 $ 935.40 $ 6.29(c) 1.31%
Hypothetical
(5% return before
expenses) $1,000 $1,018.30 $ 6.56(c) 1.31%
Class B
Actual(b) $1,000 $ 932.10 $ 9.96(c) 2.08%
Hypothetical
(5% return before
expenses) $1,000 $1,014.48 $10.39(c) 2.08%
Class C
Actual(b) $1,000 $ 932.10 $ 9.96(c) 2.08%
Hypothetical
(5% return before
expenses) $1,000 $1,014.48 $10.39(c) 2.08%
Class I
Actual(b) $1,000 $ 936.40 $ 4.61(c) .96%
Hypothetical
(5% return before
expenses) $1,000 $1,020.03 $ 4.81(c) .96%
Class R4*
Actual(b) $1,000 $ 936.30 $ 5.47(c) 1.14%
Hypothetical
(5% return before
expenses) $1,000 $1,019.14 $ 5.71(c) 1.14%
Class W
Actual(b) $1,000 $ 935.30 $ 6.33(c) 1.32%
Hypothetical
(5% return before
expenses) $1,000 $1,018.25 $ 6.61(c) 1.32%
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(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 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2007: -6.46%
for Class A, -6.79% for Class B, -6.79% for Class C, -6.36% for Class I,
-6.37% for Class R4 and -6.47% 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, 2008,
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, 2.12% for Class B, 2.12% for Class C, 0.96% for Class I, 1.23% for
Class R4 and 1.41% for Class W. Any amounts waived will not be reimbursed
by the Fund. This change was effective Aug. 1, 2007. If this change had
been in place for the entire six month period ended July 31, 2007, the
actual expenses paid would have been $9.92 for Class B, $9.92 for Class C,
$4.37 for Class I, $5.67 for Class R4 and $6.57 for Class W; the
hypothetical expenses paid would have been $10.34 for Class B, $10.34 for
Class C, $4.56 for Class I, $5.91 for Class R4 and $6.85 for Class W; the
actual and hypothetical expenses paid for Class A would have been the same
as those expenses in the table above.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 15
INVESTMENTS IN SECURITIES
JULY 31, 2007
(Percentages represent value of investments compared to net assets)
<Table>
<Caption>
COMMON STOCKS (96.3%)
ISSUER SHARES VALUE(A)
AEROSPACE & DEFENSE (0.7%)
Armor Holdings 5,210(b) $458,376
BE Aerospace 5,157(b) 209,168
Innovative Solutions & Support 8,009(b) 142,800
---------------
Total 810,344
- -----------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.1%)
Park-Ohio Holdings 6,076(b) 150,928
- -----------------------------------------------------------------------------------
AIRLINES (1.4%)
Alaska Air Group 11,296(b) 263,536
Continental Airlines Cl B 10,307(b) 324,774
Copa Holdings Cl A 1,965(c) 107,898
Midwest Air Group 14,919(b) 207,971
Pinnacle Airlines 10,347(b,d) 166,794
UAL 4,443(b) 196,114
US Airways Group 12,841(b) 398,198
---------------
Total 1,665,285
- -----------------------------------------------------------------------------------
AUTO COMPONENTS (3.9%)
Aftermarket Technology 5,250(b) 159,338
American Axle & Mfg Holdings 16,804 406,657
Amerigon 10,957(b) 176,079
ArvinMeritor 13,543 268,558
Autoliv 1,997(c) 111,692
BorgWarner 5,875 507,894
Cooper Tire & Rubber 15,387 353,747
Goodyear Tire & Rubber 33,198(b) 953,446
Hayes Lemmerz Intl 41,436(b) 198,893
Modine Mfg 7,571 193,818
Spartan Motors 15,601 190,488
Standard Motor Products 12,908 160,705
Tenneco 3,143(b) 110,948
TRW Automotive Holdings 20,388(b) 670,153
Visteon 15,289(b) 98,155
---------------
Total 4,560,571
- -----------------------------------------------------------------------------------
BIOTECHNOLOGY (0.9%)
ArQule 28,390(b) 161,255
CytRx 52,679(b) 159,617
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
BIOTECHNOLOGY (CONT.)
GTx 10,729(b) $164,905
Immunomedics 55,560(b) 160,013
Incyte 24,435(b) 129,994
Seattle Genetics 25,360(b) 241,681
---------------
Total 1,017,465
- -----------------------------------------------------------------------------------
BUILDING PRODUCTS (1.3%)
Apogee Enterprises 5,744 147,965
Builders FirstSource 6,596(b) 96,697
Lennox Intl 9,372 358,948
Owens Corning 16,253(b) 494,580
Universal Forest Products 2,365 93,559
USG 8,102(b) 336,314
---------------
Total 1,528,063
- -----------------------------------------------------------------------------------
CAPITAL MARKETS (1.6%)
Allied Capital 3,725 105,492
American Capital Strategies 8,546 324,492
Eaton Vance 10,894 456,022
Epoch Holding 11,639(b) 183,780
Knight Capital Group Cl A 23,225(b) 328,402
Raymond James Financial 7,599 233,061
SWS Group 9,811 173,164
---------------
Total 1,804,413
- -----------------------------------------------------------------------------------
CHEMICALS (4.0%)
Albemarle 4,216 169,610
Ashland 14,950 912,846
Celanese Series A 11,638 436,425
CF Inds Holdings 6,239 358,618
Eastman Chemical 7,127 490,480
Flotek Inds 7,631(b) 226,946
Georgia Gulf 5,521 89,385
Huntsman 4,274 108,816
Innospec 9,454(c) 260,269
Landec 7,706(b) 88,696
Olin 17,507 365,371
PolyOne 16,276(b) 122,396
Terra Inds 14,219(b) 348,792
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
CHEMICALS (CONT.)
Westlake Chemical 9,437 $235,736
WR Grace & Co 19,880(b) 410,522
---------------
Total 4,624,908
- -----------------------------------------------------------------------------------
COMMERCIAL BANKS (1.3%)
First BanCorp 19,221(c) 176,833
First Horizon Natl 3,620 114,826
Trustmark 13,476 337,304
UMB Financial 14,385 537,137
W Holding 134,945(c) 298,228
---------------
Total 1,464,328
- -----------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (1.3%)
ABM Inds 8,805 221,534
Deluxe 11,656 440,131
Huron Consulting Group 2,225(b) 151,144
Labor Ready 3,843(b) 90,541
M&F Worldwide 7,139(b) 416,489
TeleTech Holdings 8,163(b) 239,421
---------------
Total 1,559,260
- -----------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (1.6%)
ADC Telecommunications 9,510(b) 177,742
Blue Coat Systems 5,350(b) 260,706
C-COR 10,010(b) 134,635
CommScope 6,319(b) 343,943
Dycom Inds 6,131(b) 171,361
Loral Space & Communications 3,875(b) 160,386
Network Equipment Technologies 14,328(b) 135,256
Polycom 5,506(b) 170,521
Sonus Networks 28,257(b) 193,278
Tellabs 13,735(b) 155,892
---------------
Total 1,903,720
- -----------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (1.8%)
Imation 13,025 407,422
Immersion 8,418(b) 131,237
Lexmark Intl Cl A 4,591(b,d) 181,528
Novatel Wireless 8,667(b) 186,601
Palm 8,323(b) 124,179
Stratasys 4,453(b) 195,977
Western Digital 41,979(b) 896,251
---------------
Total 2,123,195
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
CONSTRUCTION & ENGINEERING (1.0%)
Infrasource Services 8,951(b) $309,884
Michael Baker 3,765(b) 135,728
Perini 4,007(b) 246,070
Quanta Services 9,052(b) 257,348
Shaw Group 4,117(b) 219,107
---------------
Total 1,168,137
- -----------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.4%)
Martin Marietta Materials 3,692 505,804
- -----------------------------------------------------------------------------------
CONSUMER FINANCE (0.4%)
First Marblehead 13,973 460,550
- -----------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.8%)
Crown Holdings 5,993(b) 147,188
Owens-Illinois 11,228(b) 448,896
Rock-Tenn Cl A 4,781 146,872
Silgan Holdings 3,203 165,339
---------------
Total 908,295
- -----------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.5%)
Career Education 8,196(b) 243,257
INVESTools 14,565(b) 144,485
Service Corp Intl 16,239 196,817
---------------
Total 584,559
- -----------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.1%)
CenturyTel 4,155 190,590
Cogent Communications Group 9,062(b) 259,898
Golden Telecom 6,470(c) 417,638
Premiere Global Services 15,464(b) 180,001
SureWest Communications 6,324 170,685
---------------
Total 1,218,812
- -----------------------------------------------------------------------------------
ELECTRIC UTILITIES (0.5%)
Central Vermont Public Service 4,554 154,836
ITC Holdings 2,849 119,800
Reliant Energy 10,718(b) 275,239
---------------
Total 549,875
- -----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.5%)
AZZ 7,678(b) 272,569
Baldor Electric 3,847 175,577
Belden 2,563 140,401
Encore Wire 3,198 97,699
General Cable 5,359(b) 426,041
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 17
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ELECTRICAL EQUIPMENT (CONT.)
GrafTech Intl 11,610(b) $179,839
II-VI 6,194(b) 153,797
SunPower Cl A 2,204(b) 155,448
Woodward Governor 2,392 138,138
---------------
Total 1,739,509
- -----------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (4.4%)
Agilysys 9,973 191,581
Arrow Electronics 23,569(b) 900,807
Avnet 25,899(b) 981,053
Benchmark Electronics 21,164(b) 469,841
FARO Technologies 6,375(b) 237,341
Ingram Micro Cl A 35,113(b) 704,016
Insight Enterprises 10,848(b) 244,731
Mettler Toledo Intl 1,976(b,c) 188,036
OSI Systems 4,368(b) 108,152
PC Connection 8,545(b) 114,845
Plexus 5,898(b) 143,027
Solectron 142,419(b) 535,495
SYNNEX 12,111(b) 246,096
---------------
Total 5,065,021
- -----------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (3.2%)
Dawson Geophysical 2,355(b) 128,607
Dresser-Rand Group 10,527(b) 390,552
Global Inds 7,229(b) 187,231
Grey Wolf 30,112(b) 223,130
GulfMark Offshore 2,088(b) 98,094
Helmerich & Payne 9,874 319,621
Matrix Service 11,312(b) 261,194
Oil States Intl 3,933(b) 172,029
Parker Drilling 16,887(b) 159,076
Patterson-UTI Energy 20,243 463,565
Pioneer Drilling 8,358(b) 105,144
SEACOR Holdings 2,219(b) 193,541
Tidewater 5,868 401,489
Unit 9,305(b) 512,332
Willbros Group 4,454(b,c) 140,390
---------------
Total 3,755,995
- -----------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.6%)
BJ's Wholesale Club 6,052(b) 205,526
Great Atlantic & Pacific Tea 5,721(b) 166,767
Ingles Markets Cl A 4,866 142,525
Nash Finch 8,543 344,027
Rite Aid 58,957(b) 324,853
Ruddick 4,452 123,766
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
FOOD & STAPLES RETAILING (CONT.)
SUPERVALU 10,466 $436,117
Weis Markets 3,545 139,319
---------------
Total 1,882,900
- -----------------------------------------------------------------------------------
FOOD PRODUCTS (1.5%)
Cal-Maine Foods 7,002 127,156
Fresh Del Monte Produce 4,086(c) 104,806
Pilgrim's Pride 5,825 196,186
Sanderson Farms 6,016 239,858
Seaboard 416 832,000
Smithfield Foods 5,983(b) 185,832
---------------
Total 1,685,838
- -----------------------------------------------------------------------------------
GAS UTILITIES (0.6%)
Nicor 10,078 397,173
ONEOK 5,434 275,776
---------------
Total 672,949
- -----------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.7%)
Conceptus 7,944(b) 128,693
Cytyc 16,170(b) 680,757
Intuitive Surgical 4,001(b) 850,652
Regeneration Technologies 9,138(b) 97,959
Sonic Innovations 27,111(b) 228,275
---------------
Total 1,986,336
- -----------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (3.4%)
American Dental Partners 4,037(b) 103,630
AMERIGROUP 21,574(b) 597,168
Apria Healthcare Group 6,854(b) 179,712
Chemed 5,973 377,971
CorVel 6,283(b) 167,128
CryoLife 18,785(b) 179,397
Emeritus 9,690(b) 237,405
HMS Holdings 7,331(b) 139,509
Kindred Healthcare 15,719(b) 420,955
LHC Group 6,038(b) 146,240
Magellan Health Services 3,499(b) 146,328
Molina Healthcare 16,427(b) 515,644
Sunrise Senior Living 4,198(b) 166,912
WellCare Health Plans 5,306(b) 537,286
---------------
Total 3,915,285
- -----------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY (0.2%)
Emageon 23,357(b) 214,651
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
HOTELS, RESTAURANTS & LEISURE (0.5%)
Ameristar Casinos 4,332 $137,238
Premier Exhibitions 13,453(b) 222,781
Vail Resorts 3,840(b) 205,632
---------------
Total 565,651
- -----------------------------------------------------------------------------------
HOUSEHOLD DURABLES (4.1%)
American Greetings Cl A 7,207 178,229
Avatar Holdings 3,573(b) 231,995
Beazer Homes USA 9,284 129,883
Brookfield Homes 5,323 112,848
Champion Enterprises 9,855(b) 115,501
Hooker Furniture 6,741 136,505
Hovnanian Enterprises Cl A 11,535(b) 152,723
KB HOME 18,813 598,442
Libbey 7,193 143,500
MDC Holdings 10,245 471,270
Meritage Homes 6,650(b) 129,675
NVR 1,287(b) 744,503
Ryland Group 9,983 331,935
Standard-Pacific 13,759(d) 203,771
Tempur-Pedic Intl 6,206 193,317
Toll Brothers 31,702(b) 695,225
Tupperware Brands 6,338 164,851
---------------
Total 4,734,173
- -----------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.3%)
Energizer Holdings 3,135(b) 316,322
- -----------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.2%)
Dynegy Cl A 20,867(b) 185,925
- -----------------------------------------------------------------------------------
INSURANCE (7.6%)
American Financial Group 15,981 448,906
Arch Capital Group 9,623(b,c) 670,338
Aspen Insurance Holdings 20,926(c) 511,641
Axis Capital Holdings 16,855(c) 621,107
Commerce Group 8,910 255,984
Conseco 29,984(b) 545,409
Fidelity Natl Financial Cl A 48,429 1,011,682
First American 22,940 1,061,894
Hanover Insurance Group 4,833 212,120
LandAmerica Financial Group 4,604(d) 352,620
Natl Western Life Insurance Cl A 812 191,405
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
INSURANCE (CONT.)
Odyssey Re Holdings 12,791 $450,243
Ohio Casualty 10,906 473,429
Old Republic Intl 28,750 527,850
PartnerRe 8,003(c) 568,453
Reinsurance Group of America 10,887 580,386
Transatlantic Holdings 4,972 363,702
---------------
Total 8,847,169
- -----------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.6%)
1-800-FLOWERS.com 28,521(b) 265,530
Blue Nile 2,401(b) 181,540
Systemax 11,693 243,799
---------------
Total 690,869
- -----------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.2%)
Chordiant Software 12,282(b) 175,633
CMGI 66,663(b) 105,328
EarthLink 21,937(b) 152,462
Greenfield Online 8,927(b) 144,974
Interwoven 13,983(b) 193,665
On2 Technologies 76,615(b) 134,842
RealNetworks 46,107(b) 328,282
ValueClick 6,927(b) 148,099
---------------
Total 1,383,285
- -----------------------------------------------------------------------------------
IT SERVICES (1.3%)
Gartner 8,927(b) 186,842
MAXIMUS 2,860 119,519
SAIC 39,221(b) 657,344
Syntel 4,622 166,438
Total System Services 6,681 187,937
Unisys 28,462(b) 230,258
---------------
Total 1,548,338
- -----------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (1.1%)
Brunswick 20,891 584,112
Hasbro 6,273 175,769
JAKKS Pacific 10,213(b) 242,150
Polaris Inds 3,416(d) 168,614
Sturm, Ruger & Co 6,701(b) 130,871
---------------
Total 1,301,516
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 19
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
LIFE SCIENCES TOOLS & SERVICES (0.6%)
AMAG Pharmaceuticals 2,572(b) $138,091
eResearch Technology 10,836(b) 104,026
PAREXEL Intl 11,542(b) 466,642
---------------
Total 708,759
- -----------------------------------------------------------------------------------
MACHINERY (3.4%)
AGCO 4,691(b) 180,275
Astec Inds 5,603(b) 292,309
Barnes Group 9,712 303,014
Briggs & Stratton 6,333(d) 179,604
Cascade 3,515 238,282
FreightCar America 3,790 179,153
Gorman-Rupp 4,254 122,047
Hardinge 5,547 182,607
Hurco Companies 4,833(b) 225,121
Manitowoc 4,187 325,204
Middleby 2,406(b) 149,196
Mueller Inds 9,360 345,197
Sun Hydraulics 4,776 141,943
Terex 2,939(b) 253,489
Timken 14,510 484,634
Titan Intl 6,476 191,301
Twin Disc 2,113 113,870
---------------
Total 3,907,246
- -----------------------------------------------------------------------------------
MARINE (0.8%)
Eagle Bulk Shipping 4,579 120,519
Genco Shipping & Trading 6,958 391,944
TBS Intl Cl A 10,238(b,c) 392,832
---------------
Total 905,295
- -----------------------------------------------------------------------------------
MEDIA (1.1%)
Charter Communications Cl A 33,723(b) 136,915
Crown Media Holdings Cl A 25,694(b) 176,775
DG FastChannel 9,611(b) 170,691
Interactive Data 5,852 160,052
LIN TV Cl A 15,954(b) 241,545
Nexstar Broadcasting Group Cl A 20,605(b) 211,201
Sinclair Broadcast Group Cl A 13,308 173,536
---------------
Total 1,270,715
- -----------------------------------------------------------------------------------
METALS & MINING (4.2%)
AK Steel Holding 7,011(b) 280,230
Century Aluminum 2,649(b) 136,529
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
METALS & MINING (CONT.)
Chaparral Steel 6,091 $511,888
Cleveland-Cliffs 10,575 732,529
Commercial Metals 28,507 879,155
Haynes Intl 2,090(b) 187,703
Kaiser Aluminum 1,945 131,307
Metal Management 5,280 221,813
Quanex 9,743 439,020
Reliance Steel & Aluminum 7,427 390,215
RTI Intl Metals 1,890(b) 149,764
Ryerson 10,870 348,818
Schnitzer Steel Inds Cl A 4,948 268,132
Worthington Inds 11,581 239,727
---------------
Total 4,916,830
- -----------------------------------------------------------------------------------
MULTILINE RETAIL (1.0%)
Big Lots 5,727(b) 148,100
Bon-Ton Stores 5,136 131,071
Dillard's Cl A 18,121 541,637
Dollar Tree Stores 4,136(b) 158,243
Saks 10,282 190,320
---------------
Total 1,169,371
- -----------------------------------------------------------------------------------
MULTI-UTILITIES (0.7%)
CenterPoint Energy 21,493 354,205
Integrys Energy Group 8,212 406,412
---------------
Total 760,617
- -----------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (5.9%)
Alon USA Energy 3,183 113,538
Atlas America 2,802 136,065
Cimarex Energy 19,890 752,836
Delek US Holdings 4,507 119,345
Forest Oil 3,766(b) 152,410
Frontier Oil 15,136 586,217
Frontline 8,469(c) 389,913
General Maritime 7,067 183,742
Holly 4,984 335,872
MarkWest Hydrocarbon 2,343 127,108
Overseas Shipholding Group 7,385 573,002
Pogo Producing 12,038 641,144
Ship Finance Intl 14,479(c) 404,688
St. Mary Land & Exploration 4,693 156,230
Stone Energy 5,497(b,d) 178,653
Swift Energy 5,180(b) 221,393
Teekay 6,128(c) 343,597
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
OIL, GAS & CONSUMABLE FUELS (CONT.)
Tesoro 7,184 $357,763
USEC 21,744(b) 365,082
W&T Offshore 7,186 168,296
Western Refining 6,539 362,915
Whiting Petroleum 2,778(b) 114,092
---------------
Total 6,783,901
- -----------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.7%)
Buckeye Technologies 12,169(b) 186,551
Domtar 14,792(b,c) 140,672
Louisiana-Pacific 21,286 394,217
Schweitzer-Mauduit Intl 3,727 85,087
---------------
Total 806,527
- -----------------------------------------------------------------------------------
PERSONAL PRODUCTS (0.6%)
Alberto-Culver 10,053 236,446
American Oriental Bioengineering 17,358(b) 124,978
Chattem 3,361(b) 188,754
Elizabeth Arden 4,305(b) 92,730
---------------
Total 642,908
- -----------------------------------------------------------------------------------
PHARMACEUTICALS (1.2%)
Beijing Med-Pharm 12,061(b) 107,343
Discovery Laboratories 57,786(b) 122,506
Javelin Pharmaceuticals 40,220(b) 178,979
King Pharmaceuticals 24,950(b) 424,399
Par Pharmaceutical Companies 17,411(b) 412,467
XenoPort 2,800(b) 119,532
---------------
Total 1,365,226
- -----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.6%)
Alexander's 455(b) 161,116
American Home Mtge Investment 34,413 35,790
Arbor Realty Trust 18,644 368,219
Digital Realty Trust 12,544 415,834
Nationwide Health Properties 4,799 114,360
RAIT Financial Trust 31,605 327,428
Redwood Trust 14,634 421,458
---------------
Total 1,844,205
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ROAD & RAIL (2.4%)
Arkansas Best 11,748 $423,280
Avis Budget Group 5,196(b) 133,381
Con-way 11,299 558,058
Kansas City Southern 2,831(b) 97,698
Ryder System 7,805 424,358
Werner Enterprises 24,866 483,395
YRC Worldwide 21,070(b) 676,768
---------------
Total 2,796,938
- -----------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%)
Amkor Technology 18,620(b) 230,143
Monolithic Power Systems 14,117(b) 236,036
NetLogic Microsystems 5,821(b) 177,424
OmniVision Technologies 14,082(b) 241,788
Ultra Clean Holdings 10,067(b) 141,643
Varian Semiconductor Equipment Associates 4,365(b) 205,155
---------------
Total 1,232,189
- -----------------------------------------------------------------------------------
SOFTWARE (1.3%)
Ansoft 6,113(b) 154,598
Compuware 17,716(b) 165,290
EPIQ Systems 10,869(b) 185,316
FalconStor Software 13,316(b) 138,353
Nuance Communications 12,137(b) 200,018
SPSS 4,253(b) 174,543
Taleo Cl A 10,391(b) 223,510
VASCO Data Security Intl 11,668(b) 308,853
---------------
Total 1,550,481
- -----------------------------------------------------------------------------------
SPECIALTY RETAIL (4.6%)
Asbury Automotive Group 7,026 155,415
AutoNation 25,672(b) 500,091
Barnes & Noble 14,587 489,394
Blockbuster Cl A 61,392(b) 263,372
Borders Group 11,692 191,281
Cato Cl A 11,296 233,601
Conn's 7,739(b) 196,338
Foot Locker 34,650 643,104
Gander Mountain 25,712(b,d) 264,834
Genesco 3,779(b) 191,028
GUESS? 5,682 269,838
Jos A Bank Clothiers 3,270(b) 112,815
Pacific Sunwear of California 9,776(b) 176,164
RadioShack 13,994 351,669
Rent-A-Center 5,837(b) 113,296
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 21
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
SPECIALTY RETAIL (CONT.)
Sonic Automotive Cl A 8,936 $244,846
Stage Stores 9,845 175,635
Talbots 5,499 126,422
Tiffany & Co 5,358 258,524
Urban Outfitters 8,743(b) 175,385
Zale 7,548(b) 160,244
---------------
Total 5,293,296
- -----------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (2.1%)
Deckers Outdoor 2,762(b) 284,762
G-III Apparel Group 6,608(b) 106,587
Hanesbrands 12,848(b) 398,416
Jones Apparel Group 18,856 470,646
Liz Claiborne 10,419 366,124
Perry Ellis Intl 7,600(b) 228,076
Phillips-Van Heusen 2,366 123,174
Timberland Cl A 13,518(b) 321,323
Warnaco Group 3,959(b) 142,959
---------------
Total 2,442,067
- -----------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (2.1%)
Corus Bankshares 28,181 458,223
Fremont General 31,501 181,761
PMI Group 30,283 1,031,741
Radian Group 23,715 799,433
---------------
Total 2,471,158
- -----------------------------------------------------------------------------------
TOBACCO (0.3%)
Alliance One Intl 28,852(b,d) 249,570
Universal 2,670 147,411
---------------
Total 396,981
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
TRADING COMPANIES & DISTRIBUTORS (0.3%)
Kaman 4,118 $137,912
Rush Enterprises Cl A 5,620(b) 157,079
---------------
Total 294,991
- -----------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.7%)
Centennial Communications 27,464(b) 280,957
Leap Wireless Intl 5,670(b) 501,228
---------------
Total 782,185
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $119,057,273) $111,442,130
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (1.5%)
SHARES VALUE(A)
RiverSource Short-Term Cash Fund 1,759,787(e) $1,759,787
- -----------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,759,787) $1,759,787
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $120,817,060)(f) $113,201,917
===================================================================================
</Table>
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At July 31, 2007, the
value of foreign securities represented 5.1% of net assets.
(d) Partially pledged as initial margin deposit on the following open stock
index futures contracts (see Note 5 to the financial statements):
<Table>
<Caption>
TYPE OF SECURITY CONTRACTS
- ------------------------------------------------------------------------------
PURCHASE CONTRACTS
E-Mini S&P MidCap 400 Index, Sept. 2007 15
Mini Russell 2000 Index, Sept. 2007 30
</Table>
(e) Affiliated Money Market Fund -- See Note 6 to the financial statements.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
NOTES TO INVESTMENTS IN SECURITIES (CONTINUED)
(f) At July 31, 2007, the cost of securities for federal income tax purposes
was $120,860,745 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $ 3,737,185
Unrealized depreciation (11,396,013)
- -------------------------------------------------------------------------------
Net unrealized depreciation $ (7,658,828)
- -------------------------------------------------------------------------------
</Table>
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC (information on the operations of the
Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at riversource.com/funds.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 23
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2007
<Table>
ASSETS
Investments in securities, at value (Note 1)
Unaffiliated issuers (identified cost $119,057,273) $111,442,130
Affiliated money market fund (identified cost $1,759,787)
(Note 6) 1,759,787
- ----------------------------------------------------------------------------
Total investments in securities (identified cost
$120,817,060) 113,201,917
Capital shares receivable 2,552,578
Dividends and accrued interest receivable 58,021
Receivable for investment securities sold 170,688
Variation margin receivable 21,530
- ----------------------------------------------------------------------------
Total assets 116,004,734
- ----------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of cash on demand deposit 48,050
Capital shares payable 110,550
Payable for investment securities purchased 9,024
Accrued investment management services fee 2,235
Accrued distribution fee 560
Accrued transfer agency fee 331
Accrued administrative services fee 192
Other accrued expenses 48,913
- ----------------------------------------------------------------------------
Total liabilities 219,855
- ----------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $115,784,879
============================================================================
</Table>
- --------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JULY 31, 2007
<Table>
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 121,204
Additional paid-in capital 123,355,267
Undistributed net investment income 88,863
Accumulated net realized gain (loss) (Note 8) (76,852)
Unrealized appreciation (depreciation) on investments (Note
5) (7,703,603)
- ----------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $115,784,879
============================================================================
</Table>
<Table>
Net assets applicable to outstanding
shares: Class A $ 18,372,667
Class B $ 1,365,013
Class C $ 183,734
Class I $ 38,785,276
Class R4 $ 15,157
Class W $ 57,063,032
Net asset value per share of outstanding
capital stock: Class A shares(1) 1,924,399 $ 9.55
Class B shares 144,191 $ 9.47
Class C shares 19,407 $ 9.47
Class I shares 4,051,418 $ 9.57
Class R4 shares 1,586 $ 9.56
Class W shares 5,979,419 $ 9.54
- -------------------------------------------------------------------------------------------
</Table>
(1) The maximum offering price per share for Class A $10.13. The offering price
is calculated by dividing the net asset value by 1.0 minus the maximum sales
charge of 5.75%.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 25
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2007
<Table>
INVESTMENT INCOME
Income:
Dividends $ 598,628
Interest 775
Income distributions from affiliated money market fund (Note
6) 108,066
Less foreign taxes withheld (834)
- -----------------------------------------------------------------------------
Total income 706,635
- -----------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 273,481
Distribution fee
Class A 36,017
Class B 7,170
Class C 845
Class W 13,719
Transfer agency fee
Class A 9,970
Class B 715
Class C 80
Class R4 6
Class W 10,976
Service fee -- Class R4 4
Administrative services fees and expenses 24,904
Plan administration services fee -- Class R4 22
Compensation of board members 692
Custodian fees 43,580
Printing and postage 20,814
Registration fees 72,057
Professional fees 27,124
Other 2,005
- -----------------------------------------------------------------------------
Total expenses 544,181
Expenses waived/reimbursed by the Investment Manager and
its affiliates (Note 2) (70,623)
- -----------------------------------------------------------------------------
473,558
Earnings and bank fee credits on cash balances (Note 2) (3,850)
- -----------------------------------------------------------------------------
Total net expenses 469,708
- -----------------------------------------------------------------------------
Investment income (loss) -- net 236,927
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 166,779
Futures contracts (165,054)
- -----------------------------------------------------------------------------
Net realized gain (loss) on investments 1,725
Net change in unrealized appreciation (depreciation) on
investments (6,728,788)
- -----------------------------------------------------------------------------
Net gain (loss) on investments (6,727,063)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $(6,490,136)
=============================================================================
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED PERIOD ENDED
JULY 31, 2007 JULY 31, 2006*
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 236,927 $ 246
Net realized gain (loss) on investments 1,725 (98,983)
Net change in unrealized appreciation (depreciation)
on investments (6,728,788) (444,386)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (6,490,136) (543,123)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (51,227) --
Class B (1,714) --
Class C (180) --
Class I (86,805) --
Class R4 (57) --
Class W (25) N/A
- ------------------------------------------------------------------------------------------
Total distributions (140,008) --
- ------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) $ 9,526,024 $ 394,182
Class B shares 1,559,049 46,663
Class C shares 186,778 --
Class I shares 41,657,381 45,117
Class R4 shares 4,169 1,500
Class W shares 74,596,249 N/A
Reinvestment of distributions at net asset value
Class A shares 12,334 --
Class B shares 1,637 --
Class C shares 133 --
Class I shares 86,753 --
Class R4 shares 12 --
Payments for redemptions
Class A shares (602,001) --
Class B shares (Note 2) (163,893) (17,521)
Class C shares (Note 2) (1,577) --
Class I shares (1,367,934) (1,927)
Class W shares (12,494,015) N/A
- ------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 113,001,099 468,014
- ------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 106,370,955 (75,109)
Net assets at beginning of year (Note 1) 9,413,924 9,489,033**
- ------------------------------------------------------------------------------------------
Net assets at end of year $115,784,879 $9,413,924
==========================================================================================
Undistributed net investment income $ 88,863 $ 11,445
- ------------------------------------------------------------------------------------------
</Table>
* For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
** Initial capital of $10,012,040 was contributed on May 11, 2006. The Fund had
a decrease in net assets resulting from operations of $523,007 during the
period from May 11, 2006 to May 18, 2006 (when shares became publicly
available).
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. 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. On May 11, 2006, Ameriprise Financial, Inc. (Ameriprise
Financial), the parent company of RiverSource Investments, LLC (the Investment
Manager), invested $10,012,040* in the Fund (996,000 shares for Class A, 1,000
shares for Class B, 1,000 shares for Class C, 2,204** shares for Class I and
1,000 shares for Class R4), which represented the initial capital for each class
at $10 per share. Shares of the Fund were first offered to the public on May 18,
2006.
The Fund offers Class A, Class B, Class C, Class I and Class R4 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 have no sales charge and are offered only to
qualifying institutional investors.
Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4,
terminating the shareholder servicing agreement, revising the fee structure
under the transfer agent agreement from account-based to asset-based, and
adopting a plan administration services agreement.
At July 31, 2007, Ameriprise Financial and the affiliated funds-of-funds owned
100% of Class I shares.
Effective Dec. 1, 2006, the Fund offers an additional class of shares, Class W,
through qualifying discretionary accounts. Class W shares are sold without a
front-end sales charge or CDSC.
At July 31, 2007, Ameriprise Financial and the affiliated funds-of-funds owned
approximately 34% of the total outstanding Fund shares.
* Includes $12,040 invested by the RiverSource Retirement Plus Funds.
** Includes 1,204 shares purchased by the RiverSource Retirement Plus Funds.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
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 fees) differ among classes. Income, expenses (other
than class specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by 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
of Directors of the funds 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 equities) 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 will fair value foreign
equity securities pursuant to procedures adopted by the Board of Directors of
the funds, including utilizing a third party pricing service to determine these
fair values. These procedures take into account multiple factors, including
movements in the U.S. securities markets, to determine a good faith estimate
that reasonably reflects the current market conditions as of the close of the
New York Stock Exchange. Swap transactions are valued through an authorized
pricing service, broker, or an internal model. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 29
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. 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, 2007, 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
- --------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
or sale of securities and income and expenses are translated at the exchange
rate on the transaction date. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a component of
such gains or losses. In the statement of operations, net realized gains or
losses from foreign currency transactions, if any, may arise from sales of
foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations. At July 31, 2007, 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.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $19,501
and accumulated net realized loss has been decreased by $19,501.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 31
The tax character of distributions paid for the periods indicated is as follows:
<Table>
<Caption>
YEAR ENDED PERIOD ENDED
JULY 31, 2007 JULY 31, 2006(A)
- ---------------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income.................... $51,227 $--
Long-term capital gain............. -- --
CLASS B
Distributions paid from:
Ordinary income.................... 1,714 --
Long-term capital gain............. -- --
CLASS C
Distributions paid from:
Ordinary income.................... 180 --
Long-term capital gain............. -- --
CLASS I
Distributions paid from:
Ordinary income.................... 86,805 --
Long-term capital gain............. -- --
CLASS R4(B)
Distributions paid from:
Ordinary income.................... 57 --
Long-term capital gain............. -- --
CLASS W(C)
Distributions paid from:
Ordinary income.................... 25 N/A
Long-term capital gain............. -- N/A
</Table>
(a) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
(b) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(c) For the period from Dec. 1, 2006 (inception date) to July 31, 2007.
At July 31, 2007, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income.............................. $ 88,863
Undistributed accumulated long-term gain................... $ --
Accumulated realized loss.................................. $ (121,627)
Unrealized appreciation (depreciation)..................... $(7,658,828)
</Table>
RECENT ACCOUNTING PRONOUNCEMENTS
On Sept. 20, 2006, the Financial Accounting Standards Board (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 framework for measuring fair value, and requires additional disclosures
about fair-value measurements. The application of SFAS 157 is required for
fiscal years
- --------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
beginning after Nov. 15, 2007 and interim periods within those fiscal years. The
impact of SFAS 157 on the Fund's financial statements is being evaluated.
In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for
Uncertainty in Income Taxes." FIN 48 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. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after Dec. 15, 2006. Tax positions of the Fund are being
evaluated to determine the impact, if any, to the Fund. The adoption of FIN 48
is not anticipated to have a material impact on the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
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 based on a comparison of the
performance of Class A shares of the Fund to 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 fee by
$17,062 for the year ended July 31, 2007. The management fee for the year ended
July 31, 2007, was 0.66% of the Fund's average daily net assets, including an
adjustment under the terms of the performance incentive adjustment.
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 33
average daily net assets that declines from 0.06% to 0.03% annually as the
Fund's assets increase.
Other expenses in the amount of $863 are for, among other things, certain
expenses of the Fund or the Board including: Fund boardroom and office expense,
employee compensation, employee health and retirement benefits, and certain
other expenses. Payment of these Fund and Board expenses is facilitated by a
company providing limited administrative services to the Funds and the Board.
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.
Professional fees include fees include fees paid by the Fund for legal services
and independent registered public accounting firm services.
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. The Fund pays the Transfer
Agent an annual fee per shareholder account for this service as follows:
- - Class A $19.50
- - Class B $20.50
- - Class C $20.00
Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as
Class R4, the fee structure under the Transfer Agency Agreement was revised from
an account-based fee for Class Y to an asset-based fee for Class R4. The Fund
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. Prior to Dec.
11, 2006, the Fund paid the Transfer Agent an annual account-based fee of $17.50
per shareholder account.
In addition, the Fund pays the Transfer Agent an annual asset-based fee at a
rate of 0.20% of the Fund's average daily net assets attributable to Class W
shares.
Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per
shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated.
- --------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
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.
The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource
Distributors, Inc. (collectively, the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to Class A and Class 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.
Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted
for the restructured Class R4. The fee is calculated at a rate of 0.25% of the
Fund's average daily net assets attributable to Class R4 shares.
Prior to Dec 11, 2006, under a Shareholder Service Agreement, the Fund paid the
Distributor a fee for service provided to shareholders by the Distributor and
other servicing agents with respect to Class Y shares. The fee was calculated at
a rate of 0.10% of the Fund's average daily net assets attributable to Class Y
shares. Effective Dec. 11, 2006, this agreement was terminated.
Sales charges received by the Distributor for distributing Fund shares were
$55,860 for Class A and $5 for Class C for the year ended July 31, 2007.
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.
For the year ended July 31, 2007, the Investment Manager and its affiliates
waived certain fees and expenses such that net expenses (excluding fees and
expenses of acquired funds), before giving effect to any performance incentive
adjustment, were 1.29% for Class A, 2.06 % for Class B, 2.06% for Class C, 1.15%
for Class R4 and 1.32% for Class W. Of these waived fees and expenses, the
transfer agency fees waived for Class R4 and Class W were $8 and $5,488,
respectively, and the management fees waived at the Fund level were $65,127.
Under an agreement, which was effective until July 31, 2007, 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 1.36% for Class A, 2.13% for Class B, 2.13% for Class C, 1.01% for Class
I, 1.19% for Class R4 and 1.36% for Class W of the Fund's average daily net
assets. Effective Aug. 1, 2007,
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 35
the Investment Manager and its affiliates have 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,
will not exceed 1.36% for Class A, 2.12 % for Class B, 2.12% for Class C, 0.96%
for Class I, 1.23% for Class R4 and 1.41% for Class W of the Fund's average
daily net assets, until July 31, 2008, unless sooner terminated at the
discretion of the Board.
During the year ended July 31, 2007, the Fund's custodian and transfer agency
fees were reduced by $3,850 as a result of earnings and bank fee credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust
Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $142,075,573 and $33,333,386, respectively, for the year
ended July 31, 2007. Realized gains and losses are determined on an identified
cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<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(a) 421 1 -- 422
Class W(b) 7,145,709 -- (1,166,290) 5,979,419
- ----------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
PERIOD ENDED JULY 31, 2006(C)
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------
Class A 43,096 -- -- 43,096
Class B 5,146 -- (1,986) 3,160
Class C -- -- -- --
Class I 4,815 -- (210) 4,605
Class R4(a) 164 -- -- 164
- ----------------------------------------------------------------------------------------
</Table>
(a) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(b) For the period from Dec. 1 2006 (inception date) to July 31, 2007.
(c) For the period from May 18, 2006 (when shares became publicly available) to
July 31, 2006.
- --------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
5. STOCK INDEX FUTURES CONTRACTS
At July 31, 2007, investments in securities included securities valued at
$410,160 that were pledged as collateral to cover initial margin deposits on 45
open purchase contracts. The notional market value of the open purchase
contracts at July 31, 2007 was $3,635,100 with a net unrealized loss of $88,460.
See "Summary of significant accounting policies" and " Notes to investments in
securities."
6. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. Cost of purchases
and proceeds from sales of securities aggregated $80,827,100 and $79,067,313,
respectively, for the year ended July 31, 2007.
7. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency purposes.
The agreement went into effect Sept. 19, 2006. The Fund must maintain asset
coverage for borrowings of at least 300%. The agreement, which enables the Fund
to participate with other RiverSource funds, permits borrowings up to $500
million, collectively. Interest is charged to each Fund based on its borrowings
at a rate equal to either the higher of the Federal Funds Effective Rate plus
0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within
60 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.06%
per annum. Prior to this agreement, the Fund paid a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.07% per
annum. The Fund had no borrowings under the facility outstanding during the year
ended July 31, 2007.
8. CAPITAL LOSS CARRY-OVER AND POST-OCTOBER LOSS
For federal income tax purposes, the Fund had a capital loss carry-over of
$115,029 at July 31, 2007, that if not offset by capital gains will expire as
follows:
<Table>
2014 2015
$93,125 $21,904
</Table>
The Fund also had a post-October loss of $6,598 at July 31, 2007.
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 37
9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In June 2004, an action captioned John E. Gallus et al. v. American Express
Financial Corp. and American Express Financial Advisors Inc., was filed in the
United States District Court for the District of Arizona. The plaintiffs allege
that they are investors in several American Express Company mutual funds and
they purport to bring the action derivatively on behalf of those funds under the
Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid
to the defendants by the funds for investment advisory and administrative
services are excessive. The plaintiffs seek remedies including restitution and
rescission of investment advisory and distribution agreements. The plaintiffs
voluntarily agreed to transfer this case to the United States District Court for
the District of Minnesota. In response to defendants' motion to dismiss the
complaint, the Court dismissed one of plaintiffs' four claims and granted
plaintiffs limited discovery. Defendants moved for summary judgment in April
2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The
plaintiffs may file a notice of appeal with the Eighth Circuit Court of Appeals
within 30 days from the date of judgment.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), the parent company of RiverSource Investments, LLC
(RiverSource Investments), entered into settlement agreements with the
Securities and Exchange Commission (SEC) and Minnesota Department of Commerce
(MDOC) related to market timing activities. In connection with these matters,
the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain
provisions of the federal and Minnesota securities laws by failing to adequately
disclose market timing activities by allowing certain identified market timers
to continue to market time contrary to disclosures in mutual fund and variable
annuity product prospectuses. The Orders also alleged that AEFC failed to
implement procedures to detect and prevent market timing in 401(k) plans for
employees of AEFC and related companies and failed to adequately disclose that
there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and various
Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay
disgorgement of $10 million and civil money penalties of $7 million. AEFC also
agreed to make presentations at least annually to its board of directors and the
relevant mutual funds' board that include an overview of policies and procedures
to prevent market timing, material changes to these policies and procedures and
- --------------------------------------------------------------------------------
38 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
whether disclosures related to market timing are consistent with the SEC order
and federal securities laws. AEFC also agreed to retain an independent
distribution consultant to assist in developing a plan for distribution of all
disgorgement and civil penalties ordered by the SEC in accordance with various
undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In
addition, AEFC agreed to complete and submit to the MDOC a compliance review of
its procedures regarding market timing within one year of the MDOC Order,
including a summary of actions taken to ensure compliance with applicable laws
and regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds. Further,
although we believe proceedings are not likely to have a material adverse effect
on the Funds or the ability of Ameriprise Financial or its affiliates to perform
under their contracts with the Funds, these proceedings are subject to
uncertainties and, as such, we are unable to estimate the possible loss or range
of loss that may result. An adverse outcome in one or more of these proceedings
could result in adverse judgments, settlements, fines, penalties or other relief
that could have a material adverse effect on the consolidated financial
condition or results of operations of Ameriprise Financial.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 39
10. 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, 2007 2006(B)
Net asset value, beginning of period $8.95 $9.48
- -------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(c) --
Net gains (losses) (both realized and
unrealized) .59 (.53)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations .64 (.53)
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) --
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.55 $8.95
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $18 $9
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net
assets(d),(e),(f) 1.29% 1.26%(g)
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .52% .01%(g)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 84% 14%
- -------------------------------------------------------------------------------------------------------------
Total return(h) 7.12% (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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class A would have been 1.67% and 5.83% for the periods ended July 31, 2007
and 2006, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
40 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $8.93 $9.48
- -------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.04)(c) (.01)
Net gains (losses) (both realized and
unrealized) .62 (.54)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations .58 (.55)
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) --
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.47 $8.93
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $--
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net
assets(d),(e),(f) 2.06% 2.07%(g)
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (.41%) (.37%)(g)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 84% 14%
- -------------------------------------------------------------------------------------------------------------
Total return(h) 6.43% (5.80%)(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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class B would have been 2.12% and 6.64% for the periods ended July 31, 2007
and 2006, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 41
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $8.93 $9.48
- -------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.04)(c) (.01)
Net gains (losses) (both realized and
unrealized) .61 (.54)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations .57 (.55)
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) --
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.47 $8.93
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net
assets(d),(e),(f) 2.06% 2.04%(g)
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (.40%) (.78%)(g)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 84% 14%
- -------------------------------------------------------------------------------------------------------------
Total return(h) 6.37% (5.80%)(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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class C would have been 2.16% and 6.61% for the periods ended July 31, 2007
and 2006, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $8.95 $9.48
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08(c) --
Net gains (losses) (both realized and
unrealized) .59 (.53)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .67 (.53)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.57 $8.95
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $39 $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e) .95% 1.01%(f),(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .80% .19%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 84% 14%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class I would have been 5.58% for the period ended July 31, 2006.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 43
CLASS R4*
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $8.95 $9.48
- -------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07(c) --
Net gains (losses) (both realized and
unrealized) .58 (.53)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations .65 (.53)
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) --
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.56 $8.95
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $-- $--
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net
assets(d),(e),(f) 1.15% 1.12%(g)
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .71% .21%(g)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 84% 14%
- -------------------------------------------------------------------------------------------------------------
Total return(h) 7.30% (5.59%)(i)
- -------------------------------------------------------------------------------------------------------------
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class R4 would have been 1.68% and 5.69% for the periods ended July 31,
2007 and 2006, respectively.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
CLASS W
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $9.79
- -------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) --(c)
Net gains (losses) (both realized and
unrealized) (.20)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations (.20)
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.54
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $57
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net
assets(d),(e),(f) 1.32%(g)
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .03%(g)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 84%
- -------------------------------------------------------------------------------------------------------------
Total return(h) (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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class W would have been 1.60% for the period ended July 31, 2007.
(g) Adjusted to an annual basis.
(h) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 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 schedule of investments in securities, 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, 2007, and the related
statement of operations, statement of changes in net assets and financial
highlights for the year 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 audit. The financial statements and financial highlights of the
Fund for the periods presented through July 31, 2006, were audited by other
auditors whose report dated September 20, 2006, expressed an unqualified opinion
on those financial statements and financial highlights.
We conducted our audit 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 audit 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, 2007, by correspondence with the custodian and
brokers, or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the 2007 financial statements and financial highlights 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, 2007, the results of its operations, the
changes in its net assets and the financial highlights for the year then ended,
in conformity with U.S. generally accepted accounting principles.
Ernst & Young LLP
Minneapolis, Minnesota
September 20, 2007
- --------------------------------------------------------------------------------
46 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 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, 2007
CLASS A
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 100.00%
Dividends Received Deduction for corporations......... 100.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.03891
</Table>
CLASS B
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 100.00%
Dividends Received Deduction for corporations......... 100.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.03561
</Table>
CLASS C
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 100.00%
Dividends Received Deduction for corporations......... 100.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.02985
</Table>
CLASS I
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 100.00%
Dividends Received Deduction for corporations......... 100.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.05161
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 47
CLASS R4*
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 100.00%
Dividends Received Deduction for corporations......... 100.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.04499
</Table>
CLASS W
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 100.00%
Dividends Received Deduction for corporations......... 100.00%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.04967
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
- --------------------------------------------------------------------------------
48 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 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 102
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
901 S. Marquette Ave. since 2006 Court, 1998-2005
Minneapolis, MN 55402
Age 53
- -----------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, RiverSource Funds,
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
901 S. Marquette Ave. since 2007 in Cross Cultural Leadership
Minneapolis, MN 55402 (consulting company)
Age 52
- -----------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College; former
Minneapolis, MN 55402 Dean, McCallum Graduate School of
Age 56 Business, Bentley College
- -----------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 72
- -----------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive
901 S. Marquette Ave. since 2005 Asset Management Insurance
Minneapolis, MN 55402
Age 71
- -----------------------------------------------------------------------------------------------------
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 68 Board since 2007
- -----------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 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 Strategic
901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc.
Minneapolis, MN 55402 estate and asset management (transportation,
Age 55 company) distribution and
logistics
consultants)
- -----------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc.
901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology);
Minneapolis, MN 55402 former President, Forester Biotech American Healthways,
Age 63 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
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; President, Ameriprise
Certificate Company 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 -- 2007 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 Senior Vice President -- Asset Management,
172 Ameriprise 2006 RiverSource Investments, LLC since 2006;
Financial Center Managing Director and Global Head of Product,
Minneapolis, MN 55474 Morgan Stanley Investment Management,
Age 41 2004-2006; President, Touchstone Investments,
2002-2004; Director of Strategic Planning,
Evergreen Investments, 1995-2002
- ------------------------------------------------------------------------------------------
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 43 Certificate Company since 2003; Senior Vice
President -- Fixed Income, Ameriprise
Financial, Inc., 2002-2006 and RiverSource
Investments, LLC, 2004-2006; Managing
Director, Zurich Global Assets, 2001-2002
- ------------------------------------------------------------------------------------------
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 41 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; Vice
Financial Center President -- Finance, American Express
Minneapolis, MN 55474 Company, 2000-2002
Age 52
- ------------------------------------------------------------------------------------------
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; Vice President, General Counsel and
Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company
Age 47 since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc.,
2004-2005; Senior Vice President and Chief
Compliance Officer, U.S. Bancorp Asset
Management, 2002-2004; Second Vice President
and Assistant General Counsel, Hartford Life,
2001-2002
- ------------------------------------------------------------------------------------------
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 46 Voyageur Asset Management, 2000-2003
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 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 43 Compliance Director and Bank Secrecy Act
Officer, American Express Centurion Bank,
2000-2003
- ------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
52 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC ("RiverSource"), 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 provides investment advice and other services to the
Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of
Directors (the "Board") and the Board's Investment Review and Contracts
Committees monitor these services throughout the year.
On an annual basis, the Board, including the independent Board members (the
"Independent Directors"), considers renewal of the IMS Agreement. RiverSource
prepares detailed reports for the Board and its Contracts Committee in March and
April, 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
addressing the services RiverSource provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts and Investment Review Committees in determining whether to continue
the IMS Agreement. At the April 11-12, 2007 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: The Board
analyzed various reports and presentations it had received detailing the
services performed by RiverSource, as well as its expertise, resources and
capabilities. The Board specifically considered many developments during the
past year concerning the services provided by RiverSource, including, in
particular, the growing strength and capabilities of many RiverSource offices
and the increased investment and resources dedicated to the Fund's operations,
particularly in the areas of trading systems, legal and compliance. Further, in
connection with the Board's evaluation of the overall package of services
provided by RiverSource, the Board considered the quality of the administrative,
custody and transfer agency services provided by RiverSource affiliates to the
Fund. The Board also reviewed the financial condition of RiverSource and the
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). The Board concluded that the services being performed under the
IMS Agreement were of a reasonably high quality.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 53
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 determined that RiverSource was in a
position to continue to provide a high quality and level of services to the
Fund.
Investment Performance: The Board observed that the Fund launched in May 2006.
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) and recent Fund inflows (and outflows). The
Board observed that the Fund's investments reflected the interrelationship of
particular market conditions with the specific management style employed by the
portfolio management team.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource 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's 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 below the peer group's median expense ratio shown in the
reports. 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 and its
affiliates in connection with RiverSource providing investment management
services to the Fund. In this regard, the Board referred to a detailed
profitability report, discussing the profitability to RiverSource and Ameriprise
Financial from managing and operating the Fund, including data showing
comparative profitability. 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
- --------------------------------------------------------------------------------
54 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
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 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 12, 2007, 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.
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent
registered public accounting firm for the 2007 fiscal year. A majority of the
Fund's Board of Directors, including a majority of the Independent Directors,
approved the appointment of Ernst & Young LLP. The predecessor independent
registered public accounting firm's reports on the Fund's financial statements
for the year ended July 31, 2006 and the year ended July 31, 2005 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During such fiscal periods
and through April 12, 2007 there were no disagreements between the Fund and the
predecessor independent registered public accounting firm on any matter of
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT 55
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which such disagreements, if not resolved to the
satisfaction of the predecessor independent registered public accounting firm,
would have caused them to make reference to the subject matter of the
disagreement in connection with their reports on the financial statements for
such fiscal periods.
- --------------------------------------------------------------------------------
56 RIVERSOURCE DISCIPLINED SMALL AND MID CAP EQUITY FUND -- 2007 ANNUAL REPORT
RIVERSOURCE(R) 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.
and Ameriprise Financial Services, Inc., Members FINRA, and
managed by
(RIVERSOURCE INVESTMENTS RiverSource Investments, LLC. These companies are part of
LOGO) Ameriprise Financial, Inc. S-6505 D (9/07)
</Table>
Annual Report
and Prospectus
(RIVERSOURCE INVESTMENTS LOGO)
RIVERSOURCE(R)
DISCIPLINED SMALL CAP VALUE FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2007
(Prospectus also enclosed)
RIVERSOURCE DISCIPLINED SMALL CAP
VALUE FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM
CAPITAL GROWTH.
This annual report includes a prospectus that
describes in detail the Fund's objective,
investment strategy, risks, sales charges, fees
and other matters of interest. Please read the
prospectus carefully before you invest or send
money.
TABLE OF CONTENTS
<Table>
Fund Snapshot....................... 3
Performance Summary................. 5
Questions & Answers
with Portfolio Management........ 8
The Fund's Long-term Performance ... 12
Fund Expenses Example............... 14
Investments in Securities........... 17
Financial Statements................ 25
Notes to Financial Statements....... 31
Report of Independent Registered
Public Accounting Firm........... 51
Federal Income Tax Information...... 53
Board Members and Officers.......... 56
Approval of Investment Management
Services Agreement............... 60
Proxy Voting........................ 62
Change in Independent Registered
Public Accounting Firm........... 62
</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.
- --------------------------------------------------------------------------------
2 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2007
FUND OBJECTIVE
RiverSource Disciplined Small Cap Value Fund seeks to provide shareholders with
long-term capital growth.
SECTOR BREAKDOWN*
Percentage of portfolio assets
(PIE CHART)
<Table>
Financials 24.0%
Consumer Discretionary 18.7%
Industrials 16.1%
Information Technology 11.1%
Materials 9.5%
Energy 6.4%
Other(1) 14.2%
</Table>
* Sectors can be comprised of several industries. Please refer to the section
entitled "Investments in Securities" for a complete listing. No single
industry exceeds 25% of portfolio assets.
(1) Includes Consumer Staples 4.3%, Health Care 3.9%, Telecommunication
Services 1.3%, Utilities 1.0% and Cash & Cash Equivalents 3.7%.
TOP TEN HOLDINGS
Percentage of portfolio assets
<Table>
Ohio Casualty 1.6%
Aspen Insurance Holdings 1.5%
LandAmerica Financial Group 1.0%
First BanCorp 1.0%
Quanex 0.9%
Genco Shipping & Trading 0.8%
ArvinMeritor 0.8%
USEC 0.7%
Ryerson 0.7%
Schnitzer Steel Inds Cl A 0.7%
</Table>
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
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 -- 2007 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2007
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 generally
invests.
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 serves 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.
PORTFOLIO MANAGERS
<Table>
<Caption>
YEARS IN INDUSTRY
Dimitris Bertsimas, Ph.D. 14
Gina Mourtzinou, Ph.D. 11
Steve Kokkotos, Ph.D. 9
</Table>
FUND FACTS
<Table>
<Caption>
TICKER SYMBOL INCEPTION DATE
Class A -- 02/16/06
Class B -- 02/16/06
Class C -- 02/16/06
Class I -- 02/16/06
Class R2 -- 12/11/06
Class R3 -- 12/11/06
Class R4(1) RSDVX 02/16/06
Class R5 -- 12/11/06
(1) Effective Dec. 11, 2006, Class Y was renamed Class
R4.
Total net assets $39.4 million
Number of holdings 351
</Table>
- --------------------------------------------------------------------------------
4 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the year ended July 31, 2007
(BAR CHART)
<Table>
RiverSource Disciplined Small Cap Value Fund Class
A (excluding sales charge) +4.29
Russell 2000 Value Index (unmanaged) +7.67
Lipper Small-Cap Value Funds Index +13.52
</Table>
(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 bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
ANNUAL OPERATING EXPENSE RATIO (AS OF THE CURRENT PROSPECTUS)
<Table>
<Caption>
TOTAL NET EXPENSES(A)
Class A 1.73% 1.35%
Class B 2.38% 2.11%
Class C 2.47% 2.10%
Class I 1.19% 0.97%
Class R2(b) 1.85% 1.77%
Class R3(b) 1.60% 1.52%
Class R4(c) 1.90% 1.27%
Class R5(b) 1.10% 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, 2008,
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 0.05%) will not exceed 1.40% for Class A, 2.16% for Class
B, 2.15% for Class C, 1.02% for Class I, 1.82% for Class R2, 1.57% for
Class R3, 1.32% for Class R4 and 1.07% for Class R5.
(b) Inception date for Class R2, Class R3 and Class R5 is Dec. 11, 2006,
expenses are based on estimated amounts for the current fiscal year.
(c) Effective Dec. 11, 2006, Class Y was renamed Class R4.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 5
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
AT JULY 31, 2007
SINCE
WITHOUT SALES CHARGE 1 YEAR INCEPTION
Class A (inception 2/16/06) +4.29% -0.14%
Class B (inception 2/16/06) +3.51% -1.01%
Class C (inception 2/16/06) +3.51% -0.94%
Class I (inception 2/16/06) +4.69% +0.13%
Class R2 (inception 12/11/06) N/A -7.40%*
Class R3 (inception 12/11/06) N/A -7.21%*
Class R4** (inception 2/16/06) +4.42% -0.06%
Class R5 (inception 12/11/06) N/A -6.93%*
WITH SALES CHARGE
Class A (inception 2/16/06) -1.71% -4.14%
Class B (inception 2/16/06) -1.49% -3.70%
Class C (inception 2/16/06) +2.51% -0.94%
</Table>
- --------------------------------------------------------------------------------
6 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
PERFORMANCE SUMMARY
<Table>
<Caption>
AT JUNE 30, 2007
SINCE
WITHOUT SALES CHARGE 1 YEAR INCEPTION
Class A (inception 2/16/06) +10.60% +7.26%
Class B (inception 2/16/06) +9.65% +6.36%
Class C (inception 2/16/06) +9.75% +6.43%
Class I (inception 2/16/06) +10.91% +7.56%
Class R2 (inception 12/11/06) N/A +2.25%*
Class R3 (inception 12/11/06) N/A +2.35%*
Class R4** (inception 2/16/06) +10.63% +7.36%
Class R5 (inception 12/11/06) N/A +2.64%*
WITH SALES CHARGE
Class A (inception 2/16/06) +4.24% +2.71%
Class B (inception 2/16/06) +4.65% +3.48%
Class C (inception 2/16/06) +8.75% +6.43%
</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.
* Not annualized.
** Effective Dec. 11, 2006, Class Y was renamed Class R4.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 7
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, portfolio managers Dimitris Bertsimas, Gina Mourtzinou and Steve Kokkotos
discuss RiverSource Disciplined Small Cap Value Fund's positioning and results
for the 12-month period ended July 31, 2007.
At July 31, 2007, approximately 64% 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 39, 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 14 and 36.
Q: How did RiverSource Disciplined Small Cap Value Fund perform for the annual
period?
A: RiverSource Disciplined Small Cap Value Fund's Class A shares (excluding
sales charge) returned 4.29% for the 12-month period ended July 31, 2007. The
Fund underperformed its benchmark, the unmanaged Russell 2000(R) Value Index
(Russell Index), which gained 7.67%, as well as the Lipper Small-Cap Value
Funds Index, representing the Fund's peer group, which returned 13.52%, for
the same period.
BECAUSE OF OUR INVESTMENT PROCESS, MOST OF THE FUND'S UNDERPERFORMANCE
RESULTED FROM STOCK SELECTION.
Q: What factors most significantly affected the Fund's performance?
A: The Fund's performance resulted from the three quantitative investment
models -- momentum, value and quality -- we employ in selecting stocks for
the Fund's portfolio. The momentum model identifies stocks we believe will
experience improved 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 believe 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 portfolio. We then weight the models and determine the
- --------------------------------------------------------------------------------
8 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
QUESTIONS & ANSWERS
exposure to sectors and industries. During the reporting period, the momentum
model outperformed the Russell Index, but the quality model underperformed.
The value model also underperformed through March 2007, when we expanded the
valuation measures we use within the model. Subsequently, the value model
outperformed the Russell Index, but it was not enough to offset the
detracting effect of its underperformance earlier in the fiscal year. While
the Fund may experience underperformance in the short term, our research has
shown that the style diversification provided by the three very different
quantitative models is an investment advantage, which may lead to long-term
outperformance.
During the period, the Fund's greater-than-Russell Index positions in
consumer discretionary, materials, consumer staples, industrials and
telecommunication services and its lesser-than-Russell Index allocations to
health care, energy, financials and utilities all contributed positively to
its results relative to the Russell Index. From a sector allocation
perspective, the only detractor was the Fund's modest exposure to the
strongly performing information technology sector.
Because of our investment process, most of the Fund's underperformance
resulted from stock selection, which helped performance in the materials,
telecommunication services and industrials sectors. However, these positives
were not enough to outweigh our selections within financials, consumer
discretionary and information technology, which detracted from Fund
performance.
Some stocks that contributed favorably to the Fund's return included
financial commercial services and supply company Deluxe (selected by the
value model), telecommunication services company Cogent Communications
(momentum model), insurance company Ohio Casualty (quality and revised value
model) and materials company Terra Industries (momentum model).
Among individual holdings, the stocks that detracted most from the Fund's
results were in the financials sector. These included New Century Financial
(selected by all three models but then sold in March when we revised the
value model), American Home Mtge Investment (value and quality models), W
Holding (value and quality models), Fremont General (value and quality
models) and Accredited Home Lenders (value model).
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 9
QUESTIONS & ANSWERS
At the end of July, the Fund's largest individual stock holdings included
three insurance companies: Ohio Casualty, Aspen Insurance Holdings (selected
by value and quality models) and LandAmerica Financial Group (all three
models). Other top holdings at the end of the period were commercial bank
First BanCorp (value and quality models) and metals and mining company Quanex
(all three models).
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 from
the Russell Index.
Q: What changes did you make to the Fund's portfolio during the period?
A: Based on an extensive look we took at our quantitative models, in March 2007,
we expanded and improved the measures we use in our value model. Also,
because diversification is an effective element of risk management, we
increased the number of holdings in the portfolio during the annual period
from 250 to 351. Finally, as a result of quantitative models-driven stock
selection during the period, the portfolio's sector allocations changed
somewhat. For example, the Fund's exposure to energy relative to the Russell
Index increased, while its position in financials decreased. Overall
portfolio turnover was 127% for the 12 months.
BASED ON AN EXTENSIVE LOOK WE TOOK AT OUR QUANTITATIVE MODELS, IN MARCH
2007, WE EXPANDED AND IMPROVED THE MEASURES WE USE IN OUR VALUE MODEL.
- --------------------------------------------------------------------------------
10 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
QUESTIONS & ANSWERS
Q: How do you intend to manage the Fund in the coming months?
A: We believe our use of multiple investment disciplines serves the Fund well in
all investment environments over the long term, and the portfolio may be well
positioned for any potential market condition. 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 over extended
periods of time. We are equally convinced that our multifaceted, disciplined
approach may assist in controlling 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.
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 -- 2007 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Disciplined Small Cap Value Fund Class A shares (from
3/1/06 to 7/31/07)* 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 data
is from March 1, 2006.
COMPARATIVE RESULTS
<Table>
<Caption>
SINCE
Results at July 31, 2007 1 YEAR INCEPTION(3)
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND (INCLUDES SALES
CHARGE)
Class A Cumulative value of $10,000 $9,839 $9,405
Average annual total return -1.61% -4.14%
RUSSELL 2000 VALUE INDEX(1)
Cumulative value of $10,000 $10,767 $10,831
Average annual total return +7.67% +5.82%
LIPPER SMALL-CAP VALUE FUNDS INDEX(2)
Cumulative value of $10,000 $11,352 $11,116
Average annual total return +13.52% +7.76%
</Table>
Results for other share classes can be found on page 6.
- --------------------------------------------------------------------------------
12 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 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
(INCLUDES SALES CHARGE) RUSSELL 2000 VALUE INDEX(1) LIPPER SMALL-CAP VALUE FUNDS
($9,405) ($10,831) INDEX(2) ($11,116)
----------------------------- --------------------------- ----------------------------
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
</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
data is from March 1, 2006.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 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 acquired funds expense ratio as of the 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, 2007.
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 CAP VALUE FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class A
Actual(b) $1,000 $909.90 $6.68(c) 1.41%
Hypothetical
(5% return before
expenses) $1,000 $1,017.80 $7.05(c) 1.41%
Class B
Actual(b) $1,000 $906.60 $10.21(c) 2.16%
Hypothetical
(5% return before
expenses) $1,000 $1,014.08 $10.79(c) 2.16%
Class C
Actual(b) $1,000 $906.60 $10.12(c) 2.14%
Hypothetical
(5% return before
expenses) $1,000 $1,014.18 $10.69(c) 2.14%
Class I
Actual(b) $1,000 $911.80 $5.07(c) 1.07%
Hypothetical
(5% return before
expenses) $1,000 $1,019.49 $5.36(c) 1.07%
Class R2
Actual(b) $1,000 $908.00 $8.47(c) 1.79%
Hypothetical
(5% return before
expenses) $1,000 $1,015.92 $8.95(c) 1.79%
Class R3
Actual(b) $1,000 $909.00 $7.29(c) 1.54%
Hypothetical
(5% return before
expenses) $1,000 $1,017.16 $7.70(c) 1.54%
Class R4*
Actual(b) $1,000 $909.90 $5.92(c) 1.25%
Hypothetical
(5% return before
expenses) $1,000 $1,018.60 $6.26(c) 1.25%
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 15
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2007 JULY 31, 2007 THE PERIOD(A) EXPENSE RATIO
Class R5
Actual(b) $1,000 $911.70 $4.93(c) 1.04%
Hypothetical
(5% return before
expenses) $1,000 $1,019.64 $5.21(c) 1.04%
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(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 181/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended July 31, 2007: -9.01%
for Class A, -9.34% for Class B, -9.34% for Class C, -8.82% for Class I,
-9.20% for Class R2, -9.10% for Class R3, -9.01% for Class R4 and -8.83%.
for Class R5.
(c) The investment manager and its affiliates have contractually agreed to
waive certain fees and to absorb certain expenses until July 31, 2008,
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 1.40% for
Class A, 2.16% for Class B, 2.15% for Class C, 1.02% for Class I, 1.82% for
Class R2, 1.57% for Class R3, 1.32% for Class R4 and 1.07% for Class R5.
Any amounts waived will not be reimbursed by the Fund. This change was
effective Aug. 1, 2007. If this change had been in place for the entire six
month period ended July 31, 2007, the actual expenses paid would have been
$6.33 for Class A, $9.91 for Class B, $9.87 for Class C, $4.55 for Class I,
$8.32 for R2, $7.14 for Class R3, $5.96 for Class R4 and $4.78 for Class
R5; the hypothetical expenses paid would have been $6.69 for Class A,
$10.47 for Class B, $10.43 for Class C, $4.81 for Class I, $8.79 for R2,
$7.54 for Class R3, $6.30 for Class R4 and $5.05 for Class R5.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
INVESTMENTS IN SECURITIES
JULY 31, 2007
(Percentages represent value of investments compared to net assets)
<Table>
<Caption>
COMMON STOCKS (99.6%)
ISSUER SHARES VALUE(A)
AEROSPACE & DEFENSE (1.1%)
AAR 2,889(b) $86,179
Ceradyne 1,287(b) 96,049
Curtiss-Wright 1,152 50,193
Ladish 3,135(b) 152,015
Triumph Group 662 50,451
---------------
Total 434,887
- -----------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.5%)
Atlas Air Worldwide Holdings 1,855(b) 100,559
Park-Ohio Holdings 3,209(b) 79,712
---------------
Total 180,271
- -----------------------------------------------------------------------------------
AIRLINES (1.2%)
Alaska Air Group 7,690(b) 179,408
ExpressJet Holdings 13,333(b) 69,732
SkyWest 9,840 219,530
---------------
Total 468,670
- -----------------------------------------------------------------------------------
AUTO COMPONENTS (3.6%)
Aftermarket Technology 3,450(b) 104,708
American Axle & Mfg Holdings 8,175 197,835
ArvinMeritor 16,201 321,265
Cooper Tire & Rubber 7,952 182,816
Exide Technologies 3,662(b) 26,696
Modine Mfg 8,428 215,757
Sauer-Danfoss 2,414 65,782
Standard Motor Products 7,371 91,769
Superior Inds Intl 4,370 80,845
Tenneco 2,734(b) 96,510
Visteon 7,633(b) 49,004
---------------
Total 1,432,987
- -----------------------------------------------------------------------------------
BIOTECHNOLOGY (1.0%)
Immunomedics 38,698(b) 111,450
Incyte 11,676(b) 62,116
InterMune 3,453(b) 73,722
Isis Pharmaceuticals 8,779(b) 91,389
XOMA 20,316(b) 41,851
---------------
Total 380,528
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
BUILDING PRODUCTS (0.5%)
Ameron Intl 634 $62,024
Gibraltar Inds 2,132 41,169
Universal Forest Products 2,588 102,381
---------------
Total 205,574
- -----------------------------------------------------------------------------------
CAPITAL MARKETS (2.2%)
Apollo Investment 11,312 238,571
Capital Southwest 840(d) 113,854
Cowen Group 2,348(b) 33,717
Knight Capital Group Cl A 6,352(b) 89,817
MCG Capital 7,447 107,758
MVC Capital 2,993 48,397
SWS Group 9,559 168,716
Technology Investment Capital 5,364 73,540
---------------
Total 874,370
- -----------------------------------------------------------------------------------
CHEMICALS (3.8%)
Calgon Carbon 4,608(b) 50,688
CF Inds Holdings 4,351 250,096
Georgia Gulf 5,337 86,406
Innospec 7,370(c) 202,896
Minerals Technologies 1,458 94,289
Olin 11,018 229,946
Pioneer Companies 1,679(b) 58,093
PolyOne 20,728(b) 155,875
Rockwood Holdings 2,814(b) 97,336
Tronox Cl B 3,361 41,340
WR Grace & Co 11,594(b) 239,416
---------------
Total 1,506,381
- -----------------------------------------------------------------------------------
COMMERCIAL BANKS (6.1%)
BancFirst 4,904 198,171
Chemical Financial 8,169 177,921
Community Trust Bancorp 6,516 186,879
Farmers Capital Bank 3,336 100,647
First BanCorp 45,562(c) 419,170
FirstMerit 8,256 151,332
Glacier Bancorp 3,678 70,066
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 17
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
COMMERCIAL BANKS (CONT.)
MainSource Financial Group 8,285 $129,080
Sterling Financial 12,027 201,212
Susquehanna Bancshares 11,370 196,701
Trustmark 7,888(d) 197,437
UMB Financial 5,207 194,429
W Holding 86,156(c) 190,405
---------------
Total 2,413,450
- -----------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (2.9%)
ABM Inds 3,501 88,085
AMREP 1,299 53,519
CDI 4,276 120,968
Deluxe 1,832 69,176
Ennis 3,174 64,051
Exponent 4,298(b) 97,865
Heidrick & Struggles Intl 2,811(b) 151,064
IKON Office Solutions 7,221 100,083
Kelly Services Cl A 2,029 50,421
On Assignment 6,548(b) 65,676
PHH 3,814(b) 111,140
Pike Electric 2,486(b) 49,347
Spherion 3,679(b) 32,486
Tetra Tech 4,484(b) 94,299
---------------
Total 1,148,180
- -----------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (1.9%)
Andrew 6,072(b) 85,372
ARRIS Group 8,915(b) 132,121
Black Box 1,969 79,252
Dycom Inds 4,309(b) 120,437
Extreme Networks 17,821(b) 72,353
Foundry Networks 5,512(b) 96,956
Loral Space & Communications 2,466(b) 102,068
Plantronics 1,721 48,222
---------------
Total 736,781
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
COMPUTERS & PERIPHERALS (1.7%)
Adaptec 14,241(b) $49,844
Hutchinson Technology 3,508(b) 70,370
Imation 4,278 133,816
Immersion 4,753(b) 74,099
Komag 4,686(b) 149,999
Palm 7,176(b) 107,066
Quantum 25,758(b) 72,895
---------------
Total 658,089
- -----------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.5%)
EMCOR Group 2,030(b) 72,877
Perini 1,881(b) 115,512
---------------
Total 188,389
- -----------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.7%)
Headwaters 7,384(b) 119,104
Texas Inds 827 65,176
U.S. Concrete 11,336(b) 86,040
---------------
Total 270,320
- -----------------------------------------------------------------------------------
CONSUMER FINANCE (0.3%)
Cash America Intl 3,489 127,767
- -----------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.6%)
Rock-Tenn Cl A 2,852 87,613
Silgan Holdings 2,727 140,768
---------------
Total 228,381
- -----------------------------------------------------------------------------------
DISTRIBUTORS (0.3%)
Building Materials Holding 7,987 110,939
- -----------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (0.2%)
INVESTools 8,938(b) 88,665
- -----------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (0.6%)
Interactive Brokers Group Cl A 2,785(b) 67,620
Primus Guaranty 10,274(b,c) 97,603
Resource America Cl A 3,467 51,970
---------------
Total 217,193
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%)
Golden Telecom 2,909(c) $187,776
SureWest Communications 2,422 65,370
Time Warner Telecom Cl A 4,535(b,d) 88,659
---------------
Total 341,805
- -----------------------------------------------------------------------------------
ELECTRIC UTILITIES (0.4%)
Central Vermont Public Service 2,839 96,526
Westar Energy 1,916 44,106
---------------
Total 140,632
- -----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.3%)
Acuity Brands 2,344 138,530
Encore Wire 3,862 117,984
GrafTech Intl 7,224(b) 111,900
Lamson & Sessions 3,438(b) 76,117
Superior Essex 1,448(b) 50,463
---------------
Total 494,994
- -----------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (3.0%)
Agilysys 9,664 185,645
Anixter Intl 946(b) 78,187
Benchmark Electronics 7,065(b) 156,843
Brightpoint 5,784(b) 75,944
Insight Enterprises 5,122(b) 115,552
L-1 Identity Solutions 4,908(b) 84,123
Methode Electronics 4,543 73,460
OSI Systems 3,611(b) 89,408
PC Connection 5,258(b) 70,668
Plexus 4,919(b) 119,286
Rofin-Sinar Technologies 787(b) 51,210
SYNNEX 3,552(b) 72,177
---------------
Total 1,172,503
- -----------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (3.1%)
Allis-Chalmers Energy 2,727(b) 65,448
Bristow Group 1,547(b) 73,374
Bronco Drilling 4,773(b) 69,209
Dawson Geophysical 2,182(b) 119,159
Grey Wolf 24,111(b) 178,663
GulfMark Offshore 3,074(b) 144,417
Hornbeck Offshore Services 966(b) 41,586
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ENERGY EQUIPMENT & SERVICES (CONT.)
Oil States Intl 4,772(b) $208,727
Parker Drilling 12,843(b) 120,981
Pioneer Drilling 10,076(b) 126,756
Trico Marine Services 1,845(b) 65,405
---------------
Total 1,213,725
- -----------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (2.0%)
Andersons 2,725 116,821
Great Atlantic & Pacific Tea 5,729(b) 167,000
Ingles Markets Cl A 3,042 89,100
Nash Finch 4,214 169,698
Ruddick 2,640 73,392
Spartan Stores 3,273 95,801
Village Super Market Cl A 806 37,527
Weis Markets 1,005 39,497
---------------
Total 788,836
- -----------------------------------------------------------------------------------
FOOD PRODUCTS (1.8%)
Cal-Maine Foods 6,409 116,387
Chiquita Brands Intl 4,413(b) 77,492
Fresh Del Monte Produce 1,859(c) 47,683
Imperial Sugar 2,072 55,758
Pilgrim's Pride 3,749 126,266
Reddy Ice Holdings 1,469 43,703
Seaboard 128 256,001
---------------
Total 723,290
- -----------------------------------------------------------------------------------
GAS UTILITIES (0.3%)
Nicor 1,223 48,198
South Jersey Inds 1,324 43,387
WGL Holdings 1,241 37,156
---------------
Total 128,741
- -----------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.3%)
Inverness Medical Innovations 885(b) 42,843
Medical Action Inds 2,222(b) 43,240
ZOLL Medical 1,586(b) 42,600
---------------
Total 128,683
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 19
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
HEALTH CARE PROVIDERS & SERVICES (2.1%)
American Dental Partners 1,656(b) $42,510
AMERIGROUP 3,460(b) 95,773
Apria Healthcare Group 3,871(b) 101,498
Capital Senior Living 8,087(b) 71,651
Chemed 1,515 95,869
Emeritus 5,422(b) 132,839
Kindred Healthcare 8,267(b) 221,390
Magellan Health Services 1,614(b) 67,497
---------------
Total 829,027
- -----------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY (0.2%)
Vital Images 3,333(b) 64,960
- -----------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (1.1%)
Ambassadors Intl 2,335 65,403
Ameristar Casinos 1,342 42,515
Bluegreen 4,200(b) 35,532
Bob Evans Farms 3,264 105,917
Domino's Pizza 3,421 65,512
Jack in the Box 1,159(b) 74,164
O'Charley's 3,240 57,445
---------------
Total 446,488
- -----------------------------------------------------------------------------------
HOUSEHOLD DURABLES (3.8%)
American Greetings Cl A 7,285 180,158
Avatar Holdings 2,150(b) 139,600
Beazer Homes USA 11,104 155,345
Brookfield Homes 1,581 33,517
CSS Inds 1,684 60,523
Furniture Brands Intl 9,020 99,400
Hooker Furniture 6,208 125,712
Hovnanian Enterprises Cl A 9,031(b) 119,570
M/I Homes 1,703 41,809
Meritage Homes 6,742(b) 131,469
Standard-Pacific 16,361 242,307
Tupperware Brands 4,814 125,212
WCI Communities 3,524(b) 31,117
---------------
Total 1,485,739
- -----------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.4%)
Sequa Cl A 396(b) 65,380
Tredegar 5,416 99,437
---------------
Total 164,817
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
INSURANCE (10.6%)
American Physicians Capital 3,592(b) $136,209
Argonaut Group 7,335 201,933
Aspen Insurance Holdings 24,706(c) 604,062
Commerce Group 7,149 205,391
Horace Mann Educators 5,251 93,625
Infinity Property & Casualty 3,581 157,707
IPC Holdings 8,720(c) 216,343
LandAmerica Financial Group 5,549 424,998
Natl Western Life Insurance Cl A 601 141,668
Odyssey Re Holdings 6,349 223,485
Ohio Casualty 15,049 653,276
Platinum Underwriters Holdings 7,565(c) 251,158
Presidential Life 6,153(d) 100,355
Safety Insurance Group 4,183 139,294
Selective Insurance Group 10,909 223,853
Stewart Information Services 4,586 167,297
Zenith Natl Insurance 5,522 222,868
---------------
Total 4,163,522
- -----------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.4%)
Gaiam Cl A 3,237(b) 52,051
Systemax 4,497 93,762
---------------
Total 145,813
- -----------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.6%)
CMGI 76,471(b) 120,824
EarthLink 22,004(b) 152,928
InfoSpace 2,462 51,259
Interwoven 4,702(b) 65,123
RealNetworks 19,066(b) 135,750
United Online 4,484 63,314
Vignette 2,755(b) 57,965
---------------
Total 647,163
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
IT SERVICES (1.5%)
Authorize.Net Holdings 8,758(b) $151,775
eFunds 1,437(b) 51,373
iGATE 10,330(b) 79,334
Perot Systems Cl A 6,208(b) 94,486
Safeguard Scientifics 31,852(b) 73,260
SAIC 8,551(b) 143,315
---------------
Total 593,543
- -----------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.8%)
Arctic Cat 3,338 60,485
JAKKS Pacific 7,341(b) 174,055
MarineMax 3,266(b) 61,074
---------------
Total 295,614
- -----------------------------------------------------------------------------------
MACHINERY (4.2%)
Ampco-Pittsburgh 831 35,085
Barnes Group 5,567 173,691
Blount Intl 2,839(b) 32,279
Briggs & Stratton 4,205 119,254
Cascade 3,032 205,540
Columbus McKinnon 3,542(b) 90,852
Commercial Vehicle Group 2,980(b) 43,210
EnPro Inds 1,882(b) 74,113
LB Foster Cl A 2,471(b) 74,599
FreightCar America 1,324 62,585
Gorman-Rupp 351 10,070
Hardinge 3,151 103,731
Kaydon 946 50,337
Miller Inds 6,504(b) 158,177
Mueller Inds 3,657(d) 134,870
NACCO Inds Cl A 479 62,998
Robbins & Myers 803 42,342
Tennant 3,861 148,842
Wabash Natl 3,475 44,167
---------------
Total 1,666,742
- -----------------------------------------------------------------------------------
MARINE (1.7%)
Eagle Bulk Shipping 4,999 131,574
Genco Shipping & Trading 5,883 331,389
TBS Intl Cl A 5,822(b,c) 223,390
---------------
Total 686,353
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
MEDIA (2.3%)
Charter Communications Cl A 26,330(b) $106,900
DG FastChannel 5,734(b) 101,836
Harris Interactive 14,558(b) 65,220
Interactive Data 1,676 45,839
Knology 7,619(b) 118,246
LIN TV Cl A 6,092(b) 92,233
Media General Cl A 2,094 59,051
Nexstar Broadcasting Group Cl A 9,614(b) 98,544
Scholastic 2,985(b) 96,057
Sinclair Broadcast Group Cl A 9,649 125,822
---------------
Total 909,748
- -----------------------------------------------------------------------------------
METALS & MINING (4.3%)
AM Castle & Co 3,318 109,560
Century Aluminum 1,874(b) 96,586
Metal Management 5,004 210,218
Northwest Pipe 2,025(b) 68,060
Olympic Steel 6,357 166,998
Quanex 7,908 356,335
Ryerson 8,993 288,586
Schnitzer Steel Inds Cl A 4,901 265,585
Worthington Inds 6,631 137,262
---------------
Total 1,699,190
- -----------------------------------------------------------------------------------
MULTILINE RETAIL (0.4%)
Bon-Ton Stores 3,881 99,043
Fred's 5,848 69,416
---------------
Total 168,459
- -----------------------------------------------------------------------------------
MULTI-UTILITIES (0.1%)
NorthWestern Energy 1,999 54,093
- -----------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (3.5%)
Berry Petroleum Cl A 1,228 45,694
Brigham Exploration 7,653(b) 37,117
Callon Petroleum 4,357(b) 61,042
General Maritime 6,948 180,648
Meridian Resource 20,127(b) 54,142
Petrohawk Energy 6,333(b) 94,932
Stone Energy 5,379(b) 174,818
Swift Energy 5,949(b) 254,260
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 21
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
OIL, GAS & CONSUMABLE FUELS (CONT.)
USEC 18,160(b) $304,905
Whiting Petroleum 4,615(b) 189,538
---------------
Total 1,397,096
- -----------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.4%)
Buckeye Technologies 6,109(b) 93,651
Schweitzer-Mauduit Intl 2,709 61,846
---------------
Total 155,497
- -----------------------------------------------------------------------------------
PERSONAL PRODUCTS (0.1%)
Chattem 766(b) 43,019
- -----------------------------------------------------------------------------------
PHARMACEUTICALS (0.5%)
Alpharma Cl A 4,668 115,720
Par Pharmaceutical Companies 3,371(b) 79,859
---------------
Total 195,579
- -----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (3.8%)
American Home Mtge Investment 10,275 10,686
Annaly Capital Management 10,656 153,979
Arbor Realty Trust 3,163 62,469
Capital Trust Cl A 2,651 81,995
Crystal River Capital 4,784 83,194
Deerfield Triarc Capital 13,515 148,260
Entertainment Properties Trust 1,685 75,067
FelCor Lodging Trust 7,900 173,485
Gramercy Capital 1,985 48,017
Kite Realty Group Trust 5,156 82,290
Medical Properties Trust 5,082 56,918
Nationwide Health Properties 3,968 94,557
NorthStar Realty Finance 9,316 93,998
RAIT Financial Trust 3,805 39,420
Redwood Trust 2,266 65,261
Senior Housing Properties Trust 3,794 65,560
Thornburg Mtge 6,109 155,291
---------------
Total 1,490,447
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
ROAD & RAIL (1.0%)
Arkansas Best 5,982 $215,532
Saia 1,679(b) 33,966
Werner Enterprises 7,184 139,657
---------------
Total 389,155
- -----------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.4%)
MKS Instruments 4,649(b) 105,532
OmniVision Technologies 8,893(b) 152,693
Photronics 3,058(b) 42,873
Silicon Storage Technology 17,204(b,d) 62,278
Standard Microsystems 1,281(b) 42,773
Ultra Clean Holdings 6,294(b) 88,557
Zoran 2,214(b) 41,734
---------------
Total 536,440
- -----------------------------------------------------------------------------------
SOFTWARE (0.4%)
i2 Technologies 4,569(b) 74,201
Lawson Software 5,374(b) 51,214
Pegasystems 4,852 51,140
---------------
Total 176,555
- -----------------------------------------------------------------------------------
SPECIALTY RETAIL (5.9%)
Asbury Automotive Group 10,056 222,439
Blockbuster Cl A 27,929(b) 119,815
Books-A-Million 3,085 48,650
Borders Group 12,361 202,226
Charming Shoppes 7,337(b) 72,490
Conn's 6,515(b) 165,286
Finish Line Cl A 13,512 91,341
Gander Mountain 13,484(b) 138,885
Genesco 1,980(b) 100,089
Group 1 Automotive 3,153 118,301
Haverty Furniture Companies 4,131 46,061
Lithia Motors Cl A 3,831 78,880
Payless ShoeSource 3,057(b) 81,377
Pep Boys -- Manny, Moe & Jack 2,801 47,421
Rent-A-Center 7,663(b) 148,739
Shoe Carnival 3,908(b) 85,624
Sonic Automotive Cl A 7,789 213,419
Stage Stores 8,134 145,111
Talbots 2,271 52,210
Zale 6,388(b) 135,617
---------------
Total 2,313,981
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
TEXTILES, APPAREL & LUXURY GOODS (0.6%)
G-III Apparel Group 2,603(b) $41,986
Kellwood 1,203 30,845
Perry Ellis Intl 4,055(b) 121,691
Warnaco Group 1,125(b) 40,624
---------------
Total 235,146
- -----------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (1.3%)
Corus Bankshares 12,404 201,689
Fremont General 21,283 122,803
K-Fed Bancorp 4,489 59,524
Ocwen Financial 6,989(b) 75,761
Triad Guaranty 1,784(b) 49,185
---------------
Total 508,962
- -----------------------------------------------------------------------------------
TOBACCO (0.6%)
Universal 3,395 187,438
Vector Group 1,987 42,522
---------------
Total 229,960
- -----------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (1.3%)
Kaman 5,899 197,557
Rush Enterprises Cl A 5,829(b) 162,921
UAP Holding 4,358 118,407
Watsco 967 48,263
---------------
Total 527,148
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(A)
WATER UTILITIES (0.2%)
SJW 2,245 $64,634
- -----------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (0.4%)
Rural Cellular Cl A 2,863(b) 122,135
USA Mobility 1,996(b) 47,645
---------------
Total 169,780
- -----------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $42,575,727) $39,259,701
- -----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
MONEY MARKET FUND (3.8%)
SHARES VALUE(A)
RiverSource Short-Term Cash Fund 1,506,252(e) $1,506,252
- -----------------------------------------------------------------------------------
TOTAL MONEY MARKET FUND
(Cost: $1,506,252) $1,506,252
- -----------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $44,081,979)(f) $40,765,953
===================================================================================
</Table>
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At July 31, 2007, the
value of foreign securities represented 6.2% of net assets.
(d) Partially pledged as initial margin deposit on the following open stock
index futures contracts (see Note 5 to the financial statements):
<Table>
<Caption>
TYPE OF SECURITY CONTRACTS
- ------------------------------------------------------------------------------
PURCHASE CONTRACTS
Mini Russell 2000 Index, Sept. 2007 1
</Table>
(e) Affiliated Money Market Fund -- See Note 6 to the financial statements.
(f) At July 31, 2007, the cost of securities for federal income tax purposes
was $44,092,553 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
<Table>
Unrealized appreciation $ 1,399,748
Unrealized depreciation (4,726,348)
- ------------------------------------------------------------------------------
Net unrealized depreciation $(3,326,600)
- ------------------------------------------------------------------------------
</Table>
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 23
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.
- --------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2007
<Table>
ASSETS
Investments in securities, at value (Note 1)
Unaffiliated issuers (identified cost $42,575,727) $39,259,701
Affiliated money market fund (identified cost $1,506,252)
(Note 6) 1,506,252
- ---------------------------------------------------------------------------
Total investments in securities (identified cost
$44,081,979) 40,765,953
Capital shares receivable 99,154
Dividends and accrued interest receivable 32,582
Receivable for investment securities sold 6,003,118
- ---------------------------------------------------------------------------
Total assets 46,900,807
- ---------------------------------------------------------------------------
LIABILITIES
Payable for investment securities purchased 7,429,469
Capital shares payable 15,781
Variation margin payable 11,020
Accrued investment management services fee 927
Accrued distribution fee 111
Accrued transfer agency fee 24
Accrued administrative services fee 87
Other accrued expenses 36,894
- ---------------------------------------------------------------------------
Total liabilities 7,494,313
- ---------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $39,406,494
===========================================================================
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 25
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
JULY 31, 2007
<Table>
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 39,341
Additional paid-in capital 41,406,427
Undistributed net investment income 333,335
Accumulated net realized gain (loss) 943,261
Unrealized appreciation (depreciation) on investments (Note
5) (3,315,870)
- ---------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding
capital stock $39,406,494
===========================================================================
</Table>
<Table>
Net assets applicable to outstanding
shares: Class A $13,618,506
Class B $ 551,233
Class C $ 46,126
Class I $25,166,988
Class R2 $ 4,536
Class R3 $ 4,544
Class R4 $ 10,004
Class R5 $ 4,557
Net asset value per share of outstanding
capital stock: Class A shares(1) 1,361,629 $ 10.00
Class B shares 55,679 $ 9.90
Class C shares 4,657 $ 9.90
Class I shares 2,509,791 $ 10.03
Class R2 shares 455 $ 9.97
Class R3 shares 455 $ 9.99
Class R4 shares 1,000 $ 10.00
Class R5 shares 455 $ 10.02
- -------------------------------------------------------------------------------------------
</Table>
(1)The maximum offering price per share for Class A is $10.61. The offering
price is calculated by dividing the net asset value by 1.0 minus the maximum
sales charge of 5.75%.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2007
<Table>
INVESTMENT INCOME
Income:
Dividends $ 603,001
Interest 2,999
Income distributions from affiliated money market fund (Note
6) 52,017
Less foreign taxes withheld (921)
- ---------------------------------------------------------------------------
Total income 657,096
- ---------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 206,071
Distribution fee
Class A 34,465
Class B 4,763
Class C 349
Class R2 16
Class R3 7
Transfer agency fee
Class A 6,434
Class B 307
Class C 21
Class R2 2
Class R3 2
Class R4 6
Class R5 2
Service fee -- Class R4 6
Administrative services fees and expenses 20,681
Plan administration services fee
Class R2 7
Class R3 7
Class R4 19
Compensation of board members 330
Custodian fees 29,775
Printing and postage 15,751
Registration fees 47,588
Professional fees 20,937
Other 1,292
- ---------------------------------------------------------------------------
Total expenses 388,838
Expenses waived/reimbursed by the Investment Manager and
its affiliates (Note 2) (71,732)
- ---------------------------------------------------------------------------
317,106
Earnings and bank fee credits on cash balances (Note 2) (6,406)
- ---------------------------------------------------------------------------
Total net expenses 310,700
- ---------------------------------------------------------------------------
Investment income (loss) -- net 346,396
- ---------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 27
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED JULY 31, 2007
<Table>
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) $ 1,070,240
Futures contracts (127,007)
- ---------------------------------------------------------------------------
Net realized gain (loss) on investments 943,233
Net change in unrealized appreciation (depreciation) on
investments (2,467,303)
- ---------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (1,524,070)
- ---------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $(1,177,674)
===========================================================================
</Table>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE PERIOD FROM
JULY 31, 2007 FEB. 16, 2006*
YEAR ENDED TO JULY 31, 2006
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 346,396 $ 33,477
Net realized gain (loss) on investments 943,233 334,405
Net change in unrealized appreciation (depreciation)
on investments (2,467,303) (1,059,500)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (1,177,674) (691,618)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (22,789) --
Class I (22,690) --
Class R2 (17) N/A
Class R3 (17) N/A
Class R4 (58) --
Class R5 (18) N/A
Net realized gain
Class A (234,913) --
Class B (7,684) --
Class C (463) --
Class I (106,528) --
Class R2 (84) N/A
Class R3 (84) N/A
Class R4 (337) --
Class R5 (84) N/A
- -------------------------------------------------------------------------------------------
Total distributions (395,766) --
- -------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 29
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
FOR THE PERIOD FROM
JULY 31, 2007 FEB. 16, 2006*
YEAR ENDED TO JULY 31, 2006
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) $ 3,183,242 $ 1,781,018
Class B shares 600,360 262,415
Class C shares 23,355 20,800
Class I shares 23,678,701 3,314,962
Class R2 shares 5,000 N/A
Class R3 shares 5,000 N/A
Class R4 shares 8,003 --
Class R5 shares 5,000 N/A
Reinvestment of distributions at net asset value
Class A shares 55,291 --
Class B shares 7,499 --
Class C shares 278 --
Class I shares 128,993 --
Class R4 shares 178 --
Payments for redemptions
Class A shares (1,077,624) (134,265)
Class B shares (Note 2) (269,435) (26,868)
Class C shares (Note 2) (4,930) --
Class I shares (115,893) (125)
Class R4 shares (9,200) --
- -------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions 26,223,818 5,217,937
- -------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 24,650,378 4,526,319
Net assets at beginning of year (Note 1) 14,756,116 10,229,797**
- -------------------------------------------------------------------------------------------
Net assets at end of year $39,406,494 $14,756,116
===========================================================================================
Undistributed net investment income $ 333,335 $ 46,733
- -------------------------------------------------------------------------------------------
</Table>
* When shares became publicly available.
** Initial capital of $10,010,640 was contributed on Feb. 9, 2006. The Fund had
an increase in net assets resulting from operations of $219,157 during the
period from Feb. 9, 2006 to Feb. 16, 2006 (when shares became publicly
available).
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. 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. On Feb. 9, 2006, Ameriprise Financial, Inc. (Ameriprise
Financial), the parent company of Riversource Investments, LLC (the Investment
Manager) invested $10,010,640* in the Fund (996,000 shares for Class A, 1,000
shares for Class B, 1,000 shares for Class C, 2,064** shares for Class I and
1,000 shares for Class R4), which represented the initial capital for each class
at $10 per share. Shares of the Fund were first offered to the public on Feb.
16, 2006.
The Fund offers Class A, Class B, Class C, Class I and Class R4 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 have no sales charge and are offered only to
qualifying institutional investors.
Effective Dec. 11, 2006, the Board approved renaming Class Y as Class R4,
terminating the shareholder servicing agreement, revising the fee structure
under the transfer agent agreement from account-based to asset-based, and
adopting a plan administration services agreement.
At July 31, 2007, Ameriprise Financial and the affiliated funds-of-funds owned
100% of Class I shares.
Effective Dec. 11, 2006, the Fund offers additional classes of shares, Class R2,
Class R3 and Class R5, to certain institutional investors. These shares are sold
without a front-end sales charge or CDSC. At July 31, 2007, Ameriprise Financial
owned 100% of Class R2, Class R3 and Class R5 shares.
At July 31, 2007, Ameriprise Financial and the affiliated funds-of-funds owned
approximately 89% of the total outstanding Fund shares.
* Includes $10,640 invested by the RiverSource Income Builder Funds.
** Includes 1,064 shares purchased by RiverSource Income Builder Funds.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 31
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 fees) differ among classes. Income, expenses (other
than class specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative net
assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by 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
of Directors of the funds 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 equities) 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 will fair value foreign
equity securities pursuant to procedures adopted by the Board of Directors of
the funds, including utilizing a third party pricing service to determine these
fair values. These procedures take into account multiple factors, including
movements in the U.S. securities markets, to determine a good faith estimate
that reasonably reflects the current market conditions as of the close of the
New York Stock Exchange. Swap transactions are valued through an authorized
pricing service, broker, or an internal model. Short-term securities maturing in
more than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
- --------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
Cash collateral may be collected by the Fund to secure certain over-the-counter
options trades. Cash collateral held by the Fund for such option trades must be
returned to the counterparty upon closure, exercise or expiration of the
contract. The Fund also may buy and sell put and call options and write covered
call options on portfolio securities as well as write cash-secured put options.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid. At
July 31, 2007, 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
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 33
on the transaction date. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a component of
such gains or losses. In the statement of operations, net realized gains or
losses from foreign currency transactions, if any, may arise from sales of
foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations. At July 31, 2007, 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.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been decreased by $14,205
and accumulated net realized gain has been increased by $14,205.
- --------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
The tax character of distributions paid for the periods indicated is as follows:
<Table>
<Caption>
FOR THE PERIOD
JULY 31, 2007 FROM FEB. 16, 2006(A)
YEAR ENDED TO JULY 31, 2006
- ---------------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income.................. $232,895 $ --
Long-term capital gain........... 24,807 --
CLASS B
Distributions paid from:
Ordinary income.................. 6,873 --
Long-term capital gain........... 811 --
CLASS C
Distributions paid from:
Ordinary income.................. 414 --
Long-term capital gain........... 49 --
CLASS I
Distributions paid from:
Ordinary income.................. 117,968 --
Long-term capital gain........... 11,250 --
CLASS R2(B)
Distributions paid from:
Ordinary income.................. 92 N/A
Long-term capital gain........... 9 N/A
CLASS R3(B)
Distributions paid from:
Ordinary income.................. 92 N/A
Long-term capital gain........... 9 N/A
CLASS R4(C)
Distributions paid from:
Ordinary income.................. 359 --
Long-term capital gain........... 36 --
CLASS R5(B)
Distributions paid from:
Ordinary income.................. 93 N/A
Long-term capital gain........... 9 N/A
</Table>
(a) When shares became publicly available.
(b) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(c) Effective Dec. 11, 2006, Class Y was renamed Class R4.
At July 31, 2007, the components of distributable earnings on a tax basis are as
follows:
<Table>
Undistributed ordinary income.............................. $ 1,073,324
Undistributed accumulated long-term gain................... $ 214,002
Unrealized appreciation (depreciation)..................... $ (3,326,600)
</Table>
RECENT ACCOUNTING PRONOUNCEMENTS
On Sept. 20, 2006, the Financial Accounting Standards Board (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
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 35
a framework for measuring fair value, and requires additional disclosures about
fair-value measurements. The application of SFAS 157 is required for fiscal
years beginning after Nov. 15, 2007 and interim periods within those fiscal
years. The impact of SFAS 157 on the Fund's financial statements is being
evaluated.
In June 2006, the FASB issued FASB Interpretation 48 (FIN 48), "Accounting for
Uncertainty in Income Taxes." FIN 48 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. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after Dec. 15, 2006. Tax positions of the Fund are being
evaluated to determine the impact, if any to the Fund. The adoption of FIN 48 is
not anticipated to have a material impact on the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium, market discount and original issue discount
using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, the Investment Manager
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Fund's average daily net assets that declines from 0.85%
to 0.725% annually as the Fund's assets increase. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to 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
$13,668 for the year ended July 31, 2007. The management fee for the year ended
July 31, 2007, was 0.80% of the Fund's average daily net assets, including an
adjustment under the terms of the performance incentive arrangement.
- --------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
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.
Other expenses in the amount of $509 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.
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.
Professional fees include fees paid by the Fund for legal services and
independent registered public accounting firm services.
Under a Transfer Agency Agreement, RiverSource Service Corporation (the Transfer
Agent) maintains shareholder accounts and records. The Fund pays the Transfer
Agent an annual fee per shareholder account for this service as follows:
- - Class A $19.50
- - Class B $20.50
- - Class C $20.00
Effective Dec. 11, 2006, as part of the Board's approval to rename Class Y as
Class R4, the fee structure under the Transfer Agency Agreement was revised from
an account-based fee for Class Y to an asset-based fee for Class R4. The Fund
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. Prior to Dec.
11, 2006, the Fund paid the Transfer Agent an annual account-based fee of $17.50
per shareholder account.
In addition, the Fund pays the Transfer Agent an annual asset-based fee at a
rate of 0.05% of the Fund's average daily net assets attributable to Class R2,
Class R3 and Class R5 shares.
Prior to Dec. 11, 2006, Class I paid a transfer agency fee at an annual rate per
shareholder account of $1. Effective Dec. 11, 2006, this fee was eliminated.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 37
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.
The Fund has agreements with Ameriprise Financial Services, Inc. and RiverSource
Distributors, Inc. (collectively, the Distributor) for distribution and
shareholder services. Under a Plan and Agreement of Distribution pursuant to
Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's
average daily net assets attributable to Class A and Class R3 shares, a fee at
an annual rate of up to 0.50% of the Fund's average daily net assets
attributable to Class R2 shares and a fee at an annual rate of up to 1.00% of
the Fund's average daily net assets attributable to Class B and Class C shares.
Effective Dec. 11, 2006, a Plan Administration Services Agreement was adopted
for the restructured Class R4 and the introduction of Class R2 and Class R3. The
fee is calculated at a rate of 0.25% of the Fund's average daily net assets
attributable to Class R2, Class R3 and Class R4 shares.
Prior to Dec. 11, 2006, under a Shareholder Service Agreement, the Fund paid the
Distributor a fee for service provided to shareholders by the Distributor and
other servicing agents with respect to Class Y shares. The fee was calculated at
a rate of 0.10% of the Fund's average daily net assets attributable to Class Y
shares. Effective Dec. 11, 2006, this agreement was terminated.
Sales charges received by the Distributor for distributing Fund shares were
$15,072 for Class A, $523 for Class B and $49 for Class C for the year ended
July 31, 2007.
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.
For the year ended July 31, 2007, the Investment Manager and its affiliates
waived certain fees and expenses (excluding fees and expenses of acquired
funds), such that net expenses were 1.35% for Class A, 2.11% for Class B, 2.11%
for Class C, 1.05% for Class I, 1.80% for Class R2, 1.55% for Class R3, 1.26%
for Class R4 and 1.05% for Class R5. Of these waived fees and expenses, the
transfer agency fees waived for Class R2, Class R3, Class R4 and Class R5 were
$2, $1, $2 and $1, respectively, and the management fees waived at the Fund
level were $71,726. Under an agreement, which was effective until July 31, 2007,
the Investment Manager and its affiliates agreed to waived certain fees and
expenses such that net expenses (excluding fees and expenses of acquired funds),
before giving effect to
- --------------------------------------------------------------------------------
38 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
any performance incentive adjustment, would not exceed 1.48% for Class A, 2.25%
for Class B, 2.25% for Class C, 1.13% for Class I, 1.85% for Class R2, 1.60% for
Class R3, 1.31% for Class R4 and 1.10% for Class R5 of the Fund's average daily
net assets. Effective Aug. 1, 2007, the Investment Manager and its affiliates
have agreed to waive certain fees and expenses until July 31, 2008, 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 1.40% for Class A, 2.16% for
Class B, 2.15% for Class C, 1.02% for Class I, 1.82% for Class R2, 1.57% for
Class R3, 1.32% for Class R4 and 1.07% for Class R5 of the Fund's average daily
net assets.
During the year ended July 31, 2007, the Fund's custodian and transfer agency
fees were reduced by $6,406 as a result of earnings and bank fee credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust
Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $57,570,895 and $30,980,107, respectively, for the year
ended July 31, 2007. Realized gains and losses are determined on an identified
cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
<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(a) 455 -- -- 455
Class R3(a) 455 -- -- 455
Class R4(b) 822 17 (839) --
Class R5(a) 455 -- -- 455
- ----------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 39
<Table>
<Caption>
FEB. 16, 2006(C) TO JULY 31, 2006
ISSUED FOR
REINVESTED NET
SOLD DISTRIBUTIONS REDEEMED INCREASE (DECREASE)
- ----------------------------------------------------------------------------------------------
Class A 173,455 -- (13,317) 160,138
Class B 25,661 -- (2,790) 22,871
Class C 1,966 -- -- 1,966
Class I 324,274 -- (12) 324,262
Class R4(b) -- -- -- --
- ----------------------------------------------------------------------------------------------
</Table>
(a) For the period from Dec. 11, 2006 (inception date) to July 31, 2007.
(b) Effective Dec. 11, 2006, Class Y was renamed Class R4.
(c) When shares became publicly available.
5. STOCK INDEX FUTURES CONTRACTS
At July 31, 2007, investments in securities included securities valued at
$162,355 that were pledged as collateral to cover initial margin deposits on one
open purchase contract. The notional market value of the open purchase contract
at July 31, 2007 was $78,100 with a net unrealized gain of $156. See "Summary of
significant accounting policies" and "Notes to investments in securities."
6. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments. Cost of purchases
and proceeds from sales of securities aggregated $26,314,879 and $24,808,628,
respectively, for the year ended July 31, 2007.
7. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency purposes.
The agreement went into effect Sept. 19, 2006. The Fund must maintain asset
coverage for borrowings of at least 300%. The agreement, which enables the Fund
to participate with other RiverSource funds, permits borrowings up to $500
million, collectively. Interest is charged to each Fund based on its borrowings
at a rate equal to either the higher of the Federal Funds Effective Rate plus
0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within
60 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.06%
per annum. Prior to this agreement, the Fund paid a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.07% per
annum. The Fund had no borrowings under the facility outstanding during the year
ended July 31, 2007.
- --------------------------------------------------------------------------------
40 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
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 may file a notice of appeal with the Eighth Circuit Court of Appeals
within 30 days from the date of judgment.
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), the parent company of RiverSource Investments, LLC
(RiverSource Investments), entered into settlement agreements with the
Securities and Exchange Commission (SEC) and Minnesota Department of Commerce
(MDOC) related to market timing activities. In connection with these matters,
the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain
provisions of the federal and Minnesota securities laws by failing to adequately
disclose market timing activities by allowing certain identified market timers
to continue to market time contrary to disclosures in mutual fund and variable
annuity product prospectuses. The Orders also alleged that AEFC failed to
implement procedures to detect and prevent market timing in 401(k) plans for
employees of AEFC and related companies and failed to adequately disclose that
there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and various
Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay
disgorgement of $10 million and civil money penalties of $7 million. AEFC also
agreed to make presentations at least annually to its board of directors and the
relevant mutual funds' board that include an overview of policies and procedures
to prevent market timing, material changes to these policies and procedures and
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 41
whether disclosures related to market timing are consistent with the SEC order
and federal securities laws. AEFC also agreed to retain an independent
distribution consultant to assist in developing a plan for distribution of all
disgorgement and civil penalties ordered by the SEC in accordance with various
undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In
addition, AEFC agreed to complete and submit to the MDOC a compliance review of
its procedures regarding market timing within one year of the MDOC Order,
including a summary of actions taken to ensure compliance with applicable laws
and regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, 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.
- --------------------------------------------------------------------------------
42 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 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, 2007 2006(B)
Net asset value, beginning of period $9.77 $10.22
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .14(c) .02
Net gains (losses) (both realized and
unrealized) .29 (.47)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .43 (.45)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) --
Distributions from realized gains (.19) --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.20) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $9.77
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $14 $11
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.35% 1.40%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.30% .55%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127% 40%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 4.29% (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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class A would have been 1.73% and 3.27% for the periods ended July 31, 2007
and 2006, respectively.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 43
CLASS B
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $9.73 $10.22
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(c) --
Net gains (losses) (both realized and
unrealized) .31 (.49)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .36 (.49)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains (.19) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.90 $9.73
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $1 $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 2.11% 2.18%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .49% (.17%)(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127% 40%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 3.51% (4.79%)(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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class B would have been 2.38% and 4.05% for the periods ended July 31, 2007
and 2006, respectively.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
CLASS C
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $9.73 $10.22
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05(c) --
Net gains (losses) (both realized and
unrealized) .31 (.49)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .36 (.49)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains (.19) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.90 $9.73
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 2.11% 2.18%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .43% (.22%)(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127% 40%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 3.51% (4.79%)(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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class C would have been 2.47% and 4.05% for the periods ended July 31, 2007
and 2006, respectively.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 45
CLASS I
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $9.78 $10.22
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .15(c) .03
Net gains (losses) (both realized and
unrealized) .32 (.47)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .47 (.44)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) --
Distributions from realized gains (.19) --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.22) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.03 $9.78
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $25 $3
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.05% 1.13%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.43% .91%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127% 40%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class I would have been 1.19% and 3.00% for the periods ended July 31, 2007
and 2006, respectively.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
46 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
CLASS R2
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $10.99
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06(c)
Net gains (losses) (both realized and
unrealized) (.86)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (.80)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03)
Distributions from realized gains (.19)
- -----------------------------------------------------------------------------------------------------------
Total distributions (.22)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.97
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.80%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .77%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127%
- -----------------------------------------------------------------------------------------------------------
Total return(h) (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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class R2 would have been 1.85% for the period ended July 31, 2007.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 47
CLASS R3
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $10.99
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07(c)
Net gains (losses) (both realized and
unrealized) (.85)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (.78)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03)
Distributions from realized gains (.19)
- -----------------------------------------------------------------------------------------------------------
Total distributions (.22)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.99
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.55%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.02%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127%
- -----------------------------------------------------------------------------------------------------------
Total return(h) (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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class R3 would have been 1.58% for the period ended July 31, 2007.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
48 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
CLASS R4*
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007 2006(B)
Net asset value, beginning of period $9.77 $10.22
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .17(c) .02
Net gains (losses) (both realized and
unrealized) .28 (.47)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .45 (.45)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) --
Distributions from realized gains (.19) --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.22) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.00 $9.77
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $-- $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.26% 1.25%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.60% .69%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127% 40%
- -----------------------------------------------------------------------------------------------------------
Total return(h) 4.42% (4.40%)(i)
- -----------------------------------------------------------------------------------------------------------
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class R4 would have been 1.83% and 3.12% for the periods ended July 31,
2007 and 2006, respectively.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 49
CLASS R5
<Table>
<Caption>
PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED JULY 31, 2007(B)
Net asset value, beginning of period $10.99
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .11(c)
Net gains (losses) (both realized and
unrealized) (.86)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations (.75)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03)
Distributions from realized gains (.19)
- -----------------------------------------------------------------------------------------------------------
Total distributions (.22)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.02
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $--
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily
net assets(d),(e),(f) 1.05%(g)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.53%(g)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 127%
- -----------------------------------------------------------------------------------------------------------
Total return(h) (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 average shares outstanding
method.
(d) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances. Includes the impact of a
performance incentive adjustment fee, if any.
(e) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class R5 would have been 1.09% for the period ended July 31, 2007.
(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) Total return does not reflect payment of a sales charge.
(i) Not annualized.
- --------------------------------------------------------------------------------
50 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 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 schedule of investments in securities of RiverSource Disciplined Small Cap
Value Fund (the Fund), one of the portfolios constituting the RiverSource
Dimensions Series, Inc, as of July 31, 2007, and the related statements of
operations, changes in net assets, and financial highlights for the year 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
audit. The financial statements and 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 opinions on those
financial statements and financial highlights.
We conducted our audit 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 audit 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, 2007, by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. We believe that our audit provides a reasonable basis for our
opinion.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 51
In our opinion, the 2007 financial statements and financial highlights 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, 2007, the results of its operations, changes in its net
assets and the financial highlights for the year then ended, in conformity with
U.S. generally accepted accounting principles.
-s- Ernst & Young
Minneapolis, Minnesota
September 20, 2007
- --------------------------------------------------------------------------------
52 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 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.
RiverSource Disciplined Small Cap Value Fund
Fiscal year ended July 31, 2007
CLASS A
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.18344
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.20298
</Table>
CLASS B
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.16549
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.18503
</Table>
CLASS C
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.16549
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.18503
</Table>
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 53
CLASS I
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.20490
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.22444
</Table>
CLASS R2
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.20309
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.22263
</Table>
CLASS R3
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.20370
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.22324
</Table>
CLASS R4*
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.19695
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.21649
</Table>
- --------------------------------------------------------------------------------
54 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
CLASS R5
<Table>
<Caption>
INCOME DISTRIBUTIONS - taxable as dividend income:
Qualified Dividend Income for individuals............. 18.71%
Dividends Received Deduction for corporations......... 18.44%
</Table>
<Table>
<Caption>
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.20485
</Table>
<Table>
<Caption>
CAPITAL GAIN DISTRIBUTION - taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2006............................................... $0.01954
Total distributions......................................... $0.22439
</Table>
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 55
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 102
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
901 S. Marquette Ave. since 2006 Court, 1998-2005
Minneapolis, MN 55402
Age 53
- -----------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, RiverSource Funds,
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
901 S. Marquette Ave. since 2007 in Cross Cultural Leadership
Minneapolis, MN 55402 (consulting company)
Age 52
- -----------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College; former
Minneapolis, MN 55402 Dean, McCallum Graduate School of
Age 56 Business, Bentley College
- -----------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 72
- -----------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member Former Managing Director, Shikiar American Progressive
901 S. Marquette Ave. since 2005 Asset Management Insurance
Minneapolis, MN 55402
Age 71
- -----------------------------------------------------------------------------------------------------
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 68 Board since 2007
- -----------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
56 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 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 Director, Enterprise Asset Strategic
901 S. Marquette Ave. since 2004 Management, Inc. (private real Distribution, Inc.
Minneapolis, MN 55402 estate and asset management (transportation,
Age 55 company) distribution and
logistics
consultants)
- -----------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc.
901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology);
Minneapolis, MN 55402 former President, Forester Biotech American Healthways,
Age 63 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
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; President, Ameriprise
Certificate Company 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 -- 2007 ANNUAL REPORT 57
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
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Patrick T. Bannigan President since Senior Vice President -- Asset Management,
172 Ameriprise 2006 RiverSource Investments, LLC since 2006;
Financial Center Managing Director and Global Head of Product,
Minneapolis, MN 55474 Morgan Stanley Investment Management,
Age 41 2004-2006; President, Touchstone Investments,
2002-2004; Director of Strategic Planning,
Evergreen Investments, 1995-2002
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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 43 Certificate Company since 2003; Senior Vice
President -- Fixed Income, Ameriprise
Financial, Inc., 2002-2006 and RiverSource
Investments, LLC, 2004-2006; Managing
Director, Zurich Global Assets, 2001-2002
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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 41 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; Vice
Financial Center President -- Finance, American Express
Minneapolis, MN 55474 Company, 2000-2002
Age 52
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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; Vice President, General Counsel and
Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company
Age 47 since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc.,
2004-2005; Senior Vice President and Chief
Compliance Officer, U.S. Bancorp Asset
Management, 2002-2004; Second Vice President
and Assistant General Counsel, Hartford Life,
2001-2002
- ------------------------------------------------------------------------------------------
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 46 Voyageur Asset Management, 2000-2003
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</Table>
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58 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
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 43 Compliance Director and Bank Secrecy Act
Officer, American Express Centurion Bank,
2000-2003
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</Table>
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RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 59
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
RiverSource Investments, LLC ("RiverSource"), 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 provides investment advice and other services to the
Fund and all RiverSource funds (collectively, the "Funds"). The Fund's Board of
Directors (the "Board") and the Board's Investment Review and Contracts
Committees monitor these services throughout the year.
On an annual basis, the Board, including the independent Board members (the
"Independent Directors"), considers renewal of the IMS Agreement. RiverSource
prepares detailed reports for the Board and its Contracts Committee in March and
April, 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
addressing the services RiverSource provides and Fund performance. The Board
accords particular weight to the work, deliberations and conclusions of the
Contracts and Investment Review Committees in determining whether to continue
the IMS Agreement. At the April 11-12, 2007 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: The Board
analyzed various reports and presentations it had received detailing the
services performed by RiverSource, as well as its expertise, resources and
capabilities. The Board specifically considered many developments during the
past year concerning the services provided by RiverSource, including, in
particular, the growing strength and capabilities of many RiverSource offices
and the increased investment and resources dedicated to the Fund's operations,
particularly in the areas of trading systems, legal and compliance. Further, in
connection with the Board's evaluation of the overall package of services
provided by RiverSource, the Board considered the quality of the administrative,
custody and transfer agency services provided by RiverSource affiliates to the
Fund. The Board also reviewed the financial condition of RiverSource and the
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). The Board concluded that the services being performed under the
IMS Agreement were of a reasonably high quality.
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60 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
Based on the foregoing, and based on other information received (both oral and
written, including the information on investment performance referenced below)
and other considerations, the Board determined that RiverSource was in a
position to continue to provide a high quality and level of services to the
Fund.
Investment Performance: The Board observed that the Fund was first launched in
February 2006. 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) and recent Fund
inflows (and outflows).The Board observed that the Fund's investment performance
reflected the interrelationship of particular market conditions with the
specific management style employed by the portfolio management team. Further,
the Board noted that appropriate measures have been taken to modify the
disciplined quantitative method designed to lead to a more consistent
performance experience over time.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource 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's 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) approximated the peer group's median expense ratio. 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 and its
affiliates in connection with RiverSource providing investment management
services to the Fund. In this regard, the Board referred to a detailed
profitability report, discussing the profitability to RiverSource and Ameriprise
Financial from managing and operating the Fund, including data showing
comparative profitability. The Board also considered the services acquired by
the investment
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RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 61
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 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 12, 2007, 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.
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
On April 12, 2007, Ernst & Young LLP was selected as the Fund's independent
registered public accounting firm for the 2007 fiscal year. A majority of the
Fund's Board of Directors, including a majority of the Independent Directors,
approved the appointment of Ernst & Young LLP. The predecessor independent
registered public accounting firm's reports on the Fund's financial statements
for the year ended July 31, 2006 and the year ended July 31, 2005 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. During such fiscal periods
and
- --------------------------------------------------------------------------------
62 RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT
through April 12, 2007 there were no disagreements between the Fund and the
predecessor independent registered public accounting firm on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which such disagreements, if not resolved to the
satisfaction of the predecessor independent registered public accounting firm,
would have caused them to make reference to the subject matter of the
disagreement in connection with their reports on the financial statements for
such fiscal periods.
- --------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED SMALL CAP VALUE FUND -- 2007 ANNUAL REPORT 63
RIVERSOURCE(R) 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.
and Ameriprise Financial Services, Inc., Members FINRA, and
managed by
(RIVERSOURCE INVESTMENTS RiverSource Investments, LLC. These companies are part of
LOGO) Ameriprise Financial, Inc. S-6397 D (9/07)
</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 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:
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:
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:
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:
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
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:
2007 - $239,670
(h) 100% of the services performed in item (g) above during 2007 were
pre-approved by the 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, 2007
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, 2007
By /s/ Jeffrey P. Fox
-----------------------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date October 3, 2007