UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2111
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RIVERSOURCE LARGE CAP SERIES, INC.
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(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
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Date of fiscal year end: 7/31
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Date of reporting period: 7/31
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Annual Report
RIVERSOURCE [LOGO](SM)
INVESTMENTS
RIVERSOURCE(SM)
DISCIPLINED EQUITY FUND
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ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2006
> RIVERSOURCE DISCIPLINED EQUITY
FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM
CAPITAL GROWTH.
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TABLE OF CONTENTS
Fund Snapshot .......................................................... 3
Performance Summary .................................................... 5
Questions & Answers with Portfolio Management .......................... 7
The Fund's Long-term Performance ....................................... 10
Investments in Securities .............................................. 12
Financial Statements ................................................... 18
Notes to Financial Statements .......................................... 22
Report of Independent Registered Public Accounting Firm ................ 37
Federal Income Tax Information ......................................... 38
Fund Expenses Example .................................................. 40
Board Members and Officers ............................................. 42
Approval of Investment Management Services Agreement ................... 45
Proxy Voting ........................................................... 45
[LOGO]
DALBAR RATED
2006
FOR COMMUNICATION
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 EQUITY FUND -- 2006 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2006
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FUND OVERVIEW
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RiverSource Disciplined Equity Fund invests primarily in large cap stocks.
Quantitative models provide objective analysis of all companies in the large
cap space. The team utilizes three independent models (growth-oriented,
value-oriented, and quality-oriented) to achieve a level of style
diversification that offers the potential to perform well in a variety of
market environments. Explicit risk management tools and trading cost controls
are designed to limit turnover and tightly manage risk.
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SECTOR BREAKDOWN*
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Percentage of portfolio assets
Financials 21.3%
Energy 15.5%
Health Care 13.9%
Information Technology 10.8% [PIE CHART]
Industrials 9.7%
Consumer Discretionary 9.1%
Other(1) 19.7%
* 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 7.4%, Telecommunication Services 6.0%,
Materials 4.1%, Utilities 1.2% and Short-Term Securities(2) 1.0%.
(2) Of the 1.0%, 0.6% is due to security lending activity and 0.4% is the
Fund's cash equivalent position.
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TOP TEN HOLDINGS
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Percentage of portfolio assets
Exxon Mobil 5.3%
Johnson & Johnson 3.8
Chevron 3.8
Merck & Co 3.4
Verizon Communications 2.7
Citigroup 2.4
Schlumberger 2.4
AT&T 2.2
Fannie Mae 2.1
ConocoPhillips 2.1
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.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2006
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STYLE MATRIX
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[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
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 involve risks including possible loss of principal and
fluctuation in value.
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PORTFOLIO MANAGERS
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YEARS IN INDUSTRY
Dimitris Bertsimas, Ph.D. 13
Gina Mourtzinou, Ph.D. 10
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FUND FACTS
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TICKER SYMBOL INCEPTION DATE
Class A AQEAX 4/24/03
Class B AQEBX 4/24/03
Class C -- 4/24/03
Class I ALEIX 7/15/04
Class Y RQEYX 4/24/03
Total net assets $1.920 billion
Number of holdings 238
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4 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
PERFORMANCE SUMMARY
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PERFORMANCE COMPARISON
For the year ended July 31, 2006
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
+6.25% RiverSource Disciplined Equity Fund
Class A (excluding sales charge)
+5.38% S&P 500 Index (unmanaged)
+5.00% Lipper Large-Cap Core Funds Index
(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.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 5
PERFORMANCE SUMMARY
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AVERAGE ANNUAL TOTAL RETURNS
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CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (4/24/03) (4/24/03) (4/24/03) (7/15/04) (4/24/03)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5)
AT JULY 31, 2006
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1 year +6.25% +0.14% +5.42% +0.42% +5.51% +4.51% +6.73% +6.48%
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3 years +11.32% +9.15% +10.39% +9.29% +10.43% +10.43% N/A +11.46%
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Since inception +13.23% +11.20% +12.30% +11.59% +12.33% +12.33% +10.88% +13.42%
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AT JUNE 30, 2006
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1 year +9.89% +3.57% +8.89% +3.89% +8.82% +7.82% +10.20% +9.95%
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3 years +10.97% +8.80% +10.09% +8.98% +10.07% +10.07% N/A +11.17%
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Since inception +13.40% +11.31% +12.49% +11.75% +12.47% +12.47% +11.04% +13.59%
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(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows:
first year 5%; second and third year 4%; fourth year 3%; fifth year 2%;
sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
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6 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, Portfolio Managers Dimitris Bertsimas and Gina Mourtzinou discuss
RiverSource Disciplined Equity Fund's positioning and results for the 12
months ended July 31, 2006. On March 10, 2006, the assets of RiverSource Stock
Fund were merged into RiverSource Disciplined Equity Fund. This reorganization
was completed after shareholders of RiverSource Stock Fund approved the merger
plan on Feb. 15, 2006.
Q: How did RiverSource Disciplined Equity Fund perform for the annual
period?
A: RiverSource Disciplined Equity Fund's Class A shares (excluding sales
charge) returned 6.25% for the 12 months ended July 31, 2006. The Fund
outperformed the Standard & Poor's 500 Index (S&P 500 Index), which
gained 5.38%, as well as the Lipper Large-Cap Core Funds Index,
representing the Fund's peer group, which returned 5.00%, for the same
period.
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BECAUSE OF OUR INVESTMENT PROCESS, MOST OF THE FUND'S OUTPERFORMANCE
RESULTED FROM STOCK SELECTION, PARTICULARLY IN INFORMATION TECHNOLOGY,
HEALTH CARE AND MATERIALS.
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Q: What factors most significantly affected the Fund's performance?
A: The Fund's outperformance resulted from the performance of the three
quantitative investment models -- momentum, value and quality -- we
employ in selecting stocks for the Fund's portfolio. Under the Fund's
investment process, the three models choose the stocks for the
portfolio. We then weight the models and determine the exposure to
sectors and industries. During the 12-month period, the value model was
the strongest performer. We believe the style diversification provided
by the three quantitative models continued to be a significant
investment advantage during the period.
Our risk modeling also contributed to the Fund's strong performance
relative to the S&P 500 Index and Lipper peer group. Our risk models
limit the size of individual holdings, as well as sector and industry
allocations, relative to the S&P 500 Index. For example, the portfolio's
weightings by sector and industry can never be more than 6% overweighted
or underweighted relative to the S&P 500 Index. We also apply additional
risk controls that impose constraints on market capitalization, price,
quality, turnover, transaction costs and other variables.
During the period, the Fund had greater-than-S&P 500 Index positions in
energy, health care and telecommunication services. The Fund had
less-than-S&P 500 Index positions in industrials, financials,
information technology, consumer discretionary and materials. Energy was
the biggest contributor to the Fund's
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 7
QUESTIONS & ANSWERS
return, while the Fund's allocations to telecommunication services and
consumer discretionary helped as well. Positioning in health care,
industrials, financials and materials modestly detracted from
performance.
Because of our investment process, most of the Fund's outperformance
resulted from stock selection, particularly in information technology,
health care and materials. These positives outweighed less than
effective stock selection in the consumer discretionary and financials
sectors. Among individual holdings, drug manufacturer Merck contributed
most to the Fund's return. Other strong positive contributors included
integrated oil giant Exxon Mobil, food and tobacco leader Altria Group,
telecommunications leader AT&T, and computer maker Hewlett-Packard.
The Fund's investment in iShares MSCI EAFE Index Fund, an
exchange-traded fund based on the MSCI EAFE Index of stocks from
developed international markets, also was a strong contributor to the
Fund's results. International stocks, as measured by the MSCI EAFE
Index, significantly outperformed domestic stocks, as measured by the
S&P 500 Index, for the annual period. The Fund's position in iShares was
established based on a separate asset allocation model.
Stocks that detracted from the Fund's return included wireless equipment
manufacturer Qualcomm, building products retailer Home Depot,
homebuilder DR Horton, mortgage loan giant Fannie Mae, and semiconductor
makers Advanced Micro Devices and Intel.
Q: What changes did you make to the Fund's portfolio during the period?
A: Following a remarkably strong run in the international equity market, we
decreased the Fund's holding in iShares MSCI EAFE Index Fund. With an
average weighting of 3.17% during the 12-month period, the portfolio's
allocation to international equities declined from approximately 5% of
total assets at its peak to approximately 1% at the end of July.
As a result of stock selection during the period, the portfolio's sector
allocations changed somewhat. For example, while both the
telecommunication services and health care sectors remained overweighted
relative to the S&P 500 Index, their weightings moved closer to the S&P
500 Index's weightings. Also, consumer staples and utilities went from a
higher-than-S&P 500 Index allocation to a less-than-S&P 500 Index
allocation during the fiscal year. The Fund's exposure to information
technology, financials and industrials remained moderate but did
increase somewhat during the 12-month period, and the Fund's position in
materials shifted from less than the Index to greater than the S&P 500
Index. Overall portfolio turnover was 137% for the 12 months.
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8 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
At the end of the period, the Fund had significant exposures to the
energy and health care sectors. The Fund had more modest exposure to the
utilities and consumer staples sectors.
It also needs to be noted that in mid-March 2006, RiverSource
Disciplined Equity Fund absorbed the total net assets, approximately
$1.8 billion, of RiverSource Stock Fund.
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FOR OUR PART, WE INTEND TO CONTINUE SEEKING OPTIMAL RETURNS FOR THE FUND
THROUGH THE STYLE DIVERSIFICATION OFFERED BY OUR THREE QUANTITATIVE
INVESTMENT MODELS.
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Q: How do you intend to manage the Fund in the coming months?
A: We continue to hold a positive view of the U.S. equity market. We think
conditions may be especially favorable for large-cap stocks, which carry
lower valuations on average than stocks of smaller companies. In
addition, large-caps tend to appeal to investors seeking lower risk
investments during what may be the last stage of the current economic
recovery and a period when economic growth is expected to slow in what
we would characterize as a "soft landing."
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INVESTMENT TERM
Soft landing: A term used to describe a rate of economic growth high
enough to avoid recession but slow enough to avoid high inflation.
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For our part, we intend to continue seeking optimal returns for the Fund
through the style diversification offered by our three quantitative
investment models. We are equally convinced of the merit of our
multifaceted, disciplined approach to controlling risk in the portfolio.
We believe this combination of style diversification and rigorous risk
control will allow us to maintain the high quality of the Fund's
portfolio in whatever market conditions lie ahead.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 9
THE FUND'S LONG-TERM PERFORMANCE
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource Disciplined Equity Fund Class A shares (from 5/1/03
to 7/31/06)* as compared to the performance of two widely cited performance
indices, the S&P 500 Index and the Lipper Large-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 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 April 24, 2003. S&P 500 Index and Lipper peer group data
is from May 1, 2003.
COMPARATIVE RESULTS
Results at July 31, 2006
SINCE
1 YEAR 3 YEARS INCEPTION(3)
RIVERSOURCE DISCIPLINED EQUITY FUND
(INCLUDES SALES CHARGE)
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Class A Cumulative value of $10,000 $10,014 $13,004 $14,147
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Average annual total return +0.14% +9.15% +11.20%
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STANDARD & POOR'S 500 INDEX(1)
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Cumulative value of $10,000 $10,538 $13,603 $14,756
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Average annual total return +5.38% +10.80% +12.72%
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LIPPER LARGE-CAP CORE FUNDS INDEX(2)
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Cumulative value of $10,000 $10,500 $13,000 $13,984
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Average annual total return +5.00% +9.14% +10.87%
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Results for other share classes can be found on page 6.
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10 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE DISCIPLINED EQUITY
FUND
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
RiverSource Disciplined
Equity Fund Class A Lipper Large-Cap
(includes sales charge) S&P 500 Index(1) Core Funds Index(2)
5/1/03 $ 9,425 $10,000 $10,000
7/31/03 $10,254 $10,849 $10,755
7/31/04 $11,483 $12,278 $11,832
7/31/05 $13,315 $14,003 $13,318
7/31/06 $14,147 $14,756 $13,984
(1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of
common stocks, is frequently used as a general measure of market
performance. The index reflects reinvestment of all distributions and
changes in market prices, but excludes brokerage commissions or other
fees.
(2) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured
against this index for purposes of determining the performance incentive
adjustment.
(3) Fund data is from April 24, 2003. S&P 500 Index and Lipper peer group
data is from May 1, 2003.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 11
INVESTMENTS IN SECURITIES
JULY 31, 2006
(Percentages represent value of investments compared to net assets)
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COMMON STOCKS (99.6%)
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ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (1.5%)
Boeing 90,788 $ 7,028,807
United Technologies 351,550 21,862,894
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Total 28,891,701
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AIR FREIGHT & LOGISTICS (0.8%)
FedEx 150,842 15,794,666
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AUTO COMPONENTS (0.7%)
Cooper Tire & Rubber 134,474(f) 1,343,395
Johnson Controls 149,411 11,468,789
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Total 12,812,184
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AUTOMOBILES (1.0%)
Ford Motor 949,756 6,334,873
General Motors 198,200(f) 6,387,986
Harley-Davidson 107,706 6,139,242
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Total 18,862,101
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BEVERAGES (2.6%)
Coca-Cola 831,216 36,989,112
Coca-Cola Enterprises 63,000 1,351,980
Pepsi Bottling Group 39,400 1,310,050
PepsiCo 175,615 11,130,479
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Total 50,781,621
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BIOTECHNOLOGY (0.6%)
Biogen Idec 85,459(b) 3,599,533
Gilead Sciences 109,838(b) 6,752,841
MedImmune 62,293(b) 1,580,996
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Total 11,933,370
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CAPITAL MARKETS (6.6%)
Bear Stearns Companies 59,262 8,407,500
Charles Schwab 229,045 3,637,235
E*TRADE Financial 310,097(b) 7,228,361
Federated Investors Cl B 41,050 1,272,961
Franklin Resources 121,417 11,103,585
Goldman Sachs Group 156,520 23,908,429
Janus Capital Group 74,113 1,199,889
Lehman Brothers Holdings 328,565 21,340,297
Mellon Financial 103,533 3,623,655
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COMMON STOCKS (CONTINUED)
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ISSUER SHARES VALUE(a)
CAPITAL MARKETS (CONT.)
Merrill Lynch & Co 426,443 $ 31,053,578
Morgan Stanley 185,655 12,346,058
T Rowe Price Group 52,172 2,155,225
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Total 127,276,773
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CHEMICALS (0.8%)
Air Products & Chemicals 55,408 3,542,233
Ashland 8,000 532,080
Dow Chemical 80,450(e) 2,781,961
Eastman Chemical 21,200 1,052,156
Monsanto 114,036 4,902,408
PPG Inds 17,500 1,076,950
Sigma-Aldrich 29,836 2,073,602
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Total 15,961,390
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COMMERCIAL BANKS (1.8%)
AmSouth Bancorporation 24,300 696,438
Comerica 80,681 4,723,873
Fifth Third Bancorp 10,200 389,028
First Horizon Natl 64,839 2,716,754
Huntington Bancshares 41,800 1,017,830
KeyCorp 80,436 2,968,088
Natl City 266,234 9,584,424
PNC Financial Services Group 118,696 8,408,425
US Bancorp 128,076 4,098,432
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Total 34,603,292
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COMMERCIAL SERVICES & SUPPLIES (0.6%)
Cendant 130,262 1,955,233
Monster Worldwide 58,405(b) 2,336,200
Waste Management 200,724 6,900,891
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Total 11,192,324
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COMMUNICATIONS EQUIPMENT (2.0%)
ADC Telecommunications 103,541(b) 1,266,306
Corning 201,201(b) 3,836,903
JDS Uniphase 513,972(b) 1,094,760
Motorola 642,688 14,627,579
QUALCOMM 429,828 15,155,736
Tellabs 315,628(b) 2,966,903
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Total 38,948,187
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See accompanying notes to investments in securities.
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12 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
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COMMON STOCKS (CONTINUED)
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ISSUER SHARES VALUE(a)
COMPUTERS & PERIPHERALS (2.2%)
Apple Computer 431,039(b) $ 29,293,410
Lexmark Intl Cl A 63,242(b) 3,418,230
Network Appliance 123,178(b) 3,657,155
SanDisk 86,629(b) 4,042,109
Sun Microsystems 419,773(b) 1,826,013
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Total 42,236,917
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CONSTRUCTION & ENGINEERING (0.2%)
Fluor 45,564 4,001,886
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CONSTRUCTION MATERIALS (--%)
Vulcan Materials 11,774 788,505
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CONTAINERS & PACKAGING (--%)
Pactiv 34,800(b) 852,948
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DISTRIBUTORS (0.2%)
Genuine Parts 81,078 3,376,088
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DIVERSIFIED CONSUMER SERVICES (--%)
Apollo Group Cl A 13,400(b) 634,088
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DIVERSIFIED FINANCIAL SERVICES (4.8%)
CIT Group 120,412 5,528,115
Citigroup 977,792 47,237,131
iShares MSCI EAFE Index Fund 304,360 20,036,019
JPMorgan Chase & Co 200,222 9,134,128
Moody's 176,900 9,708,272
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Total 91,643,665
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DIVERSIFIED TELECOMMUNICATION SERVICES (6.0%)
AT&T 1,420,452 42,599,355
BellSouth 447,060 17,511,340
Qwest Communications Intl 372,093(b) 2,973,023
Verizon Communications 1,540,736 52,107,691
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Total 115,191,409
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ELECTRIC UTILITIES (0.2%)
American Electric Power 112,566 4,065,884
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ELECTRICAL EQUIPMENT (0.5%)
Cooper Inds Cl A 45,489 3,919,332
Rockwell Automation 87,387 5,416,247
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Total 9,335,579
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COMMON STOCKS (CONTINUED)
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ISSUER SHARES VALUE(a)
ELECTRONIC EQUIPMENT & INSTRUMENTS (--%)
Tektronix 21,900 $ 597,213
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ENERGY EQUIPMENT & SERVICES (3.8%)
Baker Hughes 44,019 3,519,319
BJ Services 81,210 2,945,487
Halliburton 133,360 4,448,890
Nabors Inds 80,748(b,c) 2,852,019
Schlumberger 701,202 46,875,353
Transocean 19,560(b) 1,510,619
Weatherford Intl 214,059(b) 10,026,524
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Total 72,178,211
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FOOD & STAPLES RETAILING (2.6%)
Kroger 421,369 9,661,991
Safeway 318,606 8,946,456
Wal-Mart Stores 717,641 31,935,025
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Total 50,543,472
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FOOD PRODUCTS (1.3%)
Archer-Daniels-Midland 322,172 14,175,568
Kellogg 73,600 3,545,312
Sara Lee 248,873 4,205,954
Tyson Foods Cl A 138,600 1,961,190
WM Wrigley Jr 8,183 375,272
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Total 24,263,296
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GAS UTILITIES (0.2%)
Nicor 46,395 2,033,029
Peoples Energy 32,000 1,350,720
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Total 3,383,749
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HEALTH CARE EQUIPMENT & SUPPLIES (1.2%)
Becton Dickinson & Co 44,419 2,928,100
Biomet 76,069 2,505,713
Medtronic 219,814 11,105,004
St. Jude Medical 158,400(b) 5,844,960
--------------
Total 22,383,777
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HEALTH CARE PROVIDERS & SERVICES (1.7%)
AmerisourceBergen 154,761 6,654,723
Cardinal Health 85,343 5,717,981
CIGNA 66,967 6,110,739
Express Scripts 56,499(b) 4,352,118
Health Management Associates Cl A 67,300 1,370,228
McKesson 136,831 6,894,914
Tenet Healthcare 261,345(b) 1,547,162
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Total 32,647,865
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See accompanying notes to investments in securities.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 13
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COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HOTELS, RESTAURANTS & LEISURE (1.4%)
Darden Restaurants 50,646 $ 1,711,835
Intl Game Technology 211,357 8,171,062
Starbucks 377,827(b) 12,944,352
Wendy's Intl 53,279 3,205,265
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Total 26,032,514
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HOUSEHOLD DURABLES (1.2%)
Centex 82,847 3,919,492
DR Horton 218,489 4,682,219
KB HOME 33,431 1,421,486
Lennar Cl A 65,725 2,939,879
Pulte Homes 188,605 5,375,242
Stanley Works 28,742 1,304,025
Whirlpool 43,126(e) 3,328,896
--------------
Total 22,971,239
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (0.5%)
Kimberly-Clark 158,437 9,672,579
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%)
Dynegy Cl A 336,400(b) 1,893,932
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (1.1%)
3M 250,275 17,619,360
Textron 32,155 2,891,056
--------------
Total 20,510,416
- --------------------------------------------------------------------------------
INSURANCE (3.6%)
Allstate 177,893 10,107,880
Ambac Financial Group 60,196 5,002,890
Aon 207,633 7,107,278
Chubb 34,748 1,751,994
Cincinnati Financial 28,900 1,362,924
Genworth Financial Cl A 62,967 2,159,768
Lincoln Natl 144,830 8,208,964
Loews 140,863 5,220,383
Marsh & McLennan Companies 194,762 5,264,417
MBIA 75,996 4,469,325
MetLife 189,716 9,865,232
Torchmark 47,851 2,893,550
UnumProvident 313,431 5,086,985
--------------
Total 68,501,590
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.3%)
Google Cl A 65,426(b) 25,293,692
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
IT SERVICES (0.9%)
Affiliated Computer Services Cl A 19,858(b) $ 1,011,368
Convergys 120,400(b) 2,297,232
Electronic Data Systems 321,174 7,676,058
Paychex 98,702 3,373,634
Sabre Holdings Cl A 59,444 1,230,491
Unisys 153,647(b) 786,673
--------------
Total 16,375,456
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.4%)
Brunswick 50,000 1,478,500
Eastman Kodak 205,970(f) 4,582,832
Mattel 128,671 2,321,225
--------------
Total 8,382,557
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.2%)
Applera-Applied Biosystems Group 78,690(d) 2,529,884
Millipore 35,959(b) 2,252,831
--------------
Total 4,782,715
- --------------------------------------------------------------------------------
MACHINERY (2.3%)
Caterpillar 334,154 23,681,493
Cummins 29,804 3,487,068
Deere & Co 58,150 4,219,946
Eaton 65,117 4,174,000
Illinois Tool Works 40,630 1,858,010
Ingersoll-Rand Cl A 62,037(c) 2,220,925
ITT 21,002 1,061,651
Navistar Intl 54,900(b) 1,227,564
PACCAR 35,828 2,893,111
--------------
Total 44,823,768
- --------------------------------------------------------------------------------
MEDIA (0.6%)
CBS Cl B 162,181 4,448,625
Gannett 86,495 4,508,119
Interpublic Group of Companies 108,200(b) 886,158
McClatchy Cl A 15,268 647,211
New York Times Cl A 70,860 1,570,966
--------------
Total 12,061,079
- --------------------------------------------------------------------------------
METALS & MINING (3.1%)
Alcoa 320,388 9,595,621
Allegheny Technologies 41,989 2,682,677
Freeport-McMoRan Copper & Gold Cl B 119,238 6,505,625
Newmont Mining 204,166 10,459,424
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
14 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
METALS & MINING (CONT.)
Nucor 234,473 $ 12,466,929
Phelps Dodge 181,164 15,822,864
United States Steel 26,643 1,680,374
--------------
Total 59,213,514
- --------------------------------------------------------------------------------
MULTILINE RETAIL (0.5%)
Dollar General 151,012 2,026,581
Family Dollar Stores 125,366 2,848,316
JC Penney 58,043 3,654,387
Kohl's 10,300(b) 583,289
--------------
Total 9,112,573
- --------------------------------------------------------------------------------
MULTI-UTILITIES (0.8%)
CenterPoint Energy 210,603 2,893,685
CMS Energy 57,088(b) 799,803
PG&E 186,382 7,768,401
Sempra Energy 35,402 1,708,501
TECO Energy 40,396 643,912
Xcel Energy 45,721 916,249
--------------
Total 14,730,551
- --------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (11.9%)
Anadarko Petroleum 57,994 2,652,646
Chevron 1,103,817 72,609,082
ConocoPhillips 602,607 41,362,944
El Paso 69,941 1,119,056
EOG Resources 31,336 2,323,564
Exxon Mobil 1,508,551 102,189,244
Hess 17,763 939,663
Marathon Oil 18,109 1,641,400
Occidental Petroleum 12,784 1,377,476
Sunoco 17,131 1,191,290
--------------
Total 227,406,365
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.1%)
Intl Paper 60,600 2,080,398
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS (0.1%)
Alberto-Culver 41,634 2,029,241
- --------------------------------------------------------------------------------
PHARMACEUTICALS (10.3%)
Abbott Laboratories 91,508 4,371,337
Allergan 58,662 6,326,697
Bristol-Myers Squibb 646,289 15,491,547
Forest Laboratories 41,862(b) 1,938,629
Johnson & Johnson 1,173,043 73,373,839
King Pharmaceuticals 212,443(b) 3,615,780
Merck & Co 1,640,907 66,079,324
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
PHARMACEUTICALS (CONT.)
Mylan Laboratories 23,300 $ 511,668
Pfizer 832,537 21,637,637
Schering-Plough 118,547 2,423,101
--------------
Total 195,769,559
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (0.1%)
Starwood Hotels & Resorts Worldwide 53,693 2,823,178
- --------------------------------------------------------------------------------
ROAD & RAIL (2.6%)
Burlington Northern Santa Fe 272,373 18,769,223
CSX 80,066 4,858,405
Norfolk Southern 255,311 11,085,604
Ryder System 36,600 1,844,640
Union Pacific 167,643 14,249,655
--------------
Total 50,807,527
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.4%)
Advanced Micro Devices 286,253(b) 5,550,446
Broadcom Cl A 121,983(b) 2,926,372
Intel 428,480 7,712,640
Micron Technology 450,347(b) 7,020,910
NVIDIA 194,519(b) 4,304,705
--------------
Total 27,515,073
- --------------------------------------------------------------------------------
SOFTWARE (3.0%)
Autodesk 51,339(b) 1,751,173
BMC Software 101,347(b) 2,373,547
Citrix Systems 101,198(b) 3,215,060
Microsoft 1,182,172 28,407,594
Novell 267,064(b) 1,733,245
Oracle 1,389,514(b) 20,801,025
--------------
Total 58,281,644
- --------------------------------------------------------------------------------
SPECIALTY RETAIL (2.5%)
AutoNation 46,675(b) 919,498
AutoZone 19,100(b) 1,678,317
Bed Bath & Beyond 42,853(b) 1,434,718
Best Buy 88,223 4,000,031
Circuit City Stores 114,482 2,804,809
Gap 46,100 799,835
Home Depot 814,241 28,262,305
Lowe's Companies 83,594 2,369,890
Office Depot 109,398(b) 3,943,798
RadioShack 76,600 1,238,622
--------------
Total 47,451,823
- --------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 15
- --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
TEXTILES, APPAREL & LUXURY GOODS (0.8%)
Coach 79,115(b) $ 2,271,392
Jones Apparel Group 45,056 1,333,658
Liz Claiborne 54,222 1,916,748
Nike Cl B 77,946 6,157,733
VF 42,284 2,867,701
--------------
Total 14,547,232
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (4.5%)
Fannie Mae 864,002 41,394,337
Freddie Mac 370,677 21,447,371
Golden West Financial 28,932 2,131,131
MGIC Investment 83,228 4,736,505
Washington Mutual 371,876 16,622,857
--------------
Total 86,332,201
- --------------------------------------------------------------------------------
TOBACCO (0.3%)
Reynolds American 31,558 4,000,924
UST 42,237 2,135,080
--------------
Total 6,136,004
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (0.1%)
WW Grainger 26,000 1,614,340
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $1,860,992,930) $1,912,334,921
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES (1.0%)(g)
- --------------------------------------------------------------------------------
AMOUNT
EFFECTIVE PAYABLE AT
ISSUER YIELD MATURITY VALUE(a)
COMMERCIAL PAPER
Chesham Finance LLC
08-01-06 5.30% $ 9,300,000 $ 9,298,631
Park Avenue Receivables
08-01-06 5.26 10,000,000(h) 9,998,539
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $19,300,000) $ 19,297,170
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $1,880,292,930)(i) $1,931,632,091
================================================================================
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
- ------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
- ------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At July 31, 2006,
the value of foreign securities represented 0.3% of net assets.
(d) Shareholders of tracking stocks have a financial interest only in a unit
or division of the company. Unlike the common stock of the company
itself, a tracking stock usually has limited or no voting rights. In the
event of a company's liquidation, tracking stock shareholders typically
do not have a legal claim on the company's assets.
(e) Partially pledged as initial margin deposit on the following open stock
index futures contracts (see Note 6 to the financial statements):
TYPE OF SECURITY CONTRACTS
--------------------------------------------------------------------------
PURCHASE CONTRACTS
S&P 500 Index, Sept. 2006 10
(f) At July 31, 2006, security was partially or fully on loan. See Note 5 to
the financial statements.
(g) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.7% of net assets. See Note 5 to
the financial statements. 0.3% of net assets is the Fund's cash
equivalent position.
(h) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 2006, the value
of these securities amounted to $9,998,539 or 0.5% of net assets.
(i) At July 31, 2006, the cost of securities for federal income tax purposes
was $1,886,733,114 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $133,513,607
Unrealized depreciation (88,614,630)
--------------------------------------------------------------------------
Net unrealized appreciation $ 44,898,977
--------------------------------------------------------------------------
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 EQUITY FUND -- 2006 ANNUAL REPORT 17
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2006
ASSETS
Investments in securities, at value (Note 1)*
(identified cost $1,880,292,930) $ 1,931,632,091
Cash in bank on demand deposit 74,107
Capital shares receivable 91,310
Dividends and accrued interest receivable 2,934,007
Receivable for investment securities sold 6,028,457
- --------------------------------------------------------------------------------------------------------
Total assets 1,940,759,972
- --------------------------------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 56,337
Payable for investment securities purchased 7,415,109
Payable upon return of securities loaned (Note 5) 12,542,000
Accrued investment management services fee 92,826
Accrued distribution fee 34,378
Accrued service fee 1,842
Accrued transfer agency fee 3,847
Accrued administrative services fee 8,510
Other accrued expenses 138,925
- --------------------------------------------------------------------------------------------------------
Total liabilities 20,293,774
- --------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 1,920,466,198
========================================================================================================
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 2,849,072
Additional paid-in capital 1,747,484,700
Undistributed net investment income 7,730,352
Accumulated net realized gain (loss) 111,045,186
Unrealized appreciation (depreciation) on investments (Note 6)
and on translation of assets and liabilities in foreign currencies 51,356,888
- --------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to
outstanding capital stock $ 1,920,466,198
========================================================================================================
Net assets applicable to outstanding shares: Class A $ 1,367,875,719
Class B $ 73,443,835
Class C $ 2,713,393
Class I $ 252,289,749
Class Y $ 224,143,502
Net asset value per share of outstanding capital stock: Class A shares 203,067,775 $ 6.74
Class B shares 11,039,576 $ 6.65
Class C shares 408,104 $ 6.65
Class I shares 37,225,107 $ 6.78
Class Y shares 33,166,659 $ 6.76
- --------------------------------------------------------------------------------------------------------
* Including securities on loan, at value (Note 5) $ 12,108,000
- --------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
18 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2006
INVESTMENT INCOME
Income:
Dividends $ 16,282,126
Interest 716,235
Fee income from securities lending (Note 5) 155,122
- --------------------------------------------------------------------------------------
Total income 17,153,483
- --------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 5,175,451
Distribution fee
Class A 1,426,565
Class B 427,156
Class C 12,242
Transfer agency fee 817,369
Incremental transfer agency fee
Class A 53,677
Class B 15,355
Class C 413
Service fee -- Class Y 102,311
Administrative services fees and expenses 496,810
Compensation of board members 12,463
Custodian fees 44,374
Printing and postage 69,241
Registration fees 80,409
Audit fees 29,000
Other 6,064
- --------------------------------------------------------------------------------------
Total expenses 8,768,900
Expenses waived/reimbursed by the Investment Manager and its
affiliates (Note 2) (262,058)
- --------------------------------------------------------------------------------------
8,506,842
Earnings and bank fee credits on cash balances (Note 2) (62,624)
- --------------------------------------------------------------------------------------
Total net expenses 8,444,218
- --------------------------------------------------------------------------------------
Investment income (loss) -- net 8,709,265
- --------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 122,663,564
Foreign currency transactions 12,886
Futures contracts (688,122)
Reimbursement from affiliate (Note 2) 212,116
- --------------------------------------------------------------------------------------
Net realized gain (loss) on investments 122,200,444
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (121,608,827)
- --------------------------------------------------------------------------------------
Net gain (loss) on investments 591,617
- --------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 9,300,882
======================================================================================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 19
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2006 2005
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 8,709,265 $ 658,382
Net realized gain (loss) on investments 122,200,444 3,796,315
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities in foreign currencies (121,608,827) 5,439,579
- -----------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 9,300,882 9,894,276
- -----------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (354,341) (62,837)
Class B (19,051) --
Class C (767) --
Class I (1,329,352) (142,494)
Class Y (391) (172)
Net realized gain
Class A (1,913,998) (327,285)
Class B (540,285) (102,880)
Class C (14,293) (3,213)
Class I (5,176,835) (723,932)
Class Y (1,940) (727)
- -----------------------------------------------------------------------------------
Total distributions (9,351,253) (1,363,540)
- -----------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
20 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2006 2005
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 57,119,187 21,609,484
Class B shares 8,354,913 6,978,820
Class C shares 459,648 77,713
Class I shares 127,309,091 66,292,986
Class Y shares 1,874,060 7,000
Fund merger (Note 8)
Class A shares 1,396,617,869 --
Class B shares 85,982,462 --
Class C shares 2,432,014 --
Class I shares 37,756,460 --
Class Y shares 274,057,962 --
Reinvestment of distributions at net asset value
Class A shares 2,250,671 346,177
Class B shares 553,930 100,334
Class C shares 13,921 2,894
Class I shares 6,505,529 866,109
Class Y shares 1,577 505
Payments for redemptions
Class A shares (116,576,502) (9,642,178)
Class B shares (Note 2) (29,916,465) (1,046,545)
Class C shares (Note 2) (373,393) (48,696)
Class I shares (1,598,499) (150,008)
Class Y shares (51,682,981) --
- -----------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 1,801,141,454 85,394,595
- -----------------------------------------------------------------------------------
Total increase (decrease) in net assets 1,801,091,083 93,925,331
Net assets at beginning of year 119,375,115 25,449,784
- -----------------------------------------------------------------------------------
Net assets at end of year $ 1,920,466,198 $ 119,375,115
===================================================================================
Undistributed net investment income $ 7,730,352 $ 503,820
- -----------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 21
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource Large Cap Series, Inc. (formerly AXP
Growth Series, Inc.) and is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital
stock that can be allocated among the separate series as designated by the
Board. The Fund invests primarily in equity securities of companies listed on
U.S. exchanges with market capitalizations greater than $5 billion at the time
of purchase.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2006, Ameriprise Financial, Inc.
(Ameriprise Financial) and the affiliated funds-of-funds owned 100% of Class I
shares, which represents 13.14% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from
actual results.
- ------------------------------------------------------------------------------
22 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty
that the effect of the development or event has actually caused the closing
price to no longer reflect the actual value, the closing prices, as determined
at the close of the applicable foreign market, may be adjusted to reflect the
fair value of the affected foreign securities as of the close of the New York
Stock Exchange. Significant events include material movements in the U.S.
securities markets prior to the opening of foreign markets on the following
trading day. FVP results in an estimated price that reasonably reflects the
current market conditions in order to value the portfolio holdings such that
shareholder transactions receive a fair net asset value. Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a
put option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option
is that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option or the cost of a security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 23
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to
the purchase or sale of securities and income and expenses are translated at
the exchange rate on the transaction date. The effect of changes in foreign
exchange rates on realized and unrealized security gains or losses is
reflected as a component of such gains or losses. In the statement of
operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date
on securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such claims.
- ------------------------------------------------------------------------------
24 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
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
increased by $190,957 and accumulated net realized gain been increased by
$1,692,143 resulting in a net reclassification adjustment to decrease paid-in
capital by $1,883,100.
The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2006 2005
- ------------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income ................................ $ 1,705,386 $ 202,166
Long-term capital gain ......................... 562,953 187,956
CLASS B
Distributions paid from:
Ordinary income ................................ 400,261 43,797
Long-term capital gain ......................... 159,075 59,083
CLASS C
Distributions paid from:
Ordinary income ................................ 10,856 1,368
Long-term capital gain ......................... 4,204 1,845
CLASS I
Distributions paid from:
Ordinary income ................................ 4,989,806 450,678
Long-term capital gain ......................... 1,516,381 415,748
CLASS Y
Distributions paid from:
Ordinary income ................................ 1,765 481
Long-term capital gain ......................... 566 418
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 25
At July 31, 2006, the components of distributable earnings on a tax basis are
as follows:
Undistributed ordinary income ................................ $ 73,652,391
Accumulated long-term gain (loss) ............................ $ 51,560,111
Unrealized appreciation (depreciation) ....................... $ 44,919,924
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (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, that will result from the adoption of FIN 48.
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. On March 7, 2006, an additional
dividend was paid before the merger to ensure that current shareholders of
RiverSource Disciplined Equity Fund would not experience a dilution in their
share of the Fund's income or capital gains.
OTHER
Security transactions are accounted for on the date securities are purchased
or sold. Dividend income is recognized on the ex-dividend date and interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial. The management fee is a percentage of the
Fund's average daily net assets that declines from 0.60% to 0.375% annually as
the Fund's assets increase. Prior to March 1, 2006, the management fee
percentage of the Fund's average daily net assets declined from 0.60% to 0.48%
annually as the Fund's assets increased. The fee may be adjusted upward or
downward by a performance
- ------------------------------------------------------------------------------
26 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
incentive adjustment based on a comparison of the performance of Class A
shares of the Fund to the Lipper Large-Cap Core Funds Index. In certain
circumstances, the Board may approve a change in the index. The maximum
adjustment is 0.12% per year. If the performance difference is less than
0.50%, the adjustment will be zero. The adjustment increased the fee by
$77,739 for the year ended July 31, 2006.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.06% to 0.03% annually
as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of
the Fund's average daily net assets declined from 0.05% to 0.02% annually as
the Fund's assets increased. A minor portion of additional administrative
service expenses paid by the Fund are consultants' fees and fund office
expenses. Under this agreement, the Fund also pays taxes, audit and certain
legal fees, registration fees for shares, compensation of board members,
corporate filing fees and any other expenses properly payable by the Fund and
approved by the Board.
Under a Deferred Compensation Plan (the Plan), non-interested board members
may defer receipt of their compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Fund or
other RiverSource funds. The Fund's liability for these amounts is adjusted
for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund pays
the Transfer Agent an annual fee per shareholder account for this service as
follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 27
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by the Distributor and other servicing agents
with respect to those shares. The fee is calculated at a rate of 0.10% of the
Fund's average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$293,648 for Class A, $29,031 for Class B and $52 for Class C for the year
ended July 31, 2006.
For the year ended July 31, 2006, the Investment Manager and its affiliates
waived certain fees and expenses to 1.02% for Class A, 1.82% for Class B,
1.81% for Class C, 0.70% for Class I and 0.84% for Class Y. Of these waived
fees and expenses, the transfer agency fees waived for Class A, Class B, Class
C and Class Y were $73,809, $3,726, $178 and $1, respectively, and the
management fees waived at the Fund level were $184,344. Effective as of Oct.
1, 2005, the Investment Manager and its affiliates had agreed to waive certain
fees and expenses until March 10, 2006, such that net expenses, before giving
effect to any performance incentive adjustment, would not exceed 1.25% for
Class A, 2.04% for Class B, 2.06% for Class C, 0.93% for Class I and 1.06% for
Class Y of the Fund's average daily net assets. Effective as of March 11,
2006, the Investment Manager and its affiliates have agreed to waive certain
fees and expenses until July 31, 2007, unless sooner terminated at the
discretion of the Board, such that net expenses before giving effect to any
performance incentive adjustment, will not exceed 1.00% for Class A, 1.78% for
Class B, 1.77% for Class C, 0.64% for Class I and 0.84% for Class Y of the
Fund's average daily net assets.
During the year July 31, 2006, the Fund's custodian and transfer agency fees
were reduced by $62,624 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.
In addition, the Fund received a one time reimbursement of $212,116 by
Ameriprise Financial for additional earnings from overnight cash balances
determined to be owed for prior years. This amount was insignificant to the
Fund's net asset value and total return.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $2,776,607,128 (including $1,617,217,195 from
RiverSource Stock Fund that was acquired in the fund merger as described in
Note 8) and $1,151,292,444 respectively, for the year ended July 31, 2006.
Realized gains and losses are determined on an identified cost basis.
- ------------------------------------------------------------------------------
28 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED JULY 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ----------------------------------------------------------------------------------------
Sold 8,536,165 1,250,216 68,880 18,763,732 276,369
Fund merger 207,275,407 12,879,602 364,574 5,576,952 40,564,166
Issued for reinvested
distributions 337,195 83,745 2,104 969,971 235
Redeemed (17,270,329) (4,576,044) (55,973) (237,632) (7,679,229)
- ----------------------------------------------------------------------------------------
Net increase (decrease) 198,878,438 9,637,519 379,585 25,073,023 33,161,541
- ----------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ----------------------------------------------------------------------------------------
Sold 3,401,658 1,109,408 12,216 10,493,500 1,160
Issued for reinvested
distributions 54,345 15,850 457 135,541 79
Redeemed (1,531,238) (165,421) (7,726) (24,014) --
- ----------------------------------------------------------------------------------------
Net increase (decrease) 1,924,765 959,837 4,947 10,605,027 1,239
- ----------------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES
At July 31, 2006, securities valued at $12,108,000 were on loan to brokers.
For collateral, the Fund received $12,542,000 in cash. Cash collateral
received is invested in short-term securities, which are included in the
short-term section of the "Investments in securities." Income from securities
lending amounted to $155,122 for year ended July 31, 2006. The risks to the
Fund of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
6. STOCK INDEX FUTURES CONTRACTS
At July 31, 2006, investments in securities included securities valued at
$812,940 that were pledged as collateral to cover initial margin deposits on
10 open purchase contracts. The notional market value of the open purchase
contracts at July 31, 2006 was $3,204,500 with a net unrealized loss of
$3,220. See "Summary of significant accounting policies" and "Notes to
investments in securities."
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. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.40%
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 29
or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within 60
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of the credit facility at a rate of 0.07% per
annum. Prior to this agreement, the Fund had a revolving credit agreement that
permitted borrowings up to $500 million with The Bank of New York. The Fund
had no borrowings outstanding during the year ended July 31, 2006.
8. FUND MERGER
At the close of business on March 10, 2006, RiverSource Disciplined Equity
Fund acquired the assets and assumed the identified liabilities of RiverSource
Stock Fund. The reorganization was completed after shareholders approved the
plan on Feb. 15, 2006.
The aggregate net assets of RiverSource Disciplined Equity Fund immediately
before the acquisition were $207,410,855 and the combined net assets
immediately after the acquisition were $2,004,257,622.
The merger was accomplished by a tax-free exchange of 87,585,087 shares of
RiverSource Stock Fund valued at $1,796,846,767.
In exchange for the RiverSource Stock Fund shares and net assets, RiverSource
Disciplined Equity Fund issued the following number of shares:
SHARES
- ------------------------------------------------------------------------------
Class A 207,275,407
Class B 12,879,602
Class C 364,574
Class I 5,576,952
Class Y 40,564,166
- ------------------------------------------------------------------------------
RiverSource Stock Fund's net assets after adjustments for any permanent
book-to-tax differences at the merger date were as follows, which include the
following amounts of capital stock, unrealized appreciation, accumulated net
realized loss and undistributed net income.
TOTAL CAPITAL UNREALIZED ACCUMULATED UNDISTRIBUTED
NET ASSETS STOCK APPRECIATION NET REALIZED LOSS NET INCOME
- --------------------------------------------------------------------------------------------------
RiverSource
Stock Fund $1,796,846,767 $1,638,521,442 $166,822,042 $(8,526,929) $30,212
- --------------------------------------------------------------------------------------------------
9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement agreements
with the Securities and Exchange Commission (SEC) and Minnesota Department of
Commerce (MDOC) related to market timing activities. In connection with these
matters, the SEC and
- ------------------------------------------------------------------------------
30 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
MDOC issued orders (the Orders) alleging that AEFC violated certain provisions
of the federal and Minnesota securities laws by failing to adequately disclose
market timing activities by allowing certain identified market timers to
continue to market time contrary to disclosures in mutual fund and variable
annuity product prospectuses. The Orders also alleged that AEFC failed to
implement procedures to detect and prevent market timing in 401(k) plans for
employees of AEFC and related companies and failed to adequately disclose that
there were no such procedures. Pursuant to the MDOC Order, the MDOC also
alleged that AEFC allowed inappropriate market timing to occur by failing to
have written policies and procedures and failing to properly supervise its
employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million. AEFC
also agreed to make presentations at least annually to its board of directors
and the relevant mutual funds' board that include an overview of policies and
procedures to prevent market timing, material changes to these policies and
procedures and whether disclosures related to market timing are consistent
with the SEC order and federal securities laws. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a summary
of actions taken to ensure compliance with applicable laws and regulations and
certification by a senior officer regarding compliance and supervisory
procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, 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.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 31
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.
10. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- ------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003(b)
Net asset value, beginning of period $ 6.70 $ 5.95 $ 5.44 $ 5.00
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06 .04 .02 .01
Net gains (losses) (both realized and unrealized) .35 .90 .63 .43
- ------------------------------------------------------------------------------------------------------
Total from investment operations .41 .94 .65 .44
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.03) (.02) --
Distributions from realized gains (.31) (.16) (.12) --
- ------------------------------------------------------------------------------------------------------
Total distributions (.37) (.19) (.14) --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.74 $ 6.70 $ 5.95 $ 5.44
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 1,368 $ 28 $ 13 $ 8
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c),(d) 1.02% 1.25% 1.13% 1.22%(e)
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily
net assets .95% .84% .65% .81%(e)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 137% 64% 64% 17%
- ------------------------------------------------------------------------------------------------------
Total return(f) 6.25% 15.95% 11.99% 8.80%(g)
- ------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) 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 1.05%, 1.35%, 1.91% and 7.39% for the
periods ended July 31, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
32 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
CLASS B
- --------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003(b)
Net asset value, beginning of period $ 6.62 $ 5.90 $ 5.43 $ 5.00
- --------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .01 .02 (.02) --
Net gains (losses) (both realized and unrealized) .34 .86 .61 .43
- --------------------------------------------------------------------------------------------------------
Total from investment operations .35 .88 .59 .43
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) -- -- --
Distributions from realized gains (.31) (.16) (.12) --
- --------------------------------------------------------------------------------------------------------
Total distributions (.32) (.16) (.12) --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.65 $ 6.62 $ 5.90 $ 5.43
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 73 $ 9 $ 3 $ 1
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c),(d) 1.82% 2.04% 1.95% 2.01%(e)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily
net assets .20% .06% (.16%) (.08%)(e)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 137% 64% 64% 17%
- --------------------------------------------------------------------------------------------------------
Total return(f) 5.42% 15.03% 10.95% 8.60%(g)
- --------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.85%, 2.13%, 2.73% and 8.18% for the
periods ended July 31, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 33
CLASS C
- --------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003(b)
Net asset value, beginning of period $ 6.62 $ 5.90 $ 5.43 $ 5.00
- --------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .01 .01 (.02) --
Net gains (losses) (both realized and unrealized) .35 .87 .61 .43
- --------------------------------------------------------------------------------------------------------
Total from investment operations .36 .88 .59 .43
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- -- --
Distributions from realized gains (.31) (.16) (.12) --
- --------------------------------------------------------------------------------------------------------
Total distributions (.33) (.16) (.12) --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.65 $ 6.62 $ 5.90 $ 5.43
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 3 $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c),(d) 1.81% 2.06% 1.95% 2.01%(e)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily
net assets .20% .02% (.17%) (.05%)(e)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 137% 64% 64% 17%
- --------------------------------------------------------------------------------------------------------
Total return(f) 5.51% 15.03% 10.96% 8.60%(g)
- --------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.84%, 2.13%, 2.73% and 8.20% for the
periods ended July 31, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
34 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
CLASS I
- --------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004(b)
Net asset value, beginning of period $ 6.73 $ 5.96 $ 5.99
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .08 .04 .02
Net gains (losses) (both realized and unrealized) .36 .92 (.05)
- --------------------------------------------------------------------------------------------------
Total from investment operations .44 .96 (.03)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.03) --
Distributions from realized gains (.31) (.16) --
- --------------------------------------------------------------------------------------------------
Total distributions (.39) (.19) --
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.78 $ 6.73 $ 5.96
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 252 $ 82 $ 9
- --------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .70%(d) .91% .93%(d),(e)
- --------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily
net assets 1.41% 1.19% 5.35%(e)
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 137% 64% 64%
- --------------------------------------------------------------------------------------------------
Total return(f) 6.73% 16.29% (.50%)(g)
- --------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Inception date is July 15, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class I would have been 0.72% and 1.27% for the periods ended July
31, 2006 and 2004, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 35
CLASS Y
- ------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003(b)
Net asset value, beginning of period $ 6.71 $ 5.95 $ 5.45 $ 5.00
- ------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .05 .03 .01
Net gains (losses) (both realized and unrealized) .36 .91 .61 .44
- ------------------------------------------------------------------------------------------------------
Total from investment operations .43 .96 .64 .45
- ------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.04) (.02) --
Distributions from realized gains (.31) (.16) (.12) --
- ------------------------------------------------------------------------------------------------------
Total distributions (.38) (.20) (.14) --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 6.76 $ 6.71 $ 5.95 $ 5.45
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 224 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c),(d) .84% 1.06% .98% 1.01%(e)
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily
net assets 1.10% 1.03% .78% .90%(e)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 137% 64% 64% 17%
- ------------------------------------------------------------------------------------------------------
Total return(f) 6.48% 16.25% 11.87% 9.00%(g)
- ------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from April 24, 2003 (when shares became publicly
available) to July 31, 2003.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class Y would have been 0.87%, 1.18%, 1.76% and 7.20% for the
periods ended July 31, 2006, 2005, 2004 and 2003, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
36 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD AND SHAREHOLDERS
RIVERSOURCE LARGE CAP SERIES, INC.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of RiverSource
Disciplined Equity Fund (a series of RiverSource Large Cap Series, Inc.) as of
July 31, 2006, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the years in the two-year
period ended July 31, 2006, and the financial highlights for each of the years
in the three-year period ended July 31, 2006 and for the period from April 24,
2003 (when shares became publicly available) to July 31, 2003. These financial
statements and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of July 31, 2006, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
RiverSource Disciplined Equity Fund as of July 31, 2006, and the results of
its operations, changes in its net assets and the financial highlights for
each of the periods stated in the first paragraph above, in conformity with
U.S. generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2006
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 37
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, 2006
CLASS A
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 29.46%
Dividends Received Deduction for corporations ............ 29.23%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.20419
March 7, 2006 .................................................. 0.07482
Total .......................................................... $0.27901
CAPITAL GAIN DISTRIBUTIONS -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.06882
March 7, 2006 .................................................. 0.02343
Total .......................................................... $0.09225
Total distributions ............................................ $0.37126
CLASS B
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 29.46%
Dividends Received Deduction for corporations ............ 29.23%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.16736
March 7, 2006 .................................................. 0.06422
Total .......................................................... $0.23158
CAPITAL GAIN DISTRIBUTIONS -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.06882
March 7, 2006 .................................................. 0.02343
Total .......................................................... $0.09225
Total distributions ............................................ $0.32383
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38 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
CLASS C
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 29.46%
Dividends Received Deduction for corporations ............ 29.23%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.17258
March 7, 2006 .................................................. 0.06484
Total .......................................................... $0.23742
CAPITAL GAIN DISTRIBUTIONS -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.06882
March 7, 2006 .................................................. 0.02343
Total .......................................................... $0.09225
Total distributions ............................................ $0.32967
CLASS I
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 29.46%
Dividends Received Deduction for corporations ............ 29.23%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.22139
March 7, 2006 .................................................. 0.08062
Total .......................................................... $0.30201
CAPITAL GAIN DISTRIBUTIONS -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.06882
March 7, 2006 .................................................. 0.02343
Total .......................................................... $0.09225
Total distributions ............................................ $0.39426
CLASS Y
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 29.46%
Dividends Received Deduction for corporations ............ 29.23%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .................................................. $0.20745
March 7, 2006 .................................................. 0.07713
Total .......................................................... $0.28458
CAPITAL GAIN DISTRIBUTIONS -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 20, 2004 .................................................. $0.06882
March 7, 2006 .................................................. 0.02343
Total .......................................................... $0.09225
Total distributions ............................................ $0.37683
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 39
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the six months ended July 31, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values
and actual expenses. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading titled "Expenses paid during the period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
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40 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2006 JULY 31, 2006 THE PERIOD(a) EXPENSE RATIO
- ----------------------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 992.60 $4.99 1.01%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.79 $5.06 1.01%
- ----------------------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 987.90 $8.82 1.79%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.92 $8.95 1.79%
- ----------------------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 988.00 $8.77 1.78%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.97 $8.90 1.78%
- ----------------------------------------------------------------------------------------------------------------
Class I
- ----------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 994.90 $3.22 .65%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.57 $3.26 .65%
- ----------------------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $ 992.90 $4.20 .85%
- ----------------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.58 $4.26 .85%
- ----------------------------------------------------------------------------------------------------------------
(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, 2006:
-0.74% for Class A, -1.21% for Class B, -1.20% for Class C, -0.51% for
Class I and -0.71% for Class Y.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 41
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 99
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
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 52
- ------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards); former Governor
Age 71 of Minnesota
- ------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College;
Minneapolis, MN 55402 former Dean, McCallum Graduate
Age 55 School of Business, Bentley College
- ------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 71
- ------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind Board member Former Managing Director, American Progressive
901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance
Minneapolis, MN 55402
Age 70
- ------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation
Minneapolis, MN 55402 Carleton College systems)
Age 67
- ------------------------------------------------------------------------------------------------------------------------
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42 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
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 Distribution,
901 S. Marquette Ave. since 2004 Management, Inc. (private real Inc. (transportation,
Minneapolis, MN 55402 estate and asset management distribution and logistics
Age 54 company) consultants)
- ------------------------------------------------------------------------------------------------------------------------
Vikki L. Pryor Board member President and Chief Executive
901 S. Marquette Ave. since 2006 Officer, SBLI USA Mutual Life
Minneapolis, MN 55402 Insurance Company, Inc. since 1999
Age 53
- ------------------------------------------------------------------------------------------------------------------------
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 62 Inc. (health management
programs)
- ------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
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, Ameriprise Certificate
53600 Ameriprise since 2001, Company since 2006; President -
Financial Center Vice President U.S. Asset Management and Chief
Minneapolis, MN 55474 since 2002, Investment Officer, Ameriprise
Age 46 Acting President Financial, Inc. and President,
since 2006 Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC since 2005; Senior
Vice President - Chief Investment
Officer, Ameriprise Financial, Inc.
and Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC, 2001-2005
- ------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security
holder and/or employee of RiverSource Investments.
** Paula R. Meyer resigned her position as President for the RiverSource
funds. Mr. Truscott has been appointed Acting President and will be
assuming the responsibilities of President until a permanent replacement
for Ms. Meyer is found.
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RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 43
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 and
Acting President, the Fund's other officers are:
FUND OFFICERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer Vice President - Investment Accounting, Ameriprise Financial,
105 Ameriprise since 2002 Inc., since 2002; Vice President - Finance, American Express
Financial Center Company, 2000-2002
Minneapolis, MN 55474
Age 51
- -----------------------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed Income,
172 Ameriprise since 2004 Ameriprise Financial, Inc. and RiverSource Investments, LLC
Financial Center since 2006; Vice President - Investments, Ameriprise
Minneapolis, MN 55474 Certificate Company since 2003; Senior Vice President - Fixed
Age 42 Income, Ameriprise Financial, Inc., 2002-2006 and
RiverSource Investments, LLC, 2004-2006; Managing Director, Zurich
Global Assets, 2001-2002
- -----------------------------------------------------------------------------------------------------------------------
Leslie L. Ogg Vice President, President of Board Services Corporation
901 S. Marquette Ave. General Counsel,
Minneapolis, MN 55402 and Secretary
Age 68 since 1978
- -----------------------------------------------------------------------------------------------------------------------
Edward S. Dryden* Acting Chief Chief Compliance Officer, Ameriprise Certificate Company since
1875 Ameriprise Compliance Officer 2006; Vice President - Asset Management Compliance, RiverSource
Financial Center since 2006 Investments, LLC since 2006; Chief Compliance Officer - Mason
Minneapolis, MN 55474 Street Advisors, LLC, 2002-2006
Age 41
- -----------------------------------------------------------------------------------------------------------------------
Neysa M. Alecu Anti-Money Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Laundering Officer Ameriprise Financial, Inc. since 2004; Manager Anti-Money
Financial Center since 2004 Laundering, Ameriprise Financial, Inc., 2003-2004; Compliance
Minneapolis, MN 55474 Director and Bank Secrecy Act Officer, American Express Centurion
Age 42 Bank, 2000-2003
- -----------------------------------------------------------------------------------------------------------------------
* Beth E. Weimer resigned her position as Chief Compliance Officer for the
RiverSource funds. Mr. Dryden has been appointed Acting Chief Compliance
Officer and will be assuming the responsibilities of Chief Compliance
Officer until a permanent replacement for Ms. Weimer is found.
The SAI has additional information about the Fund's directors and is
available, without charge, upon request by calling RiverSource Funds at (888)
791-3380; contacting your financial institution; or visiting
riversource.com/funds.
- ------------------------------------------------------------------------------
44 RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
During the period covered by this report, RiverSource Investments, LLC
("RiverSource Investments" or the "investment manager"), a wholly-owned
subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as
the investment manager to RiverSource funds under an Investment Management
Services Agreement ("IMS Agreement").
The Board of Directors (the "Board") annually determines whether to continue
the IMS Agreement and subadvisory agreements, as applicable, by evaluating the
quality and level of services received and the costs associated with those
services. The Board did not make the specific determination this year as each
fund's IMS Agreement was approved by the vote of a majority of the outstanding
voting securities of the funds at a shareholder meeting held on Feb. 15, 2006.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities during
the 12-month period ended June 30, 2006 is available without charge by
visiting riversource.com/funds; or searching the website of the SEC at
www.sec.gov.
- ------------------------------------------------------------------------------
RIVERSOURCE DISCIPLINED EQUITY FUND -- 2006 ANNUAL REPORT 45
RIVERSOURCE(SM) DISCIPLINED EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
riversource.com/funds
This report must be accompanied or preceded by the
Fund's current prospectus. RiverSource(SM) mutual
RIVERSOURCE [LOGO](SM) funds are distributed by RiverSource Distributors,
INVESTMENTS Inc. and Ameriprise Financial Services, Inc., Members
NASD, and managed by RiverSource Investments, LLC.
These companies are part of Ameriprise Financial, Inc.
S-6263 F (9/06)
Annual Report
RIVERSOURCE [LOGO](SM)
INVESTMENTS
RIVERSOURCE(SM)
GROWTH FUND
- ------------------------------------------------------------------------------
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2006
> RIVERSOURCE GROWTH FUND
SEEKS TO PROVIDE SHAREHOLDERS
WITH LONG-TERM CAPITAL GROWTH.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Fund Snapshot ............................................................. 3
Performance Summary ....................................................... 5
Questions & Answers with Portfolio Management ............................. 7
The Fund's Long-term Performance .......................................... 12
Investments in Securities ................................................. 14
Financial Statements ...................................................... 18
Notes to Financial Statements ............................................. 21
Report of Independent Registered Public Accounting Firm ................... 36
Federal Income Tax Information ............................................ 37
Fund Expenses Example ..................................................... 38
Board Members and Officers ................................................ 40
Approval of Investment Management Services Agreement ...................... 43
Proxy Voting .............................................................. 43
DALBAR RATED
[LOGO]
2006
FOR COMMUNICATION
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 GROWTH FUND - 2006 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2006
- --------------------------------------------------------------------------------
FUND OVERVIEW
- --------------------------------------------------------------------------------
RiverSource Growth Fund invests primarily in large-company stocks with strong
earnings growth and price appreciation potential. To find the right companies
in which to invest, a research-driven stock selection process leverages the
capabilities of a talented and experienced analyst team. Then, the portfolio
manager focuses on these individual companies and applies a "price conscious"
growth strategy. The desired result is a portfolio composed of large-company
stocks with growth rates at or above market levels and reasonable valuations.
- --------------------------------------------------------------------------------
SECTOR BREAKDOWN*
- --------------------------------------------------------------------------------
Percentage of portfolio assets
Health Care 21.6%
Information Technology 20.6%
Telecommunication Services 18.1% [PIE CHART]
Consumer Discretionary 13.6%
Consumer Staples 11.0%
Energy 4.6%
Other(1) 10.5%
* 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 Industrials 3.6%, Financials 3.2%, Short-Term Securities(2)
2.3%, Materials 1.3% and Telecommunications 0.1%.
(2) Of the 2.3%, 0.4% is due to security lending activity and 1.9% is the
Fund's cash equivalent position.
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
- --------------------------------------------------------------------------------
Percentage of portfolio assets
Sprint Nextel 7.8%
NTL 7.3
Google Cl A 3.9
Pfizer 3.8
Cisco Systems 3.3
ALLTEL 2.9
Vodafone Group 2.9
Exxon Mobil 2.5
Microsoft 2.4
Boston Scientific 2.4
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.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2006
- ------------------------------------------------------------------------------
STYLE MATRIX
- ------------------------------------------------------------------------------
[chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
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 involve risks including possible loss of principal and
fluctuation in value.
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
YEARS IN INDUSTRY
Nick Thakore 13
- --------------------------------------------------------------------------------
FUND FACTS
- --------------------------------------------------------------------------------
TICKER SYMBOL INCEPTION DATE
Class A INIDX 3/1/72
Class B IGRBX 3/20/95
Class C AXGCX 6/26/00
Class I AGWIX 3/4/04
Class Y IGRYX 3/20/95
Total net assets $3.353 billion
Number of holdings 103
- --------------------------------------------------------------------------------
4 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
PERFORMANCE SUMMARY
- ------------------------------------------------------------------------------
PERFORMANCE COMPARISON
For the year ended July 31, 2006
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
+0.98% RiverSource Growth Fund Class A (excluding sales charge)
- -0.76% Russell 1000 Growth(R) Index (unmanaged)
- -1.86% Lipper Large-Cap Growth Funds Index
(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.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 5
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (3/1/72) (3/20/95) (6/26/00) (3/4/04) (3/20/95)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5)
AT JULY 31, 2006
- -------------------------------------------------------------------------------------------------
1 year +0.98% -4.82% +0.19% -4.81% +0.23% -0.77% +1.44% +1.17%
- -------------------------------------------------------------------------------------------------
3 years +7.89% +5.78% +7.04% +5.86% +7.05% +7.05% N/A +8.07%
- -------------------------------------------------------------------------------------------------
5 years -0.71% -1.88% -1.49% -1.88% -1.49% -1.49% N/A -0.53%
- -------------------------------------------------------------------------------------------------
10 years +3.94% +3.32% +3.14% +3.14% N/A N/A N/A +4.10%
- -------------------------------------------------------------------------------------------------
Since inception +11.72% +11.52% +5.50% +5.50% -9.98% -9.98% +5.82% +6.48%
- -------------------------------------------------------------------------------------------------
AT JUNE 30, 2006
- -------------------------------------------------------------------------------------------------
1 year +3.41% -2.54% +2.61% -2.39% +2.61% +1.61% +3.87% +3.59%
- -------------------------------------------------------------------------------------------------
3 years +7.34% +5.24% +6.51% +5.32% +6.51% +6.51% N/A +7.52%
- -------------------------------------------------------------------------------------------------
5 years -2.11% -3.27% -2.88% -3.27% -2.88% -2.88% N/A -1.95%
- -------------------------------------------------------------------------------------------------
10 years +3.16% +2.55% +2.37% +2.37% N/A N/A N/A +3.32%
- -------------------------------------------------------------------------------------------------
Since inception +11.73% +11.54% +5.51% +5.51% -10.17% -10.17% +5.84% +6.49%
- -------------------------------------------------------------------------------------------------
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows:
first year 5%; second and third year 4%; fourth year 3%; fifth year 2%;
sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- --------------------------------------------------------------------------------
6 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, Portfolio Manager Nick Thakore discusses the Fund's positioning and
results for the 2006 fiscal year.
Q: How did RiverSource Growth Fund perform for the fiscal year ended July
31, 2006?
A: RiverSource Growth Fund's Class A shares rose 0.98%, excluding sales
charge, for the 12 months ended July 31, 2006. The Fund outperformed
both its benchmark, the Russell 1000(R) Growth Index (Russell Index),
which declined 0.76%, and its peer group as represented by the Lipper
Large-Cap Growth Funds Index (Lipper Index) which declined 1.86% for the
same period.
Q: What factors influenced performance during the period?
A: The stock market advanced strongly during the first six months of the
fiscal year and the Fund participated in the rally. However, later in
the year, concerns about interest rates, inflation, rising energy costs
and global conflicts led to increased volatility in U.S. stock prices.
Within the large-cap equity universe, growth stocks declined while value
stocks advanced sharply, continuing a prolonged period of growth
underperforming value. This made the year even more challenging for our
growth-oriented strategy. We are pleased to report that during a
difficult period, the Fund advanced slightly while its benchmark and
peer group declined.
Half of the 10 index sectors were positive contributors to the Fund's
performance. Information technology, health care and consumer
discretionary were the most notable contributors, while
telecommunication services, industrials and consumer staples detracted.
- --------------------------------------------------------------------------------
WE ARE PLEASED TO REPORT THAT DURING A DIFFICULT PERIOD, THE FUND ADVANCED
SLIGHTLY WHILE ITS BENCHMARK AND PEER GROUP DECLINED.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 7
QUESTIONS & ANSWERS
In information technology, a below-Russell Index allocation was
advantageous as information technology stocks struggled throughout the
period. Information technology stock selection also added to relative
return. Within the sector, we have focused on companies with solid
growth stories and good stock valuations and have emphasized a few key
themes. As part of an ongoing concentration on wireless communications,
cell phone manufacturer holdings, such as Nokia, were solid contributors
to relative return. The stock advanced as sales of handset units and the
average selling price were higher than expected. Another theme within
information technology was internet companies achieving market share
gains and Google was a key contributor among this group. Finally, our
effort to avoid companies with deteriorating fundamentals led us to a
smaller-than-Russell Index weighting in Intel, which suffered from
weaker demand for personal computers and competitive pressure on PC
prices.
Stock selection in the consumer discretionary sector added to relative
return. A slightly larger-than-Russell Index allocation was also
advantageous. Key contributors within the sector included companies
where the Fund had smaller-than-Russell Index positions, especially some
retail companies, which suffered from fear that a weaker housing market
would depress consumer spending. The Fund's allocation to the media and
cable group was particularly beneficial as we continued to see strong
free cash flow, good growth and attractive valuations in those stocks.
However, NTL, a U.K. cable company, was a notable detractor for the
period. Though NTL has lagged while other cable companies performed
well, we remain optimistic about the company's growth potential. NTL's
recent acquisitions give it the ability to bundle four key services to
its customers: TV, internet, traditional telephone and wireless phone
services.
- --------------------------------------------------------------------------------
8 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
Within the health care sector, both stock selection and a
larger-than-Russell Index position added to performance. Our dominant
theme in this sector was companies where consolidation, acquisitions or
cost reductions can sustain earnings growth even if the economy slows.
Pfizer is an example of a health care stock that added to relative
return. Pfizer, and the pharmaceuticals group in general, experienced a
mild turnaround during the period as their fundamentals matched
investors' lowered expectations. The Fund also had exposure to some
underperforming health care stocks including Boston Scientific. The
medical device maker was negatively affected by potential changes in
government reimbursements for cardiac devices and by recalls for
products acquired through Guidant.
We remained overweight relative to the Russell Index in
telecommunication services, mainly wireless services, because we believe
they offer a unique combination of a powerful secular trend, high free
cash flow yields and a high growth rate. Having a larger-than-Russell
Index position in telecommunication services was effective, but was more
than offset by underperformance of the Fund's individual holdings.
Sprint Nextel was a meaningful detractor as the company experienced
deteriorating fundamentals, specifically fewer new subscribers and less
revenue per subscriber. However, in line with our theme of focusing on
companies that can benefit from consolidation, our conviction about the
stock is supported by our analysis of the potential synergies of
Sprint's merger with Nextel, which are still not fully realized. The
company's valuation remains attractive to us and we will continue to
weigh the fundamentals against growth potential. In keeping with this
consolidation theme, we also owned shares of Lucent Technologies, a
telecommunication services equipment vendor scheduled to merge with
Alcatel later this year. In an industry with such high fixed costs, the
synergies of this merger have the potential to drive earnings higher.
Although some of the Fund's telecommunication services holdings have
lagged, we maintain our confidence in the secular growth potential for
wireless companies.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 9
QUESTIONS & ANSWERS
The Fund's allocation to consumer staples was in line with that of the
Russell Index, but stock selection was a significant detractor,
primarily due to the underperformance of Spectrum Brands. We expected
this maker of batteries, fertilizers and other consumer products to
benefit from consolidation and cost cutting related to a recent
acquisition. However, rising raw material costs, which the company could
not pass on to customers, overwhelmed the earnings gains and prevented
the synergies from being fully realized.
The Fund had a smaller-than-Russell Index position in industrials, which
was disadvantageous as the sector continued to advance despite fears of
an economic slowdown that affected other segments of the stock market.
Selection among industrial stocks was also a modest detractor.
Q: What changes did you make during the twelve-month period?
A: We increased the Fund's health care and information technology positions
and slightly reduced the allocations to telecommunications and
financials. Information technology underperformed through the period
and we added selectively to companies where we believe prices are
reflective of current fundamental risks. The story is similar for the
health care sector.
We consider telecommunication services, specifically wireless companies,
to be a core theme for the Fund and we maintained a larger-than-Russell
Index weighting in the sector. However, given some weakness in
fundamentals, we slightly adjusted the Fund's position. We still see
promising characteristics in the sector, including the secular growth
trend, free cash flow and attractive valuations.
Within financials, exposure to the weakening real estate market, the
potential for a slowing economy, and unattractive valuations have led to
a continued underweight in the sector. Therefore, we kept the Fund
underweight in financials relative to the Russell Index. We do see some
individual opportunities within the sector, including companies with
less cyclical earnings. One example is large diversified financial
companies, which have good growth stories, but have underperformed to
the extent that their valuations appear exceptionally low.
- --------------------------------------------------------------------------------
10 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
Q: How are you positioning the Fund for going forward?
A: The primary focus of the Fund remains finding good growth companies
where we believe the valuation is reasonable. In general, we believe the
Fund holds stocks that, as a group, are likely to grow earnings faster
than the market. After an extremely strong period of earnings growth, we
believe earnings growth is likely to decelerate, perhaps sharply, given
several headwinds including operating margins that are likely near a
peak and a consumer that will be negatively impacted by the housing
slowdown. We believe this favors stable growth over cyclical growth and
have the Fund positioned accordingly. This results in overweight
positions compared to the Russell Index of healthcare, consumer staples
and telecom services and underweight positions relative to the Russell
Index of retail, energy, industrials and materials. We also believe it
is a particularly attractive time for large cap stocks given the likely
deceleration in earnings growth, extended period of small cap
outperformance and attractive relative valuation of the company. We see
more opportunities than is typical in many of the largest companies in
the market and have actively increased the weighting of the Fund in many
such companies where we like the competitive positioning, growth outlook
and valuation.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 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 Growth Fund Class A shares (from 8/1/96 to 7/31/06)
as compared to the performance of two widely cited performance indices, the
Russell 1000 Growth Index and the Lipper Large-Cap Growth 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 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.
COMPARATIVE RESULTS
Results at July 31, 2006
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(3)
RIVERSOURCE GROWTH FUND
(INCLUDES SALES CHARGE)
- ----------------------------------------------------------------------------------------------------
Class A Cumulative value of $9,518 $11,836 $9,095 $13,866 $426,298
- ----------------------------------------------------------------------------------------------------
Average annual total return -4.82% +5.78% -1.88% +3.32% +11.52%
- ----------------------------------------------------------------------------------------------------
RUSSELL 1000 GROWTH INDEX(1)
- ----------------------------------------------------------------------------------------------------
Cumulative value of $10,000 $9,924 $12,175 $9,684 $17,667 N/A
- ----------------------------------------------------------------------------------------------------
Average annual total return -0.76% +6.78% -0.64% +5.86% N/A
- ----------------------------------------------------------------------------------------------------
LIPPER LARGE-CAP GROWTH FUNDS INDEX(2)
- ----------------------------------------------------------------------------------------------------
Cumulative value of $10,000 $9,814 $12,073 $9,472 $16,592 N/A
- ----------------------------------------------------------------------------------------------------
Average annual total return -1.86% +6.48% -1.08% +5.19% N/A
- ----------------------------------------------------------------------------------------------------
Results for other share classes can be found on page 6.
- --------------------------------------------------------------------------------
12 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE GROWTH FUND
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
RiverSource Growth Lipper Large-Cap
Fund Class A Russell 1000(R) Growth Funds
Date (includes sales charge) Growth Index(1) Index(2)
1996 $9,425 $10,000 $10,000
1997 $14,797 $15,185 $14,807
1998 $15,732 $18,210 $17,792
1999 $18,955 $22,588 $21,872
2000 $24,833 $28,095 $26,697
2001 $14,368 $18,245 $17,513
2002 $10,127 $13,000 $12,613
2003 $11,042 $14,513 $13,744
2004 $11,497 $15,748 $14,588
2005 $13,731 $17,802 $16,906
2006 $13,866 $17,667 $16,592
1) The Russell 1000 Growth Index, an unmanaged index, measures the
performance of those stocks in the Russell 1000 Index with higher
price-to-book ratios and higher forecasted growth values. The index
reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.
2) The Lipper Large-Cap Growth Funds Index includes the 30 largest
large-cap growth funds tracked by Lipper Inc. The index's returns
include net reinvested dividends. The Fund's performance is currently
measured against this index for purposes of determining the performance
incentive adjustment.
(3) Fund data is from March 1, 1972. The Fund began operating before the
inception of the Russell 1000 Growth Index and Lipper peer group.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 13
INVESTMENTS IN SECURITIES
JULY 31, 2006
(Percentages represent value of investments compared to net assets)
- -------------------------------------------------------------------------------------
COMMON STOCKS (97.3%)
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (1.3%)
Boeing 249,541 $ 19,319,464
Honeywell Intl 433,383 16,771,922
Lockheed Martin 89,507 7,131,918
------------
Total 43,223,304
- -------------------------------------------------------------------------------------
AIRLINES (0.1%)
UAL 173,756(b,d) 4,541,982
- -------------------------------------------------------------------------------------
BEVERAGES (2.3%)
Coca-Cola 423,768 18,857,676
PepsiCo 927,703 58,797,816
------------
Total 77,655,492
- -------------------------------------------------------------------------------------
BIOTECHNOLOGY (5.3%)
Amgen 855,676(b) 59,674,844
Biogen Idec 1,263,054(b) 53,199,834
Genentech 675,812(b,d) 54,619,126
Gilead Sciences 152,214(b) 9,358,117
------------
Total 176,851,921
- -------------------------------------------------------------------------------------
CAPITAL MARKETS (0.2%)
KKR Private Equity
Investors LP Unit 288,011(b) 6,768,259
- -------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (7.7%)
Alcatel 1,350,957(b,c) 15,236,857
Cisco Systems 6,145,565(b) 109,698,334
Lucent Technologies 18,979,960(b) 40,427,315
Motorola 2,930,960 66,708,650
Nortel Networks 9,145,144(b,c) 17,924,482
Sonus Networks 1,465,310(b) 6,564,589
------------
Total 256,560,227
- -------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (2.0%)
Apple Computer 91,569(b) 6,223,029
Dell 1,261,266(b) 27,344,248
EMC 843,513(b) 8,561,657
Hewlett-Packard 788,328 25,155,546
------------
Total 67,284,480
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
DIVERSIFIED FINANCIAL SERVICES (0.4%)
Bank of America 141,256 $ 7,278,922
Citigroup 140,885 6,806,154
------------
Total 14,085,076
- -------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (1.9%)
BellSouth 146,246 5,728,456
Embarq 948,961(b) 42,940,486
NeuStar Cl A 103,492(b) 3,193,763
Windstream 975,170 12,218,875
------------
Total 64,081,580
- -------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.1%)
Safeway 897,488 25,201,463
Wal-Mart Stores 245,322 10,916,829
------------
Total 36,118,292
- -------------------------------------------------------------------------------------
FOOD PRODUCTS (1.2%)
General Mills 134,676 6,989,684
Kellogg 669,347 32,242,445
------------
Total 39,232,129
- -------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (3.0%)
Boston Scientific 4,818,598(b) 81,964,352
Medtronic 400,459 20,231,189
------------
Total 102,195,541
- -------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (3.2%)
Cardinal Health 656,915 44,013,305
UnitedHealth Group 1,357,443 64,926,499
------------
Total 108,939,804
- -------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (3.7%)
Colgate-Palmolive 708,252 42,013,509
Procter & Gamble 1,198,085 67,332,376
Spectrum Brands 2,101,127(b,d) 14,224,630
------------
Total 123,570,515
- -------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (1.8%)
General Electric 1,885,572 61,639,349
- -------------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
- -------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
INSURANCE (1.9%)
ACE 360,351(c) $ 18,568,887
American Intl Group 738,668 44,814,988
------------
Total 63,383,875
- -------------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (4.4%)
eBay 330,874(b) 7,964,137
Google Cl A 335,347(b,f) 129,645,150
Yahoo! 306,740(b) 8,324,924
------------
Total 145,934,211
- -------------------------------------------------------------------------------------
IT SERVICES (0.3%)
First Data 284,759 11,632,405
- -------------------------------------------------------------------------------------
MACHINERY (0.3%)
Deere & Co 40,851 2,964,557
Flowserve 159,110(b) 8,241,898
------------
Total 11,206,455
- -------------------------------------------------------------------------------------
MEDIA (12.9%)
Cablevision
Systems Cl A 689,050 15,331,363
Comcast Cl A 1,237,688(b,d) 42,551,713
Liberty Global Cl A 2,756,112(b) 60,221,047
Liberty Global Series C 787,014(b) 16,668,957
News Corp Cl A 1,067,043 20,529,907
NTL 10,694,281 244,364,321
Viacom Cl B 258,837(b) 9,020,469
Vivendi 632,519(c) 21,417,879
WorldSpace Cl A 419,274(b,d) 1,320,713
XM Satellite Radio
Holdings Cl A 232,755(b) 2,699,958
------------
Total 434,126,327
- -------------------------------------------------------------------------------------
METALS & MINING (1.3%)
Coeur d'Alene Mines 4,180,885(b) 19,984,630
Newmont Mining 448,091 22,955,702
------------
Total 42,940,332
- -------------------------------------------------------------------------------------
MULTILINE RETAIL (0.7%)
Federated Department
Stores 400,888 14,075,178
Target 195,902 8,995,820
------------
Total 23,070,998
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
OIL, GAS & CONSUMABLE FUELS (4.6%)
Aventine Renewable
Energy Holdings 6,120(b) $ 181,152
Chevron 144,847 9,528,036
ConocoPhillips 139,108 9,548,373
Exxon Mobil 1,243,096 84,207,323
Kerr-McGee 712,252 50,000,090
Kinder Morgan
Management LLC --(b) 14
------------
Total 153,464,988
- -------------------------------------------------------------------------------------
PHARMACEUTICALS (10.1%)
AstraZeneca 412,763(c) 25,202,652
Bristol-Myers Squibb 2,022,088 48,469,449
Eli Lilly & Co 146,525 8,318,224
Johnson & Johnson 695,513 43,504,338
Merck & Co 668,908 26,936,925
Novartis ADR 167,811(c) 9,434,334
Pfizer 4,849,143 126,029,227
Roche Holding 80,668(c) 14,354,670
Schering-Plough 742,196 15,170,486
Teva Pharmaceutical
Inds ADR 615,008(c) 20,344,465
------------
Total 337,764,770
- -------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.6%)
Freescale
Semiconductor Cl A 1,359,161(b) 38,912,779
Freescale
Semiconductor Cl B 304,402(b) 8,681,545
Integrated
Device Technology 1,588,217(b) 24,569,717
Intel 798,885 14,379,930
------------
Total 86,543,971
- -------------------------------------------------------------------------------------
SOFTWARE (3.6%)
Adobe Systems 180,496(b) 5,145,941
Microsoft 3,416,168 82,090,517
Symantec 1,985,876(b) 34,494,666
------------
Total 121,731,124
- -------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (0.4%)
Countrywide Financial 333,239 11,939,953
- -------------------------------------------------------------------------------------
TOBACCO (2.7%)
Altria Group 920,247 73,592,153
Imperial Tobacco
Group ADR 268,384(c) 17,512,056
------------
Total 91,104,209
- -------------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 15
- -------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
WIRELESS TELECOMMUNICATION SERVICES (16.3%)
ALLTEL 1,784,672 $ 98,460,354
Hutchison
Telecommunications
Intl 14,147,310(b,c) 24,580,585
Orascom Telecom
Holding GDR 748,715(c) 35,788,577
Partner
Communications ADR 156,160(c) 1,449,165
Sprint Nextel 13,203,529 261,429,873
Vodafone Group 45,207,225(c) 98,159,281
Vodafone Group ADR 443,566(c) 9,616,500
Vodafone Group Cl B 51,665,401(c) 14,475,102
--------------
Total 543,959,437
- -------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $3,301,032,532) $3,261,551,006
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
OPTIONS PURCHASED (0.5%)
- -------------------------------------------------------------------------------------
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
PUTS
Google Cl A 1,677 $380 Dec. 2006 $ 4,242,810
S&P 500 Index 25,461 123 Dec. 2006 6,237,945
S&P 500 Index 17,779 125 Dec. 2006 5,333,700
- -------------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost: $20,362,846) $ 15,814,455
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
SHORT-TERM SECURITIES (2.3%)(e)
- -------------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
COMMERCIAL PAPER
Chesham Finance LLC
08-01-06 5.30% $ 3,800,000 $ 3,799,441
Deer Valley Funding LLC
08-14-06 5.32 30,000,000 29,938,050
Ebury Finance LLC
08-07-06 5.31 20,000,000 19,979,389
Fairway Finance
08-21-06 5.32 2,700,000(g) 2,691,652
Nieuw Amsterdam
08-08-06 5.30 21,700,000(g) 21,674,490
- -------------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $78,094,537) $ 78,083,022
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $3,399,489,915)(h) $3,355,448,483
=====================================================================================
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
16 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
- --------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. At July 31, 2006,
the value of foreign securities represented 10.3% of net assets.
(d) At July 31, 2006, security was partially or fully on loan. See Note 5 to
the financial statements.
(e) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.4% of net assets. See Note 5 to
the financial statements. 1.9% of net assets is the Fund's cash
equivalent position.
(f) At July 31, 2006, securities valued at $97,229,900 were held to cover
open call options written as follows (see Note 6 to the financial
statements):
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
--------------------------------------------------------------------------
Google Cl A 2,515 $420 Dec. 2006 $5,055,150
(g) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 2006, the value
of these securities amounted to $24,366,142 or 0.7% of net assets.
(h) At July 31, 2006, the cost of securities for federal income tax purposes
was $3,427,733,857 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $ 161,569,355
Unrealized depreciation (233,854,729)
-------------------------------------------------------------------------
Net unrealized depreciation $ (72,285,374)
-------------------------------------------------------------------------
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 GROWTH FUND - 2006 ANNUAL REPORT 17
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2006
ASSETS
Investments in securities, at value (Note 1)*
(identified cost $3,399,489,915) $3,355,448,483
Foreign currency holdings (identified cost $19,430) (Note 1) 19,548
Capital shares receivable 436,036
Dividends and accrued interest receivable 6,695,752
Receivable for investment securities sold 57,826,520
- -----------------------------------------------------------------------------------------------------
Total assets 3,420,426,339
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of cash on demand deposit 112,189
Capital shares payable 141,186
Payable for investment securities purchased 46,555,970
Payable upon return of securities loaned (Note 5) 14,835,000
Accrued investment management services fee 158,260
Accrued distribution fee 88,576
Accrued service fee 2,206
Accrued transfer agency fee 24,778
Accrued administrative services fee 14,201
Other accrued expenses 406,709
Options contracts written, at value (premiums received $5,531,700) (Note 6) 5,055,150
- -----------------------------------------------------------------------------------------------------
Total liabilities 67,394,225
- -----------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $3,353,032,114
=====================================================================================================
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 1,184,563
Additional paid-in capital 3,933,352,194
Undistributed net investment income 21,642,770
Accumulated net realized gain (loss) (Note 8) (559,606,585)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (43,540,828)
- -----------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $3,353,032,114
=====================================================================================================
Net assets applicable to outstanding shares: Class A $2,350,963,254
Class B $ 462,284,256
Class C $ 18,728,947
Class I $ 255,882,653
Class Y $ 265,173,004
Net asset value per share of outstanding capital stock: Class A shares 82,166,864 $ 28.61
Class B shares 17,737,114 $ 26.06
Class C shares 718,480 $ 26.07
Class I shares 8,730,515 $ 29.31
Class Y shares 9,103,369 $ 29.13
- -----------------------------------------------------------------------------------------------------
*Including securities on loan, at value (Note 5) $ 13,620,350
- -----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
STATEMENT OF OPERATIONS
PERIOD FROM PERIOD FROM TOTAL
AUG. 1, 2005 TO DEC. 6, 2005 TO AUG. 1, 2005 TO
DEC. 5, 2005 (NOTE 1) JULY 31, 2006 JULY 31, 2006
INVESTMENT INCOME
Income:
Dividends $ 14,193,685 $ 43,961,760 $ 58,155,445
Interest 1,247,678 4,525,832 5,773,510
Fee income from securities lending (Note 5) 63,368 276,959 340,327
Less foreign taxes withheld (197,993) (1,087,574) (1,285,567)
- ------------------------------------------------------------------------------------------------------------
Total income 15,306,738 47,676,977 62,983,715
- ------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 6,845,457 13,076,622 19,922,079
Distribution fee
Class A 1,921,807 3,930,351 5,852,158
Class B 1,879,387 3,695,019 5,574,406
Class C 56,959 124,255 181,214
Transfer agency fee 2,065,763 3,859,453 5,925,216
Incremental transfer agency fee
Class A 149,860 287,112 436,972
Class B 88,975 163,582 252,557
Class C 2,333 4,826 7,159
Service fee -- Class Y 101,751 187,536 289,287
Administrative services fees and expenses 552,037 1,239,510 1,791,547
Custodian fees 103,625 190,549 294,174
Compensation of board members 6,232 12,464 18,696
Printing and postage 215,775 580,400 796,175
Registration fees 50,115 112,300 162,415
Audit fees 23,925 16,075 40,000
Other 63,721 49,914 113,635
- ------------------------------------------------------------------------------------------------------------
Total expenses 14,127,722 27,529,968 41,657,690
Earnings and bank fee credits on cash balances (44,884) (165,452) (210,336)
- ------------------------------------------------------------------------------------------------------------
Total net expenses 14,082,838 27,364,516 41,447,354
- ------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 1,223,900 20,312,461 21,536,361
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 124,446,635 247,052,576 371,499,211
Foreign currency transactions (24,009) (153,629) (177,638)
Options contracts written (Note 6) -- 6,887,300 6,887,300
Reimbursement from affiliate (Note 2) -- 283,994 283,994
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 124,422,626 254,070,241 378,492,867
and on translation of assets and
liabilities in foreign currencies (71,020,375) (298,555,385) (369,575,760)
- ------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments 53,402,251 (44,485,144) 8,917,107
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ 54,626,151 $ (24,172,683) $ 30,453,468
============================================================================================================
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 19
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2006 2005
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 21,536,361 $ 1,207,349
Net realized gain (loss) on investments 378,492,867 289,309,123
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (369,575,760) 243,570,687
- -------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 30,453,468 534,087,159
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (766,414) --
Class I (240,149) --
Class Y (164,443) --
- -------------------------------------------------------------------------------------------------------
Total distributions (1,171,006) --
- -------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 723,627,727 245,400,269
Class B shares 155,729,842 84,469,961
Class C shares 8,410,448 4,411,692
Class I shares 109,795,697 115,544,634
Class Y shares 54,128,249 47,375,409
Reinvestment of distributions at net asset value
Class A shares 748,320 --
Class I shares 240,142 --
Class Y shares 164,443 --
Payments for redemptions
Class A shares (500,308,297) (623,373,452)
Class B shares (Note 2) (269,341,808) (200,303,603)
Class C shares (Note 2) (4,706,122) (4,584,216)
Class I shares (3,449,675) (1,248,614)
Class Y shares (96,349,570) (152,214,350)
- -------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 178,689,396 (484,522,270)
- -------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 207,971,858 49,564,889
Net assets at beginning of year 3,145,060,256 3,095,495,367
- -------------------------------------------------------------------------------------------------------
Net assets at end of year $3,353,032,114 $3,145,060,256
=======================================================================================================
Undistributed net investment income $ 21,642,770 $ 1,171,059
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------
20 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource Large Cap Series, Inc. (formerly AXP
Growth Series, Inc.) and is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital
stock that can be allocated among the separate series as designated by the
Board. The Fund invests primarily in common stocks of U.S. and foreign
companies that appear to offer growth opportunities.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July, 31, 2006, Ameriprise Financial, Inc.
(Ameriprise Financial) and the affiliated funds-of-funds owned 100% of Class I
shares, which represents 7.63% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Prior to Dec. 6, 2005, the Fund invested all of its assets in Growth Portfolio
(the Portfolio). The Fund recorded its daily share of the Portfolio's income,
expenses and realized and unrealized gains and losses.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 21
Effective at the close of business on Dec. 5, 2005, the Portfolio was
liquidated and the Fund exchanged its interest in the Portfolio for its
proportionate share (99.99%) of the Portfolio's assets and liabilities. Within
the statement of operations for the period from Aug. 1, 2005 to Dec. 5, 2005,
income and expense amounts include allocations from the Portfolio in the
following amounts:
- ---------------------------------------------------------------------------------
Dividends $14,193,685
- ---------------------------------------------------------------------------------
Interest Income $1,247,678
- ---------------------------------------------------------------------------------
Fee income from securities lending $63,368
- ---------------------------------------------------------------------------------
Foreign taxes withheld $(197,993)
- ---------------------------------------------------------------------------------
Investment management services fee $6,845,457
- ---------------------------------------------------------------------------------
Custodian fees $103,173
- ---------------------------------------------------------------------------------
Audit fees $12,025
- ---------------------------------------------------------------------------------
Other $46,334
- ---------------------------------------------------------------------------------
Earnings credits on cash balances $(714)
- ---------------------------------------------------------------------------------
All realized and unrealized gains (losses) presented for the period from Aug.
1, 2005 to Dec. 5, 2005 were as a result of allocations from the Portfolio.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from
actual results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty
that the effect of the development or event has actually caused the closing
price to no longer reflect the actual value, the closing prices, as determined
at the close of the applicable foreign market, may be adjusted to reflect the
fair value of the affected foreign securities as of the close of the New York
Stock Exchange. Significant events include material movements in the U.S.
securities markets prior to the opening of foreign markets on the following
trading day. FVP results in an estimated price that reasonably reflects the
current market conditions in order to value the portfolio holdings such that
shareholder transactions receive a fair net asset value. Short-term securities
maturing in more
- --------------------------------------------------------------------------------
22 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
than 60 days from the valuation date are valued at the market price or
approximate market value based on current interest rates; those maturing in 60
days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a
put option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option
is that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option or the cost of a security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to
the purchase or sale of securities 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
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 23
losses. In the statement of operations, net realized gains or losses from
foreign currency transactions, if any, may arise from sales of foreign
currency, closed forward contracts, exchange gains or losses realized between
the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At July 31, 2006, foreign currency holdings were entirely
comprised of European monetary units.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to the shareholders. No provision for income or
excise taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts and losses deferred due to "wash sale" transactions.
The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed may differ
from the year that the income or realized gains (losses) were recorded by the
Fund.
On the statement of assets and liabilities, as a result of permanent
book-to-tax differences, undistributed net investment income has been
increased by $106,356 and accumulated net realized loss has been increased by
$106,704 resulting in a net reclassification adjustment to increase paid-in
capital by $348.
- --------------------------------------------------------------------------------
24 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2006 2005
- --------------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income ................................... $766,414 $--
Long-term capital gain ............................ -- --
CLASS B
Distributions paid from:
Ordinary income ................................... -- --
Long-term capital gain ............................ -- --
CLASS C
Distributions paid from:
Ordinary income ................................... -- --
Long-term capital gain ............................ -- --
CLASS I
Distributions paid from:
Ordinary income ................................... 240,149 --
Long-term capital gain ............................ -- --
CLASS Y
Distributions paid from:
Ordinary income ................................... 164,443 --
Long-term capital gain ............................ -- --
At July 31, 2006, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income ........................... $ 21,642,770
Accumulated long-term gain (loss) ....................... $(535,377,023)
Unrealized appreciation (depreciation) .................. $ (67,770,390)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (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, that will result from the adoption of FIN 48.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 25
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased
or sold. Interest income, including amortization of premium, market discount
and original issue discount using the effective interest method, is accrued
daily.
2. EXPENSES AND SALES CHARGES
Effective Dec. 6, 2005, the Fund entered into an Investment Management
Services Agreement with RiverSource Investments, LLC (the Investment Manager)
to determine which securities will be purchased, held or sold. Prior to the
withdrawal of the Fund's assets from the Portfolio, Growth Trust (the Trust),
on behalf of the Portfolio, had an Investment Management Services Agreement
with Ameriprise Financial. Prior to Dec. 6, 2005, the investment management
fee was assessed at the Portfolio level. The management fee is a percentage of
the Fund's average daily net assets that declines from 0.60% to 0.375%
annually as the Fund's assets increase. Prior to March 1, 2006, the management
fee percentage of the Fund's average daily net assets declined from 0.60% to
0.48% annually as the Fund's assets increased. The fee may be adjusted upward
or downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Large-Cap Growth Funds
Index. In certain circumstances, the Board may approve a change in the index.
The maximum adjustment is 0.12% per year. If the performance difference is
less than 0.50%, the adjustment will be zero. For the period from Aug. 1, 2005
to Dec. 5, 2005, the adjustment increased the fee by $432,349 and for the
period from Dec. 6, 2005 to July 31, 2006, the adjustment increased the fee by
$135,722.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.06% to 0.03% annually
as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of
the Fund's average daily net assets declined from 0.05% to 0.02% annually as
the Fund's assets increased. A minor portion of additional administrative
service expenses paid by the Fund are consultants' fees and fund office
expenses. Under this agreement, the Fund also pays taxes, audit and certain
legal fees, registration fees for shares, compensation of board members,
corporate filing fees and any other expenses properly payable by the Fund and
approved by the Board.
Under a Deferred Compensation Plan (the Plan), non-interested board members
may defer receipt of their compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Fund or
other
- --------------------------------------------------------------------------------
26 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
RiverSource funds. The Fund's liability for these amounts is adjusted for
market value changes and remains in the Fund until distributed in accordance
with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund pays
the Transfer Agent an annual fee per shareholder account for this service as
follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by the Distributor and other servicing agents
with respect to those shares. The fee is calculated at a rate of 0.10% of the
Fund's average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$3,919,352 for Class A, $631,265 for Class B and $3,105 for Class C for the
year ended July 31, 2006.
During the period from Aug. 1, 2005 to Dec. 5, 2005, the Fund's custodian and
transfer agency fees were reduced by $44,884 as a result of earnings and bank
fee credits from overnight cash balances. During the period from Dec. 6, 2005
to July 31, 2006, the Fund's custodian and transfer agency fees were reduced
by $165,452 as a result of earnings and bank fee credits from overnight cash
balances.
In addition, the Fund received a one time reimbursement of $283,994 by
Ameriprise Financial for additional earnings from overnight cash balances
determined to be owed for prior years. This amount was insignificant to the
Fund's net assets value and total return.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 27
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,543,392,466 and $1,352,146,154, respectively, for
the period from Aug. 1, 2005 to Dec. 5, 2005 and $3,111,480,078 and
$2,980,514,147, respectively, for the period from Dec. 6, 2005 to July 31,
2006. Realized gains and losses are determined on an identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as
follows:
YEAR ENDED JULY 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- --------------------------------------------------------------------------------------------------
Sold 25,321,178 5,918,299 320,095 3,763,917 1,827,502
Issued for reinvested
distributions 25,727 -- -- 8,083 5,559
Redeemed (17,311,509) (10,403,829) (178,061) (113,992) (3,287,393)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) 8,035,396 (4,485,530) 142,034 3,658,008 (1,454,332)
- --------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- --------------------------------------------------------------------------------------------------
Sold 9,267,227 3,475,136 181,331 4,366,146 1,841,710
Issued for reinvested
distributions -- -- -- -- --
Redeemed (24,353,716) (8,484,021) (194,446) (44,571) (5,823,100)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) (15,086,489) (5,008,885) (13,115) 4,321,575 (3,981,390)
- --------------------------------------------------------------------------------------------------
5. LENDING OF PORTFOLIO SECURITIES
At July 31, 2006, securities valued at $13,620,350 were on loan to brokers.
For collateral, the Fund received $14,835,000 in cash. Cash collateral
received is invested in short-term securities, which are included in the
short-term section of the "Investments in securities." Income from securities
lending amounted to $340,327 for year ended July 31, 2006. The risks to the
Fund of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
6. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as
follows:
YEAR ENDED JULY 31, 2006
CALLS
- --------------------------------------------------------------------------------
CONTRACTS PREMIUMS
- --------------------------------------------------------------------------------
Balance July 31, 2005 -- $ --
Opened 4,827 12,746,749
Closed (2,312) (7,215,049)
- --------------------------------------------------------------------------------
Balance July 31, 2006 2,515 $ 5,531,700
- --------------------------------------------------------------------------------
See "Summary of significant accounting policies."
- --------------------------------------------------------------------------------
28 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
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. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate.
Borrowings are payable within 60 days after such loan is executed. The Fund
also pays a commitment fee equal to its pro rata share of the amount of the
credit facility at a rate of 0.07% per annum. Prior to this agreement, the
Fund had a revolving credit agreement that permitted borrowings up to $500
million with The Bank of New York. The Fund had no borrowings outstanding
during the year ended July 31, 2006.
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$535,377,023 at July 31, 2006, that if not offset by capital gains will expire
as follows:
2010 2011
- --------------------------------------------------------------------------------
$166,602,696 $368,774,327
- --------------------------------------------------------------------------------
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement agreements
with the Securities and Exchange Commission (SEC) and Minnesota Department of
Commerce (MDOC) related to market timing activities. In connection with these
matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC
violated certain provisions of the federal and Minnesota securities laws by
failing to adequately disclose market timing activities by allowing certain
identified market timers to continue to market time contrary to disclosures in
mutual fund and variable annuity product prospectuses. The Orders also alleged
that AEFC failed to implement procedures to detect and prevent market timing
in 401(k) plans for employees of AEFC and related companies and failed to
adequately disclose that there were no such procedures. Pursuant to the MDOC
Order, the MDOC also alleged that AEFC allowed inappropriate market timing to
occur by failing to have written policies and procedures and failing to
properly supervise its employees.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 29
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million. AEFC
also agreed to make presentations at least annually to its board of directors
and the relevant mutual funds' board that include an overview of policies and
procedures to prevent market timing, material changes to these policies and
procedures and whether disclosures related to market timing are consistent
with the SEC order and federal securities laws. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a summary
of actions taken to ensure compliance with applicable laws and regulations and
certification by a senior officer regarding compliance and supervisory
procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, 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.
- --------------------------------------------------------------------------------
30 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
10. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- --------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002
Net asset value, beginning of period $28.34 $23.73 $22.80 $20.88 $29.68
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .18 .04 .02 -- (.04)
Net gains (losses) (both realized
and unrealized) .10 4.57 .91 1.92 (8.74)
- --------------------------------------------------------------------------------------------
Total from investment operations .28 4.61 .93 1.92 (8.78)
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) -- -- -- --
Distributions from realized gains -- -- -- -- (.02)
- --------------------------------------------------------------------------------------------
Total distributions (.01) -- -- -- (.02)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $28.61 $28.34 $23.73 $22.80 $20.88
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $2,351 $2,101 $2,117 $2,263 $2,213
- --------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(b) 1.14% 1.19% 1.03% 1.21% .99%
- --------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .72% .16% .07% --% (.15%)
- --------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 134% 136% 171% 205% 225%
- --------------------------------------------------------------------------------------------
Total return(c) .98% 19.43% 4.08% 9.20% (29.59%)
- --------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 31
CLASS B
- ----------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002
Net asset value, beginning of period $26.01 $21.95 $21.25 $19.61 $28.11
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.05) (.16) (.16) (.17) (.25)
Net gains (losses) (both realized
and unrealized) .10 4.22 .86 1.81 (8.23)
- ----------------------------------------------------------------------------------------------
Total from investment operations .05 4.06 .70 1.64 (8.48)
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- -- -- -- (.02)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $26.06 $26.01 $21.95 $21.25 $19.61
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 462 $ 578 $ 598 $ 775 $ 845
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(b) 1.91% 1.97% 1.81% 1.99% 1.77%
- ----------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (.06%) (.62%) (.71%) (.77%) (.93%)
- ----------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 134% 136% 171% 205% 225%
- ----------------------------------------------------------------------------------------------
Total return(c) .19% 18.50% 3.29% 8.36% (30.18%)
- ----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
32 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
CLASS C
- ----------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ----------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002
Net asset value, beginning of period $26.01 $21.95 $21.25 $19.62 $28.12
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.04) (.16) (.16) (.17) (.21)
Net gains (losses) (both realized
and unrealized) .10 4.22 .86 1.80 (8.27)
- ----------------------------------------------------------------------------------------------
Total from investment operations .06 4.06 .70 1.63 (8.48)
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- -- -- -- (.02)
- ----------------------------------------------------------------------------------------------
Net asset value, end of period $26.07 $26.01 $21.95 $21.25 $19.62
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 19 $ 15 $ 13 $ 12 $ 7
- ----------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(b) 1.91% 1.97% 1.81% 2.01% 1.80%
- ----------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (.03%) (.62%) (.71%) (.81%) (.96%)
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 134% 136% 171% 205% 225%
- ----------------------------------------------------------------------------------------------
Total return(c) .23% 18.50% 3.29% 8.31% (30.17%)
- ----------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 33
CLASS I
- --------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004(b)
Net asset value, beginning of period $28.93 $24.10 $25.61
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .32 .12 .09
Net gains (losses) (both realized
and unrealized) .10 4.71 (1.60)
- --------------------------------------------------------------------------------
Total from investment operations .42 4.83 (1.51)
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) -- --
- --------------------------------------------------------------------------------
Net asset value, end of period $29.31 $28.93 $24.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 256 $ 147 $ 18
- --------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) .68% .75% .57%(d)
- --------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.22% .55% .43%(d)
- --------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 134% 136% 171%
- --------------------------------------------------------------------------------
Total return(e) 1.44% 20.04% (5.90%)(f)
- --------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
- --------------------------------------------------------------------------------
34 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
CLASS Y
- -------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002
Net asset value, beginning of period $28.81 $24.07 $23.09 $21.11 $29.96
- -------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .24 .09 .07 .04 --
Net gains (losses) (both realized
and unrealized) .10 4.65 .91 1.94 (8.83)
- -------------------------------------------------------------------------------------------
Total from investment operations .34 4.74 .98 1.98 (8.83)
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- -- -- --
Distributions from realized gains -- -- -- -- (.02)
- -------------------------------------------------------------------------------------------
Total distributions (.02) -- -- -- (.02)
- -------------------------------------------------------------------------------------------
Net asset value, end of period $29.13 $28.81 $24.07 $23.09 $21.11
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 265 $ 304 $ 350 $ 398 $ 481
- -------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(b) .95% 1.02% .86% 1.03% .82%
- -------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .89% .34% .25% .18% .02%
- -------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 134% 136% 171% 205% 225%
- -------------------------------------------------------------------------------------------
Total return(c) 1.17% 19.69% 4.24% 9.38% (29.48%)
- -------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(c) Total return does not reflect payment of a sales charge.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD AND SHAREHOLDERS
RIVERSOURCE LARGE CAP SERIES, INC.
We have audited the accompanying statement of assets and liabilities of
RiverSource Growth Fund (a series of RiverSource Large Cap Series, Inc.) as of
July 31, 2006, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the years in the two-year
period ended July 31, 2006, and the financial highlights for each of the years
in the five-year period ended July 31, 2006. These financial statements and
the financial highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedure included confirmation of securities owned as of July 31, 2006, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
RiverSource Growth Fund as of July 31, 2006, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2006
- --------------------------------------------------------------------------------
36 RIVERSOURCE GROWTH FUND - 2006 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, 2006
CLASS A
INCOME DISTRIBUTION -- taxable as dividend income:
Qualified Dividend Income for individuals ............................ 100%
Dividends Received Deduction for corporations ........................ 100%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .......................................................... $0.00928
CLASS I
INCOME DISTRIBUTION -- taxable as dividend income:
Qualified Dividend Income for individuals ............................ 100%
Dividends Received Deduction for corporations ........................ 100%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .......................................................... $0.03842
CLASS Y
Income distribution -- taxable as dividend income:
Qualified Dividend Income for individuals ............................ 100%
Dividends Received Deduction for corporations ........................ 100%
PAYABLE DATE PER SHARE
Dec. 21, 2005 .......................................................... $0.01653
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 37
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the six months ended July 31, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values
and actual expenses. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading titled "Expenses paid during the period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
38 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2006 JULY 31, 2006 THE PERIOD(a) EXPENSE RATIO
- ---------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------
Actual(b) $1,000 $973.80 $5.48 1.12%
- ---------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.24 $5.61 1.12%
- ---------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------
Actual(b) $1,000 $969.80 $9.28 1.90%
- ---------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.37 $9.49 1.90%
- ---------------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------------
Actual(b) $1,000 $970.20 $9.23 1.89%
- ---------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.42 $9.44 1.89%
- ---------------------------------------------------------------------------------------------------
Class I
- ---------------------------------------------------------------------------------------------------
Actual(b) $1,000 $976.00 $3.33 .68%
- ---------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,021.42 $3.41 .68%
- ---------------------------------------------------------------------------------------------------
Class Y
- ---------------------------------------------------------------------------------------------------
Actual(b) $1,000 $974.60 $4.60 .94%
- ---------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.13 $4.71 .94%
- ---------------------------------------------------------------------------------------------------
(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, 2006:
-2.62% for Class A, -3.02% for Class B, -2.98% for Class C, -2.40% for
Class I and -2.54% for Class Y.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 39
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 99
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
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 52
- ------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards); former Governor
Age 71 of Minnesota
- ------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College;
Minneapolis, MN 55402 former Dean, McCallum Graduate
Age 55 School of Business, Bentley College
- ------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 71
- ------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind Board member Former Managing Director, American Progressive
901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance
Minneapolis, MN 55402
Age 70
- ------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation
Minneapolis, MN 55402 Carleton College systems)
Age 67
- ------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
40 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
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 Distribution,
901 S. Marquette Ave. since 2004 Management, Inc. (private real Inc. (transportation,
Minneapolis, MN 55402 estate and asset management distribution and logistics
Age 54 company) consultants)
- ----------------------------------------------------------------------------------------------------------------------------------
Vikki L. Pryor Board member President and Chief Executive
901 S. Marquette Ave. since 2006 Officer, SBLI USA Mutual Life
Minneapolis, MN 55402 Insurance Company, Inc. since 1999
Age 53
- ----------------------------------------------------------------------------------------------------------------------------------
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 62 Inc. (health management
programs)
- ----------------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
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, Ameriprise Certificate
53600 Ameriprise since 2001, Company since 2006; President -
Financial Center Vice President U.S. Asset Management and Chief
Minneapolis, MN 55474 since 2002, Investment Officer, Ameriprise
Age 46 Acting President Financial, Inc. and President,
since 2006 Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC since 2005; Senior
Vice President - Chief Investment
Officer, Ameriprise Financial, Inc. and
Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC, 2001-2005
- ----------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security
holder and/or employee of RiverSource Investments.
** Paula R. Meyer resigned her position as President for the RiverSource
funds. Mr. Truscott has been appointed Acting President and will be
assuming the responsibilities of President until a permanent replacement
for Ms. Meyer is found.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 41
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 and
Acting President, the Fund's other officers are:
FUND OFFICERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer Vice President - Investment Accounting, Ameriprise Financial,
105 Ameriprise since 2002 Inc., since 2002; Vice President - Finance, American Express
Financial Center Company, 2000-2002
Minneapolis, MN 55474
Age 51
- --------------------------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed Income,
172 Ameriprise since 2004 Ameriprise Financial, Inc. and RiverSource Investments, LLC
Financial Center since 2006; Vice President - Investments, Ameriprise
Minneapolis, MN 55474 Certificate Company since 2003; Senior Vice President - Fixed
Age 42 Income, Ameriprise Financial, Inc., 2002-2006 and
RiverSource Investments, LLC, 2004-2006; Managing Director,
Zurich Global Assets, 2001-2002
- --------------------------------------------------------------------------------------------------------------------------
Leslie L. Ogg Vice President, President of Board Services Corporation
901 S. Marquette Ave. General Counsel,
Minneapolis, MN 55402 and Secretary
Age 68 since 1978
- --------------------------------------------------------------------------------------------------------------------------
Edward S. Dryden* Acting Chief Chief Compliance Officer, Ameriprise Certificate Company since
1875 Ameriprise Compliance Officer 2006; Vice President - Asset Management Compliance,
Financial Center since 2006 RiverSource Investments, LLC since 2006; Chief Compliance
Minneapolis, MN 55474 Officer - Mason Street Advisors, LLC, 2002-2006
Age 41
- --------------------------------------------------------------------------------------------------------------------------
Neysa M. Alecu Anti-Money Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Laundering Officer Ameriprise Financial, Inc. since 2004; Manager Anti-Money
Financial Center since 2004 Laundering, Ameriprise Financial, Inc., 2003-2004;
Minneapolis, MN 55474 Compliance Director and Bank Secrecy Act Officer,
Age 42 American Express Centurion Bank, 2000-2003
- --------------------------------------------------------------------------------------------------------------------------
* Beth E. Weimer resigned her position as Chief Compliance Officer for the
RiverSource funds. Mr. Dryden has been appointed Acting Chief Compliance
Officer and will be assuming the responsibilities of Chief Compliance
Officer until a permanent replacement for Ms. Weimer is found.
The SAI has additional information about the Fund's directors and is available,
without charge, upon request by calling RiverSource Funds at (888) 791-3380;
contacting your financial institution; or visiting riversource.com/funds.
- --------------------------------------------------------------------------------
42 RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
During the period covered by this report, RiverSource Investments, LLC
("RiverSource Investments" or the "investment manager"), a wholly-owned
subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as
the investment manager to RiverSource funds under an Investment Management
Services Agreement ("IMS Agreement").
The Board of Directors (the "Board") annually determines whether to continue
the IMS Agreement and subadvisory agreements, as applicable, by evaluating the
quality and level of services received and the costs associated with those
services. The Board did not make the specific determination this year as each
fund's IMS Agreement was approved by the vote of a majority of the outstanding
voting securities of the funds at a shareholder meeting held on Feb. 15, 2006.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities during
the 12-month period ended June 30, 2006 is available without charge by
visiting riversource.com/funds; or searching the website of the SEC at
www.sec.gov.
- --------------------------------------------------------------------------------
RIVERSOURCE GROWTH FUND - 2006 ANNUAL REPORT 43
RIVERSOURCE(SM) GROWTH FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
riversource.com/funds
This report must be accompanied or preceded by the
Fund's current prospectus. RiverSource(SM) mutual
funds are distributed by RiverSource Distributors, Inc.
RIVERSOURCE [LOGO](SM) and Ameriprise Financial Services, Inc., Members NASD,
INVESTMENTS and managed by RiverSource Investments, LLC. These
companies are part of Ameriprise Financial, Inc.
S-6455 AA (9/06)
Annual Report
RIVERSOURCE [LOGO] (SM)
INVESTMENTS
RIVERSOURCE(SM)
LARGE CAP EQUITY FUND
- ----------------------------------------------------------------------------
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2006
> RIVERSOURCE LARGE CAP EQUITY
FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM
GROWTH OF CAPITAL.
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Fund Snapshot ......................................................... 3
Performance Summary ................................................... 5
Questions & Answers
with Portfolio Management .......................................... 7
The Fund's Long-term Performance ...................................... 12
Investments in Securities ............................................. 14
Financial Statements .................................................. 23
Notes to Financial Statements ......................................... 27
Report of Independent Registered
Public Accounting Firm ............................................. 44
Federal Income Tax Information ........................................ 45
Fund Expenses Example ................................................. 46
Board Members and Officers ............................................ 48
Approval of Investment Management
Services Agreement ................................................. 51
Proxy Voting .......................................................... 52
[LOGO]
DALBAR RATED
2006
FOR COMMUNICATION
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 LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2006
- ------------------------------------------------------------------------------
FUND OVERVIEW
- ------------------------------------------------------------------------------
RiverSource Large Cap Equity Fund offers a combination of growth and value
within a single portfolio. The Fund strives to deliver consistent and
potentially above-average returns compared to the market in a variety of
economic conditions. The stock selection process is research-driven,
leveraging the talents of an experienced team of analysts. The portfolio
management team then selects the securities and determines the allocation
within the growth and value styles. The Fund is also broadly diversified
across all sectors.
- ------------------------------------------------------------------------------
SECTOR BREAKDOWN*
- ------------------------------------------------------------------------------
Percentage of portfolio assets
Other(1) 23.2%
Energy 9.1%
Telecommunication Services 9.5%
Financials 18.1% [PIE CHART]
Information Technology 14.9%
Health Care 14.1%
Consumer Discretionary 11.1%
* 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 8.9%, Industrials 7.4%, Utilities 2.5%,
Materials 2.2% and Short-Term Securities(2) 2.2%.
(2) Of the 2.2%, 0.5% is due to security lending activity and 1.7% is the
Fund's cash equivalent position.
- ------------------------------------------------------------------------------
TOP TEN HOLDINGS
- ------------------------------------------------------------------------------
Percentage of portfolio assets
Sprint Nextel 3.5%
Exxon Mobil 3.4
NTL 2.7
Pfizer 2.7
General Electric 2.4
Bank of America 2.3
American Intl Group 2.0
Altria Group 1.9
Citigroup 1.8
Microsoft 1.7
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2006
- --------------------------------------------------------------------------------
STYLE MATRIX
- --------------------------------------------------------------------------------
[Chart] Shading within the style matrix indicates areas in which the Fund
generally invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
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 involve risks including possible loss of principal
and fluctuation in value.
- ------------------------------------------------------------------------------
PORTFOLIO MANAGERS
- ------------------------------------------------------------------------------
YEARS IN INDUSTRY
Robert Ewing, CFA 18
Nick Thakore 13
- ------------------------------------------------------------------------------
FUND FACTS
- ------------------------------------------------------------------------------
TICKER SYMBOL INCEPTION DATE
Class A ALEAX 3/28/02
Class B ALEBX 3/28/02
Class C ARQCX 3/28/02
Class I ALRIX 3/4/04
Class Y ALEYX 3/28/02
Total net assets $7.839 billion
Number of holdings 422
- ------------------------------------------------------------------------------
4 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the year ended July 31, 2006
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
+3.51% RiverSource Large Cap Equity Fund Class A (excluding sales charge)
+5.23% Russell 1000(R) Index (unmanaged)
+5.38% S&P 500 Index
+5.00% Lipper Large-Cap Core Funds Index
(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.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 5
- -------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (3/28/02) (3/28/02) (3/28/02) (3/4/04) (3/28/02)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5)
AT JULY 31, 2006
- -------------------------------------------------------------------------------------------------------------
1 year +3.51% -2.44% +2.72% -2.28% +2.71% +1.71% +4.06% +4.03%
- -------------------------------------------------------------------------------------------------------------
3 years +8.14% +6.03% +7.34% +6.17% +7.33% +7.33% N/A +8.43%
- -------------------------------------------------------------------------------------------------------------
Since inception +3.21% +1.81% +2.39% +1.97% +2.44% +2.44% +5.03% +3.45%
- -------------------------------------------------------------------------------------------------------------
AT JUNE 30, 2006
- -------------------------------------------------------------------------------------------------------------
1 year +5.55% -0.51% +4.58% -0.42% +4.57% +3.57% +5.90% +5.49%
- -------------------------------------------------------------------------------------------------------------
3 years +7.88% +5.77% +6.99% +5.81% +6.98% +6.98% N/A +7.96%
- -------------------------------------------------------------------------------------------------------------
Since inception +3.09% +1.67% +2.26% +1.82% +2.30% +2.30% +4.81% +3.25%
- -------------------------------------------------------------------------------------------------------------
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows: first year 5%; second and third year 4%; fourth year 3%;
fifth year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- ------------------------------------------------------------------------------
6 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
RiverSource Large Cap Equity Fund's Class A shares advanced 3.51%, excluding
sales charge, for the 12 months ended July 31, 2006. The Fund underperformed
its benchmarks, the Russell 1000(R) Index (Russell Index) and the Standard &
Poor's 500 Index (S&P 500 Index), which increased 5.23% and 5.38%,
respectively. The Fund's peer group, the Lipper Large-Cap Core Funds Index,
gained 5.00% during the same time frame. On March 10, 2006, the assets of
RiverSource New Dimensions Fund were merged into RiverSource Large Cap Equity
Fund. This reorganization was completed after shareholders of RiverSource New
Dimensions Fund approved the merger plan on Feb. 15, 2006.
Q: What factors most significantly affected performance for the period?
A: The stock market advanced strongly during the first six months of the
fiscal year, but in the latter months of the period U.S. stocks weakened
amid concerns about rising interest rates, high energy prices,
inflationary pressures and global conflicts. In the large-cap equity
universe, value stocks continued to outperform growth stocks. With its
multi-style strategy, the Fund held both value and growth stocks and
though its value exposure supported absolute results, the Fund did not
keep pace with the gains of its benchmark index or peers.
Compared to the Russell Index, information technology and health care
were the two strongest sectors for the Fund. Conversely,
telecommunication services, financials and consumer staples were the
weakest sectors on a relative basis.
- ------------------------------------------------------------------------------
IN THE LARGE-CAP EQUITY UNIVERSE, VALUE STOCKS CONTINUED TO OUTPERFORM
GROWTH STOCKS.
- ------------------------------------------------------------------------------
In information technology, a below-Russell Index allocation was
advantageous as technology stocks struggled throughout the period.
Strong stock selection was also a meaningful positive factor and four of
the five largest individual contributors to relative return were
technology stocks. Within information technology, we have focused on
companies with solid growth stories and good stock valuations and have
emphasized a few key themes. As part of an ongoing concentration on
wireless communications, cell phone manufacturer holdings such as Nokia,
were a solid contributor to relative return. The stock advanced as sales
of handset units and the average selling price were higher than
expected.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 7
QUESTIONS & ANSWERS
Another theme within information technology was internet companies
achieving market share gains, and Google was a key contributor among
this group. A third theme is growing interest in solar energy, which has
caused demand to outpace the supply of polysilicon used in
semiconductors for solar panels. This imbalance has fueled the strong
performance of MEMC Electronic Materials, also a contributor to
performance. Finally, our effort to avoid companies with deteriorating
fundamentals led us to a smaller-than-Russell Index weighting in Intel,
which suffered from weaker demand for personal computers and competitive
pressures on PC prices.
Within the health care sector, both stock selection and a
larger-than-Russell Index position added to the Fund's return. Our
dominant theme in this sector was companies where consolidation,
acquisitions or cost reductions can sustain earnings growth even if the
economy slows. Within this theme, Pfizer added to the Fund's return.
Pfizer, and the pharmaceuticals group in general, had a mild turnaround
during the period as their fundamentals matched investors' lowered
expectations. The Fund also had exposure to some underperforming health
care stocks including Boston Scientific. The medical device maker was
negatively affected by potential changes in government reimbursements
for cardiac devices and by additional recalls for products acquired
through its previous merger with Guidant.
We remained overweight relative to the Russell Index in
telecommunication services, mainly wireless services, because we believe
they offer a unique combination of a powerful secular trend, high free
cash flow yields and a high growth rate. Having a larger-than-Russell
Index position in telecommunication services was effective, but was more
than offset by the underperformance of the Fund's telecommunication
services holdings. Sprint Nextel was a meaningful
- ------------------------------------------------------------------------------
8 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
detractor as the company experienced deteriorating fundamentals,
specifically fewer new subscribers and less revenue per subscriber.
However, in line with our theme of focusing on companies that can
benefit from consolidation, our conviction about the stock is supported
by our analysis of the potential synergies of Sprint's merger with
Nextel, which are still not fully realized. The company's valuation
remains attractive to us and we will continue to weigh the fundamentals
against growth potential. Also in keeping with this theme, the Fund
owned shares of Lucent Technologies, a telecommunications equipment
vendor scheduled to merge with Alcatel later this year. In an industry
with such high fixed costs, the synergies of this merger have the
potential to drive earnings higher. Although some of the Fund's
telecommunications holdings have lagged, we maintain our confidence in
the secular growth potential for wireless companies.
Stock selection and a smaller-than-Russell Index position in financials
hurt performance as investors began to believe the Federal Reserve was
nearing an end to its interest rate increases. We continue to see risk
in this sector because of its exposure to real estate and its
vulnerability to a slowing economy. However, we believe the Fund's
financial holdings have attractive valuations and generally have less
risk of deteriorating fundamentals resulting from slower economic
activity.
The Fund's allocation to consumer staples was in line with that of the
Russell Index, but stock selection was a significant detractor,
primarily due to the underperformance of Spectrum Brands. We expected
this maker of batteries, fertilizers and other consumer products to
benefit from consolidation and cost cutting related to a recent
acquisition. However, rising raw material costs, which the company could
not pass on to customers, overwhelmed the potential earnings gains and
prevented the synergies from being fully realized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 9
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: Over the course of the past year, we added to the Fund's health care and
technology positions, while reducing the allocations to
telecommunication services and financials. Technology underperformed
through the period and we have added selectively to companies where we
believe price levels are reflective of current fundamental risks. The
story is similar for the health care sector.
Wireless services within telecommunications remains a core theme for the
Fund. Because we still see promising characteristics in the sector,
including the secular growth trend, strong free cash flow and attractive
valuations, we maintained a larger-than-Russell Index weighting. But, we
saw some deterioration in fundamentals and made some minor adjustments,
which slightly reduced the total portfolio position.
Within financials exposure to the weakening real estate market, the
potential for a slowing economy, and unattractive valuations, have led
to a continued underweight in the sector. Therefore, we kept the Fund
underweight in financials relative to the Russell Index. We do see some
individual opportunities within the sector, particularly companies with
less cyclical earnings. These include large diversified financial
companies, which have good growth stories, but have underperformed to
the extent that their valuations appear exceptionally low.
Q: How do you plan to manage the Fund in coming months?
A: From an economic standpoint, we thought pressures from energy costs and
a softening housing market would have begun to slow economic growth
before now. Though we were early in our anticipation of an economic
slowdown, we believe the U.S. economy is now at a pivotal point where
lower housing prices are preventing many consumers from drawing on their
home equity to finance spending. We are likely to see effects from this
over the next few years and it could offset some income and job growth
we have seen over the course of this economic cycle.
- --------------------------------------------------------------------------------
10 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
Given our current outlook, we have positioned the Fund to be less
exposed to economically sensitive companies. This doesn't necessarily
mean consumer stocks, which tend to be one of the first cyclical stock
groups to suffer and have already underperformed for an extended period.
Rather, we want to de-emphasize late cyclical groups such as industrial
and material companies. We may even begin to see some value emerge in
the consumer discretionary group.
We continue to find more opportunities in large-cap stocks, which still
appear inexpensive relative to mid and small-cap stocks, based on the
historical relationships between these groups. Although the prolonged
underperformance of growth stocks is consistent with this stage of the
economic cycle, it does seem a bit extreme to us. We think
growth-oriented stocks have more limited downside than value stocks in
the current environment and that's why the Fund has a bit more of a
growth tilt than is typical. In our view, it's now just a question of
when the growth bias will be rewarded.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 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 Large Cap Equity Fund Class A shares (from 4/1/02 to
7/31/06)* as compared to the performance of three widely cited performance
indices, the Russell 1000 Index, the Standard & Poor's 500 Index (S&P 500
Index) and the Lipper Large-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 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 March 28, 2002. Russell 1000 Index, S&P 500 Index and
Lipper peer group data is from April 1, 2002.
COMPARATIVE RESULTS
Results at July 31, 2006 SINCE
1 YEAR 3 YEARS INCEPTION(4)
RIVERSOURCE LARGE CAP EQUITY FUND
(INCLUDES SALES CHARGE)
- --------------------------------------------------------------------------------------
Class A Cumulative value of $10,000 $ 9,756 $ 11,920 $ 10,807
- --------------------------------------------------------------------------------------
Average annual total return -2.44% +6.03% +1.81%
- --------------------------------------------------------------------------------------
RUSSELL 1000 INDEX(1)
- --------------------------------------------------------------------------------------
Cumulative value of $10,000 $ 10,523 $ 13,821 $ 12,316
- --------------------------------------------------------------------------------------
Average annual total return +5.23% +11.39% +4.92%
- --------------------------------------------------------------------------------------
STANDARD & POOR'S 500 INDEX(2)
- --------------------------------------------------------------------------------------
Cumulative value of $10,000 $ 10,538 $ 13,603 $ 12,018
- --------------------------------------------------------------------------------------
Average annual total return +5.38% +10.80% +4.33%
- --------------------------------------------------------------------------------------
LIPPER LARGE-CAP CORE FUNDS INDEX(3)
- --------------------------------------------------------------------------------------
Cumulative value of $10,000 $ 10,500 $ 13,000 $ 11,452
- --------------------------------------------------------------------------------------
Average annual total return +5.00% +9.14% +3.18%
- --------------------------------------------------------------------------------------
Results for other share classes can be found on page 6.
- ------------------------------------------------------------------------------
12 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE LARGE CAP EQUITY
FUND
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
RiverSource Large Cap
Equity Fund Class A Russell 1000 Lipper Large-Cap
(includes sales charge) Index(1) S&P 500 Index(2) Core Funds Index(3)
4/1/02 $ 9,425 $10,000 $10,000 $10,000
7/31/02 7,766 8,014 7,985 8,108
7/31/03 8,546 8,911 8,835 8,808
7/31/04 9,160 10,072 9,999 9,690
7/31/05 10,441 11,704 11,404 10,907
7/31/06 $10,807 $12,316 $12,018 $11,452
(1) The Russell 1000 Index, an unmanaged index, measures the performance of
the 1,000 largest companies in the Russell 3000(R) Index, which
represents approximately 92% of the total market capitalization of the
Russell 3000 Index. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or
other fees.
(2) The S&P 500 Index, an unmanaged index of common stocks, is frequently
used as a general measure of market performance. The index reflects
reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.
(3) The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap
core funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured
against this index for purposes of determining the performance incentive
adjustment.
(4) Fund data is from March 28, 2002. Russell 1000 Index, S&P 500 Index and
Lipper peer group data is from April 1, 2002.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 13
INVESTMENTS IN SECURITIES
JULY 31, 2006
(Percentages represent value of investments compared to net assets)
- ------------------------------------------------------------------------------
COMMON STOCKS (97.9%)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (3.0%)
Boeing 684,452 $52,990,274
DRS Technologies 25,833 1,195,810
General Dynamics 146,614 9,826,070
Goodrich 442,244 17,853,390
Honeywell Intl 1,601,315 61,970,890
L-3 Communications
Holdings 99,204 7,306,375
Lockheed Martin 466,354 37,159,087
Northrop Grumman 275,806 18,255,599
United Technologies 435,314 27,072,178
-----------
Total 233,629,673
- ------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS (0.1%)
United Parcel Service Cl B 97,226 6,699,844
- ------------------------------------------------------------------------------
AIRLINES (0.1%)
UAL 203,183(b,e) 5,311,204
- ------------------------------------------------------------------------------
AUTO COMPONENTS (--%)
Cooper Tire & Rubber 13,699 136,853
Goodyear Tire & Rubber 39,529(b,e) 434,819
Johnson Controls 43,369 3,329,004
-----------
Total 3,900,676
- ------------------------------------------------------------------------------
AUTOMOBILES (0.1%)
Ford Motor 416,368(e) 2,777,175
General Motors 126,310(e) 4,070,971
Harley-Davidson 46,828 2,669,196
-----------
Total 9,517,342
- ------------------------------------------------------------------------------
BEVERAGES (1.8%)
Anheuser-Busch
Companies 172,637 8,312,472
Brown-Forman Cl B 18,826 1,382,770
Coca-Cola 955,417 42,516,057
Coca-Cola Enterprises 67,400 1,446,404
Constellation Brands Cl A 44,319(b) 1,084,043
Molson Coors Brewing Cl B 13,214 944,140
Pepsi Bottling Group 30,309 1,007,774
PepsiCo 1,368,244 86,719,304
-----------
Total 143,412,964
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
BIOTECHNOLOGY (2.5%)
Amgen 1,092,597(b) $76,197,714
Biogen Idec 1,311,757(b) 55,251,205
Genentech 562,019(b,e) 45,422,376
Gilead Sciences 224,183(b) 13,782,771
MedImmune 71,424(b) 1,812,741
-----------
Total 192,466,807
- ------------------------------------------------------------------------------
BUILDING PRODUCTS (0.1%)
American Standard
Companies 65,300 2,522,539
Masco 258,237 6,902,675
-----------
Total 9,425,214
- ------------------------------------------------------------------------------
CAPITAL MARKETS (2.4%)
Bank of New York 390,673 13,130,520
Bear Stearns Companies 13,331 1,891,269
Franklin Resources 346,557 31,692,638
Goldman Sachs Group 48,693 7,437,856
KKR Private Equity
Investors LP Unit 407,329(b) 9,572,232
Legg Mason 111,309 9,290,962
Lehman Brothers
Holdings 568,072 36,896,275
Merrill Lynch & Co 391,623 28,517,987
Morgan Stanley 681,909 45,346,948
State Street 91,865 5,517,412
-----------
Total 189,294,099
- ------------------------------------------------------------------------------
CHEMICALS (0.9%)
Air Products & Chemicals 49,724 3,178,855
Ashland 15,918 1,058,706
Dow Chemical 780,134 26,977,035
Eastman Chemical 124,259 6,166,974
Ecolab 40,721 1,753,853
EI du Pont de
Nemours & Co 205,481 8,149,376
Hercules 25,214(b) 350,475
Intl Flavors & Fragrances 17,633 652,421
Lyondell Chemical 268,309 5,975,241
Monsanto 120,334 5,173,159
PPG Inds 36,928 2,272,549
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
CHEMICALS (CONT.)
Praxair 72,095 $ 3,953,690
Rohm & Haas 32,167 1,483,542
RPM Intl 157,442 2,950,463
Sigma-Aldrich 14,937 1,038,122
------------
Total 71,134,461
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (2.8%)
BB&T 59,794 2,510,750
Commerce Bancorp 378,493(e) 12,857,407
Fifth Third Bancorp 62,052 2,366,663
ICICI Bank ADR 39,994(c) 1,044,643
Natl City 61,133 2,200,788
PNC Financial
Services Group 340,439 24,116,699
Regions Financial 50,965 1,849,520
SunTrust Banks 41,408 3,265,849
US Bancorp 1,027,699 32,886,368
Wachovia 758,077 40,655,670
Wells Fargo & Co 1,298,738 93,950,707
------------
Total 217,705,064
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.3%)
Allied Waste Inds 50,401(b) 512,074
Avery Dennison 71,615 4,198,787
Cendant 577,127 8,662,677
Cintas 30,773 1,086,287
Monster Worldwide 28,241(b) 1,129,640
Robert Half Intl 38,305 1,239,550
Waste Management 123,359 4,241,082
------------
Total 21,070,097
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (4.0%)
Alcatel 1,085,880(b,c) 12,247,168
Cisco Systems 7,350,932(b) 131,214,137
Corning 385,015(b) 7,342,236
Juniper Networks 91,730(b) 1,233,769
Lucent Technologies 20,513,731(b) 43,694,247
Motorola 3,926,249 89,361,427
Nortel Networks 10,725,177(b,c) 21,021,347
Sonus Networks 1,466,965(b) 6,572,003
------------
Total 312,686,334
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (2.7%)
Apple Computer 308,033(b) 20,933,923
Dell 1,902,295(b) 41,241,756
EMC 2,357,026(b) 23,923,814
Hewlett-Packard 2,218,650 70,797,121
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
COMPUTERS & PERIPHERALS (CONT.)
Intl Business Machines 621,728 $ 48,127,964
SanDisk 59,006(b) 2,753,220
Sun Microsystems 330,746(b) 1,438,745
------------
Total 209,216,543
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (--%)
Vulcan Materials 22,422 1,501,601
- ------------------------------------------------------------------------------
CONSUMER FINANCE (1.0%)
American Express 608,903 31,699,490
Capital One Financial 492,656 38,106,941
SLM 139,985 7,041,246
------------
Total 76,847,677
- ------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.2%)
Ball 23,292 892,084
Bemis 23,519 722,033
Pactiv 32,003(b) 784,394
Sealed Air 18,179 858,776
Temple-Inland 268,109 11,405,356
------------
Total 14,662,643
- ------------------------------------------------------------------------------
DISTRIBUTORS (--%)
Genuine Parts 38,623 1,608,262
- ------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES (--%)
Apollo Group Cl A 31,406(b) 1,486,132
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES (5.2%)
Bank of America 3,561,814 183,540,275
Citigroup 2,948,157 142,425,465
Consumer Discretionary
Select Sector
SPDR Fund 43,272 1,396,820
iShares Dow Jones US
Healthcare Sector
Index Fund 1 63
JPMorgan Chase & Co 1,658,673 75,668,662
Materials Select
Sector SPDR Trust 118,974(e) 3,676,297
------------
Total 406,707,582
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (2.3%)
AT&T 665,840 19,968,542
BellSouth 1,135,498 44,477,457
Chunghwa Telecom ADR 399,766(c) 7,423,655
Citizens
Communications 225,528 2,893,524
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 15
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
DIVERSIFIED TELECOMMUNICATION SERVICES (CONT.)
Embarq 836,941(b) $ 37,871,580
FastWeb 32,554(b,c) 1,259,496
NeuStar Cl A 81,116(b) 2,503,240
Verizon
Communications 1,287,465 43,542,066
Windstream 1,697,809 21,273,542
------------
Total 181,213,102
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (1.3%)
Allegheny Energy 36,447(b) 1,496,149
American Electric Power 87,939 3,176,357
Edison Intl 72,773 3,011,347
Entergy 253,026 19,508,305
Exelon 535,967 31,032,488
FirstEnergy 73,671 4,125,576
FPL Group 171,902 7,415,852
Pinnacle West Capital 22,150 952,672
PPL 351,577 11,960,650
Progress Energy 56,350 2,454,043
Southern 577,617 19,511,902
------------
Total 104,645,341
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.1%)
Cooper Inds Cl A 20,425 1,759,818
Emerson Electric 89,393 7,054,895
Rockwell Automation 38,522 2,387,594
------------
Total 11,202,307
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%)
Agilent Technologies 87,858(b) 2,498,682
Flextronics Intl 743,471(b,c) 8,430,961
Tektronix 17,793 485,215
------------
Total 11,414,858
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.3%)
Baker Hughes 108,170 8,648,192
Cameron Intl 105,171(b) 5,301,670
Halliburton 702,800 23,445,408
Natl Oilwell Varco 121,150(b) 8,121,896
Schlumberger 397,017 26,540,586
TODCO 33,021 1,258,430
Transocean 58,324(b) 4,504,363
Weatherford Intl 484,716(b) 22,704,097
------------
Total 100,524,642
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
FOOD & STAPLES RETAILING (1.2%)
CVS 649,772 $ 21,260,540
Safeway 1,516,848 42,593,091
SYSCO 137,981 3,808,276
Wal-Mart Stores 626,488 27,878,716
Whole Foods Market 30,923 1,778,382
------------
Total 97,319,005
- ------------------------------------------------------------------------------
FOOD PRODUCTS (1.3%)
Archer-Daniels-Midland 146,229 6,434,076
Cadbury Schweppes 277,870(c) 2,716,995
Campbell Soup 180,838 6,633,138
ConAgra Foods 115,483 2,482,885
Dean Foods 30,589(b) 1,148,005
General Mills 382,146 19,833,378
Hershey 93,124 5,119,026
HJ Heinz 75,227 3,157,277
Kellogg 877,395 42,264,118
Kraft Foods Cl A 87,191 2,824,988
McCormick & Co 29,656 1,039,739
Sara Lee 170,799 2,886,503
Tyson Foods Cl A 55,998 792,372
WM Wrigley Jr 49,483 2,269,290
------------
Total 99,601,790
- ------------------------------------------------------------------------------
GAS UTILITIES (0.1%)
Nicor 9,872 432,591
ONEOK 281,832 10,486,969
Peoples Energy 8,566 361,571
------------
Total 11,281,131
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (1.7%)
Bausch & Lomb 56,472 2,671,126
Baxter Intl 137,554 5,777,268
Boston Scientific 4,993,456(b) 84,938,686
Medtronic 540,754 27,318,891
St. Jude Medical 81,754(b) 3,016,723
Stryker 170,705 7,768,785
------------
Total 131,491,479
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (2.6%)
Aetna 282,308 8,889,879
AMERIGROUP 83,713(b) 2,436,048
Brookdale Senior Living 85,504 3,975,936
Cardinal Health 898,101 60,172,767
CIGNA 276,834 25,261,103
HealthSouth 158,287(b) 626,025
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
16 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
HEALTH CARE PROVIDERS & SERVICES (CONT.)
Humana 184,736(b) $ 10,332,284
Magellan Health Services 52,794(b) 2,537,808
McKesson 38,979 1,964,152
Medco Health Solutions 90,528(b) 5,371,026
UnitedHealth Group 1,649,924 78,915,865
------------
Total 200,482,893
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.5%)
Applebee's Intl 72,795 1,292,839
Carnival Unit 146,039 5,689,679
Harrah's Entertainment 76,535 4,600,519
Marriott Intl Cl A 420,126 14,780,033
McDonald's 342,972 12,137,779
Orient-Express Hotels
Series A 44,464(c) 1,620,713
------------
Total 40,121,562
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.2%)
Centex 27,423 1,297,382
DR Horton 173,287 3,713,541
Fortune Brands 32,687 2,370,462
Harman Intl Inds 14,663 1,175,973
KB HOME 17,166 729,898
Leggett & Platt 40,737 929,618
Lennar Cl A 30,618 1,369,543
Newell Rubbermaid 60,298 1,589,455
Pulte Homes 47,788 1,361,958
Snap-On 13,022 547,054
Stanley Works 16,182 734,177
Whirlpool 17,365 1,340,404
------------
Total 17,159,465
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (2.3%)
Clorox 33,788 2,025,253
Colgate-Palmolive 821,123 48,709,016
Kimberly-Clark 102,953 6,285,281
Procter & Gamble 1,884,450 105,906,090
Spectrum Brands 2,872,896(b,e) 19,449,506
------------
Total 182,375,146
- ------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCERS & ENERGY
TRADERS (0.2%)
AES 146,520(b) 2,909,887
Constellation
Energy Group 39,859 2,308,235
Dynegy Cl A 74,703(b) 420,578
TXU 103,362 6,638,941
------------
Total 12,277,641
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
INDUSTRIAL CONGLOMERATES (2.7%)
General Electric 5,854,956 $191,398,511
Tyco Intl 729,429(c) 19,030,803
------------
Total 210,429,314
- ------------------------------------------------------------------------------
INSURANCE (4.2%)
ACE 935,075(c) 48,184,415
AFLAC 27,021 1,192,707
Allied World Assurance
Holdings 198,154(b,c) 6,915,575
American Intl Group 2,646,924 160,588,878
Aon 408,252 13,974,466
Arch Capital Group 105,811(b,c) 6,439,657
Aspen Insurance
Holdings 581,476(c) 13,722,834
Chubb 311,733 15,717,578
Endurance Specialty
Holdings 129,139(c) 3,920,660
Hartford Financial
Services Group 273,712 23,221,726
Max Re Capital 621,288(c) 13,978,980
Natl Financial Partners 260,677 11,740,892
Prudential Financial 74,904 5,890,451
XL Capital Cl A 82,937(c) 5,283,087
------------
Total 330,771,906
- ------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.1%)
Amazon.com 68,911(b,e) 1,853,017
Liberty Media Holding -
Interactive Cl A 347,993(b,d) 5,731,445
------------
Total 7,584,462
- ------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (1.8%)
eBay 512,579(b) 12,337,777
Google Cl A 303,951(b,h) 117,507,456
Yahoo! 517,644(b) 14,048,858
------------
Total 143,894,091
- ------------------------------------------------------------------------------
IT SERVICES (0.9%)
Affiliated Computer
Services Cl A 305,949(b) 15,581,983
Automatic Data
Processing 410,936 17,982,559
Computer Sciences 36,569(b) 1,915,850
Electronic Data Systems 74,407 1,778,327
First Data 624,981 25,530,474
Fiserv 15,490(b) 676,293
Ness Technologies 83,046(b,c) 916,828
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 17
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
IT SERVICES (CONT.)
Paychex 20,184 $ 689,889
Satyam Computer
Services ADR 74,216(c) 2,616,114
------------
Total 67,688,317
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.1%)
Eastman Kodak 62,994 1,401,617
Mattel 147,360 2,658,374
------------
Total 4,059,991
- ------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (0.1%)
Fisher Scientific Intl 194(b) 14,377
PerkinElmer 278,705 5,025,051
------------
Total 5,039,428
- ------------------------------------------------------------------------------
MACHINERY (1.0%)
Caterpillar 336,996 23,882,906
Danaher 53,871 3,512,389
Deere & Co 162,571 11,797,777
Dover 47,094 2,220,011
Eaton 33,033 2,117,415
Flowserve 175,995(b) 9,116,541
Illinois Tool Works 215,382 9,849,419
Ingersoll-Rand Cl A 213,361(c) 7,638,324
ITT 75,483 3,815,666
Navistar Intl 14,372(b) 321,358
Parker Hannifin 26,790 1,935,310
------------
Total 76,207,116
- ------------------------------------------------------------------------------
MEDIA (7.9%)
Cablevision Systems Cl A 625,202 13,910,745
CBS Cl B 294,643 8,082,057
Clear Channel
Communications 147,102 4,258,603
Comcast Cl A 1,447,295(b) 49,758,002
Comcast Special Cl A 784,551(b) 26,894,408
EchoStar
Communications Cl A 199,483(b) 6,991,879
Liberty Global Cl A 2,302,773(b) 50,315,590
Liberty Global Series C 791,717(b) 16,768,566
Liberty Media Holding -
Capital Series A 69,595(b,d) 5,679,648
News Corp Cl A 4,090,842 78,707,801
NTL 9,448,957 215,908,668
Time Warner 1,848,406 30,498,699
Viacom Cl B 1,077,084(b) 37,536,377
Vivendi 1,401,442(c) 47,454,566
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
MEDIA (CONT.)
Walt Disney 602,646(e,g) $ 17,892,560
WorldSpace Cl A 322,298(b,e) 1,015,239
XM Satellite Radio
Holdings Cl A 178,920(b) 2,075,472
------------
Total 613,748,880
- ------------------------------------------------------------------------------
METALS & MINING (0.7%)
Alcan 43,742(c) 2,001,634
Alcoa 302,002 9,044,960
Allegheny Technologies 19,311 1,233,780
Coeur d'Alene Mines 3,213,879(b) 15,362,342
Freeport-McMoRan
Copper & Gold Cl B 41,134 2,244,271
Newmont Mining 444,244 22,758,619
Nucor 69,424 3,691,274
United States Steel 24,309 1,533,169
------------
Total 57,870,049
- ------------------------------------------------------------------------------
MULTILINE RETAIL (1.4%)
Dollar General 71,584 960,657
Federated Department
Stores 893,721 31,378,544
JC Penney 181,431 11,422,896
Kohl's 79,820(b) 4,520,207
Nordstrom 181,517 6,226,033
Sears Holdings 27,956(b) 3,836,961
Target 1,110,661 51,001,553
------------
Total 109,346,851
- ------------------------------------------------------------------------------
MULTI-UTILITIES (0.8%)
Ameren 45,731 2,355,147
CenterPoint Energy 69,265 951,701
CMS Energy 49,309(b) 690,819
Consolidated Edison 54,821 2,569,460
Dominion Resources 367,664 28,854,271
DTE Energy 39,716 1,680,781
Duke Energy 276,807 8,392,788
KeySpan 38,993 1,570,248
NiSource 60,898 1,385,430
PG&E 77,131 3,214,820
Public Service
Enterprise Group 55,996 3,775,810
Sempra Energy 57,719 2,785,519
TECO Energy 46,531 741,704
Xcel Energy 375,297 7,520,952
------------
Total 66,489,450
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
18 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
OIL, GAS & CONSUMABLE FUELS (7.9%)
Anadarko Petroleum 166,146(e) $ 7,599,518
Apache 34,975 2,464,688
Aventine Renewable
Energy Holdings 10,010(b) 296,296
BP ADR 158,084(c) 11,464,252
Chesapeake Energy 301,599 9,922,607
Chevron 1,422,052 93,542,581
ConocoPhillips 1,433,926 98,424,681
Devon Energy 178,093 11,511,932
El Paso 147,544 2,360,704
Exxon Mobil 3,959,418 268,210,975
Hess 186,406 9,860,877
Kerr-McGee 702,647 49,325,819
Kinder Morgan 23,679 2,415,258
Marathon Oil 86,101 7,804,195
Murphy Oil 40,295 2,073,581
Newfield Exploration 160,107(b) 7,425,763
Occidental Petroleum 144,797 15,601,877
Royal Dutch Shell ADR 125,533(c) 8,887,736
Williams Companies 131,274 3,183,395
------------
Total 612,376,735
- ------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS (0.4%)
Bowater 166,287 3,372,300
Intl Paper 366,541 12,583,353
Louisiana-Pacific 23,683 473,660
MeadWestvaco 40,532 1,058,696
Weyerhaeuser 233,125 13,675,112
------------
Total 31,163,121
- ------------------------------------------------------------------------------
PERSONAL PRODUCTS (0.1%)
Alberto-Culver 16,931 825,217
Avon Products 100,234 2,905,783
Estee Lauder
Companies Cl A 26,786 999,654
------------
Total 4,730,654
- ------------------------------------------------------------------------------
PHARMACEUTICALS (7.3%)
AstraZeneca 386,417(c) 23,594,007
Bristol-Myers Squibb 3,210,083 76,945,690
Eli Lilly & Co 500,659 28,422,411
GlaxoSmithKline ADR 139,190(c) 7,701,383
Johnson & Johnson 535,751 33,511,225
Merck & Co 1,553,778 62,570,640
Novartis ADR 443,014(c) 24,906,247
Pfizer 8,230,399 213,908,070
Roche Holding 98,678(c) 17,559,504
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
PHARMACEUTICALS (CONT.)
Schering-Plough 1,973,315 $ 40,334,559
Teva Pharmaceutical
Inds ADR 636,752(c) 21,063,756
Watson Pharmaceuticals 286,661(b) 6,418,340
Wyeth 383,758 18,600,750
------------
Total 575,536,582
- ------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%)
Apartment Investment &
Management Cl A 117,659 5,658,221
Archstone-Smith Trust 47,643 2,499,828
Boston Properties 20,042 1,968,124
Equity Office
Properties Trust 258,072 9,783,510
Equity Residential 64,868 3,017,011
HomeBanc 819,841 6,722,696
Kimco Realty 47,465 1,862,527
Plum Creek Timber 41,169 1,402,216
ProLogis 54,387 3,010,320
Public Storage 18,468 1,482,796
Vornado Realty Trust 26,504 2,770,993
------------
Total 40,178,242
- ------------------------------------------------------------------------------
ROAD & RAIL (0.1%)
CSX 60,486 3,670,290
Norfolk Southern 129,921 5,641,170
------------
Total 9,311,460
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.3%)
Agere Systems 166,542(b) 2,424,852
Analog Devices 45,925 1,484,755
Applied Materials 445,123 7,006,236
ASML Holding 57,580(b,c) 1,145,842
Atmel 78,043(b) 373,826
Broadcom Cl A 27,480(b) 659,245
Credence Systems 184,801(b) 521,139
Cypress Semiconductor 533,705(b,e) 8,106,979
Elpida Memory 76,700(b,c) 3,070,944
Freescale Semiconductor
Cl A 1,521,474(b) 43,559,801
Freescale Semiconductor
Cl B 505,456(b) 14,415,605
Infineon Technologies
ADR 280,454(b,c) 3,017,685
Integrated Device
Technology 2,304,300(b) 35,647,521
Intel 2,255,270 40,594,860
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 19
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT.)
Maxim Integrated
Products 106,419 $ 3,126,590
Texas Instruments 562,313 16,745,681
------------
Total 181,901,561
- ------------------------------------------------------------------------------
SOFTWARE (3.1%)
Activision 120,575(b) 1,440,871
Adobe Systems 483,552(b) 13,786,068
BEA Systems 88,114(b) 1,034,458
Cadence Design
Systems 683,322(b) 11,062,983
Compuware 696,361(b) 4,867,563
McAfee 55,202(b) 1,189,603
Mercury Interactive 139,880(b) 7,022,675
Microsoft 5,466,961 131,371,074
Oracle 1,176,842(b) 17,617,325
Symantec 2,782,071(b) 48,324,573
TIBCO Software 893,268(b) 7,110,413
------------
Total 244,827,606
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.8%)
AutoNation 32,752(b) 645,214
AutoZone 12,338(b) 1,084,140
Bed Bath & Beyond 22,015(b) 737,062
Best Buy 17,992 815,757
Circuit City Stores 15,699 384,626
Gap 260,362 4,517,281
Home Depot 629,988 21,866,883
Lowe's Companies 349,294 9,902,485
Office Depot 66,043(b) 2,380,850
OfficeMax 15,826 650,607
RadioShack 30,069 486,216
Sherwin-Williams 24,772 1,253,463
Staples 162,755 3,518,763
Tiffany & Co 35,167 1,110,926
TJX Companies 111,066 2,706,678
Urban Outfitters 560,532(b) 8,178,162
------------
Total 60,239,113
- ------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.1%)
Coach 6,287(b) 180,500
Jones Apparel Group 25,509 755,066
Liz Claiborne 23,481 830,053
Nike Cl B 42,274 3,339,646
VF 19,686 1,335,105
------------
Total 6,440,370
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
THRIFTS & MORTGAGE FINANCE (1.9%)
Countrywide Financial 1,885,254 $ 67,548,651
Fannie Mae 900,274 43,132,127
Freddie Mac 598,972 34,656,520
Washington Mutual 136,062 6,081,971
------------
Total 151,419,269
- ------------------------------------------------------------------------------
TOBACCO (2.1%)
Altria Group 1,881,099 150,431,487
Imperial Tobacco
Group ADR 210,167(c) 13,713,397
Reynolds American 18,939 2,401,086
UST 36,516 1,845,884
------------
Total 168,391,854
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (7.2%)
ALLTEL 2,318,641 127,919,424
Hutchison
Telecommunications
Intl 12,425,490(b,c) 21,588,967
Orascom Telecom
Holding GDR 615,293(c) 29,411,005
Partner Communications
ADR 126,533(c) 1,174,226
Sprint Nextel 13,897,690 275,174,262
Vodafone Group 37,030,791(c) 80,405,639
Vodafone Group ADR 738,071(c) 16,001,385
Vodafone Group Cl B 42,320,904(c) 11,857,053
------------
Total 563,531,961
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $7,470,478,781) $7,672,572,964
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OPTIONS PURCHASED (0.1%)
- ------------------------------------------------------------------------------
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
PUTS
Google
Cl A 1,303 $380 Dec. 2006 $3,296,590
S&P 500
Index 13,977 123 Dec. 2006 3,424,365
S&P 500
Index 13,305 125 Dec. 2006 3,991,500
- ------------------------------------------------------------------------------
TOTAL OPTIONS PURCHASED
(Cost: $12,572,942) $10,712,455
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
20 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
- --------------------------------------------------------------------------------
SHORT-TERM SECURITIES (2.2%)(f)
- --------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
BNP Paribas Finance
08-01-06 5.29% $50,000,000 $49,992,653
Deer Valley Funding LLC
08-01-06 5.31 61,800,000 61,790,885
Park Granada LLC
08-01-06 5.34 13,000,000(i) 12,998,072
Societe Generale North America
08-01-06 5.29 50,000,000 49,992,652
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $174,800,000) $174,774,262
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $7,657,851,723)(j) $7,858,059,681
==============================================================================
- ------------------------------------------------------------------------------
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, 2006,
the value of foreign securities represented 6.8% of net assets.
(d) Shareholders of tracking stocks have a financial interest only in a unit
or division of the company. Unlike the common stock of the company
itself, a tracking stock usually has limited or no voting rights. In the
event of a company's liquidation, tracking stock shareholders typically
do not have a legal claim on the company's assets.
(e) At July 31, 2006, security was partially or fully on loan. See Note 6 to
the financial statements.
(f) Cash collateral received from security lending activity is invested in
short-term securities and represents 0.5% of net assets. See Note 6 to
the financial statements. 1.7% of net assets is the Fund's cash
equivalent position.
(g) Partially pledged as initial margin deposit on the following open stock
index futures contracts (see Note 5 to the financial statements):
TYPE OF SECURITY CONTRACTS
------------------------------------------------------------------------
PURCHASE CONTRACTS
S&P 500 Index, Sept. 2006 69
(h) At July 31, 2006, securities valued at $75,541,640 were held to cover
open call options written as follows (see Note 7 to the financial
statements):
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a)
PRICE DATE
------------------------------------------------------------------
Google Cl A 1,954 $420 Dec. 2006 $3,927,540
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 21
- ------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES (CONTINUED)
- ------------------------------------------------------------------------------
(i) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At July 31, 2006, the value
of these securities amounted to $12,998,072 or 0.2% of net assets.
(j) At July 31, 2006, the cost of securities for federal income tax purposes
was $7,786,809,734 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $397,108,741
Unrealized depreciation (325,858,794)
-----------------------------------------------------------------
Net unrealized appreciation $71,249,947
-----------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
22 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2006
ASSETS
Investments in securities, at value (Note 1)*
(identified cost $7,657,851,723) $ 7,858,059,681
Cash in bank on demand deposit 829,226
Foreign currency holdings (identified cost $548,482) (Note 1) 549,870
Capital shares receivable 331,392
Dividends and accrued interest receivable 11,114,204
Receivable for investment securities sold 79,482,476
- -----------------------------------------------------------------------------------------------------------
Total assets 7,950,366,849
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 268,251
Payable for investment securities purchased 66,574,425
Unrealized depreciation on swap transactions, at value (Note 8) 709,898
Payable upon return of securities loaned (Note 6) 38,098,800
Accrued investment management services fee 348,088
Accrued distribution fee 212,350
Accrued service fee 8,823
Accrued transfer agency fee 65,928
Accrued administrative services fee 28,994
Other accrued expenses 945,405
Options contracts written, at value (premiums received $4,297,846) (Note 7) 3,927,540
- -----------------------------------------------------------------------------------------------------------
Total liabilities 111,188,502
- -----------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 7,839,178,347
===========================================================================================================
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 14,529,438
Additional paid-in capital 7,905,413,450
Undistributed net investment income 35,811,841
Accumulated net realized gain (loss) (Note 11) (316,753,084)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Notes 5 and 8) 200,176,702
- -----------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $ 7,839,178,347
===========================================================================================================
Net assets applicable to outstanding shares: Class A $ 5,460,885,070
Class B $ 1,169,108,420
Class C $ 34,951,011
Class I $ 105,402,088
Class Y $ 1,068,831,758
Net asset value per share of outstanding capital stock: Class A shares 1,010,532,146 $ 5.40
Class B shares 220,862,389 $ 5.29
Class C shares 6,589,829 $ 5.30
Class I shares 19,384,483 $ 5.44
Class Y shares 195,574,986 $ 5.47
- -----------------------------------------------------------------------------------------------------------
*Including securities on loan, at value (Note 6) $ 35,872,608
- -----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 23
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2006
INVESTMENT INCOME
Income:
Dividends $ 85,300,238
Interest 4,942,241
Fee income from securities lending (Note 6) 939,726
Less foreign taxes withheld (1,253,484)
- -------------------------------------------------------------------------------------
Total income 89,928,721
- -------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 20,724,477
Distribution fee
Class A 7,096,389
Class B 8,048,484
Class C 201,664
Transfer agency fee 8,809,811
Incremental transfer agency fee
Class A 514,846
Class B 341,792
Class C 8,719
Service fee -- Class Y 475,170
Administrative services fees and expenses 2,119,930
Compensation of board members 31,346
Custodian fees 322,050
Printing and postage 536,500
Registration fees 132,285
Audit fees 43,000
Other 53,299
- -------------------------------------------------------------------------------------
Total expenses 49,459,762
Earnings and bank fee credits on cash balances (Note 2) (435,828)
- -------------------------------------------------------------------------------------
Total net expenses 49,023,934
- -------------------------------------------------------------------------------------
Investment income (loss) -- net 40,904,787
- -------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 278,523,465
Reimbursement from affiliate (Note 2) 1,215,922
Foreign currency transactions (112,103)
Futures contracts (4,112,371)
Options contracts written (Note 7) 937,487
Swap transactions (1,271,596)
- -------------------------------------------------------------------------------------
Net realized gain (loss) on investments 275,180,804
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (370,550,095)
- -------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies (95,369,291)
- -------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (54,464,504)
=====================================================================================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
24 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2006 2005
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) net $ 40,904,787 $ 9,555,645
Net realized gain (loss) on investments 275,180,804 81,295,185
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (370,550,095) 128,747,672
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (54,464,504) 219,598,502
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (8,339,131) (5,100,612)
Class I (656,302) (205,016)
Class Y (1,124) (42,646)
Net realized gain
Class A -- (1,579,848)
Class B -- (746,323)
Class C -- (14,219)
Class I -- (38,374)
Class Y -- (10,290)
- -----------------------------------------------------------------------------------------------------
Total distributions (8,996,557) (7,737,328)
- -----------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 25
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED JULY 31, 2006 2005
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) $ 429,909,019 $ 72,128,244
Class B shares 50,136,037 33,166,584
Class C shares 2,589,055 1,679,423
Class I shares 27,683,397 35,280,636
Class Y shares 19,415,795 569,613
Fund merger (Note 10)
Class A shares 5,066,390,993 N/A
Class B shares 1,262,273,829 N/A
Class C shares 31,569,946 N/A
Class I shares 97,113,086 N/A
Class Y shares 1,287,966,195 N/A
Reinvestment of distributions at net asset value
Class A shares 8,175,459 6,565,939
Class B shares -- 737,490
Class C shares -- 13,859
Class I shares 656,222 243,352
Class Y shares 1,072 52,860
Payments for redemptions
Class A shares (1,045,511,081) (438,987,389)
Class B shares (Note 2) (597,123,506) (197,466,065)
Class C shares (Note 2) (8,250,000) (4,548,807)
Class I shares (62,694,425) (11,054,445)
Class Y shares (221,738,132) (8,498,540)
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions 6,348,562,961 (510,117,246)
- ---------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 6,285,101,900 (298,256,072)
Net assets at beginning of year 1,554,076,447 1,852,332,519
- ---------------------------------------------------------------------------------------------------------
Net assets at end of year $ 7,839,178,347 $ 1,554,076,447
=========================================================================================================
Undistributed net investment income $ 35,811,841 $ 4,353,601
- ---------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
26 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource Large Cap Series, Inc. (formerly AXP
Growth Series, Inc.) and is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital
stock that can be allocated among the separate series as designated by the
Board. The Fund invests primarily in equity securities of companies with a
market capitalization greater than $5 billion at the time of purchase.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2006, Ameriprise Financial, Inc.
(Ameriprise Financial) and the affiliated funds-of-funds owned 100% of Class I
shares, which represents 1.34% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from
actual results.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 27
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty
that the effect of the development or event has actually caused the closing
price to no longer reflect the actual value, the closing prices, as determined
at the close of the applicable foreign market, may be adjusted to reflect the
fair value of the affected foreign securities as of the close of the New York
Stock Exchange. Significant events include material movements in the U.S.
securities markets prior to the opening of foreign markets on the following
trading day. FVP results in an estimated price that reasonably reflects the
current market conditions in order to value the portfolio holdings such that
shareholder transactions receive a fair net asset value. Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a
put option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option
is that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option or the cost of a security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
- ------------------------------------------------------------------------------
28 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to
the purchase or sale of securities and income and expenses are translated at
the exchange rate on the transaction date. The effect of changes in foreign
exchange rates on realized and unrealized security gains or losses is
reflected as a component of such gains or losses. In the statement of
operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date
on securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes. At July 31, 2006,
foreign currency holdings consisted of multiple denominations.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes. The net U.S. dollar value of foreign currency underlying
all contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
TOTAL RETURN EQUITY SWAP TRANSACTIONS
The Fund may enter into swap agreements to earn the total return on a
specified security, basket of securities or security indexes during the
specified period, in return for periodic payments based on a fixed or variable
interest rate of the total return from other underlying assets. Total return
swap agreements may be used to obtain exposure to a security or market without
owning or taking physical custody of such security or market. Under the terms
of a total return equity swap agreement, payments made by the Fund or the
counterparty are based on the total return of a
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 29
particular reference asset or assets (such as an equity security, a
combination of such securities, or an index). That is, one party agrees to pay
another party the return on a stock, basket of stocks, or stock index in
return for a specified interest rate.
The notional amounts of swap contracts are not recoded in the financial
statements. Swap contracts are valued daily, and the change in value is
recorded as unrealized appreciation (depreciation) until the termination of
the swap, at which time realized gain (loss) is recorded. Payments received or
made are recorded as realized gains (losses).
Swap agreements may be subject to liquidity risk, which exists when a
particular swap is difficult to purchase or sell. It may not be possible for
the Fund to initiate a transaction or liquidate a position at an advantageous
time or price, which may result in significant losses. Total return swaps are
subject to the risk associated with the investment in the underlying
securities and also the risk of the counterparty not fulfilling its
obligations under the agreement.
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 $452,076 and accumulated net realized loss has been decreased by
$502,906,915 resulting in a net reclassification adjustment to decrease
paid-in capital by $502,454,839.
- ------------------------------------------------------------------------------
30 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED JULY 31, 2006 2005
- ------------------------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income .......................................... $8,339,131 $5,588,051
Long-term capital gain ........................................... -- 1,092,409
CLASS B
Distributions paid from:
Ordinary income .................................................. -- 203,260
Long-term capital gain ........................................... -- 516,063
CLASS C
Distributions paid from:
Ordinary income .................................................. -- 4,387
Long-term capital gain ........................................... -- 9,832
CLASS I
Distributions paid from:
Ordinary income .......................................... 656,302 216,856
Long-term capital gain ........................................... -- 26,534
CLASS Y
Distributions paid from:
Ordinary income .......................................... 1,124 45,820
Long-term capital gain ........................................... -- 7,116
At July 31, 2006, the components of distributable earnings on a tax basis are
as follows:
Undistributed ordinary income ............................... $ 35,091,360
Accumulated long-term gain (loss) ........................... $ 52,909,605
Unrealized appreciation (depreciation) ...................... $(168,765,506)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (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, that will result from the adoption of FIN 48.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 31
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. On March 7, 2006, an additional
dividend was paid before the merger to ensure that current shareholders of
RiverSource Large Cap Equity Fund would not experience a dilution in their
share of the fund's income or capital gains.
OTHER
Security transactions are accounted for on the date securities are purchased
or sold. Dividend income is recognized on the ex-dividend date and interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial. The management fee is a percentage of the
Fund's average daily net assets that declines from 0.60% to 0.375% annually as
the Fund's assets increase. Prior to March 1, 2006, the fee percentage of the
Fund's average daily net assets declined from 0.60% to 0.48% annually as the
Fund's assets increased. The fee may be adjusted upward or downward by a
performance incentive adjustment based on a comparison of the performance of
Class A shares of the Fund to the Lipper Large-Cap Core Funds Index. In
certain circumstances, the Board may approve a change in the index. The
maximum adjustment is 0.12% per year. If the performance difference is less
than 0.50%, the adjustment will be zero. The adjustment decreased the fee by
$2,273,700 for the year ended July 31, 2006.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.06% to 0.03% annually
as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of
the Fund's average daily net assets declined from 0.05% to 0.02% annually as
the Fund's assets increased. A minor portion of additional administrative
service expenses paid by the Fund are consultants' fees and fund office
expenses. Under this agreement, the Fund also pays taxes, audit and certain
legal fees, registration fees for shares, compensation of board members,
corporate filing fees and any other expenses properly payable by the Fund and
approved by the Board.
- --------------------------------------------------------------------------------
32 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested board members
may defer receipt of their compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Fund or
other RiverSource funds. The Fund's liability for these amounts is adjusted
for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund pays
the Transfer Agent an annual fee per shareholder account for this service as
follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by the Distributor and other servicing agents
with respect to those shares. The fee is calculated at a rate of 0.10% of the
Fund's average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$2,497,110 for Class A, $900,274 for Class B and $2,675 for Class C for the
year ended July 31, 2006.
During the year ended July 31, 2006, the Fund's custodian and transfer agency
fees were reduced by $435,828 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.
In addition, the Fund received a one time reimbursement of $1,215,922 by
Ameriprise Financial for additional earnings from overnight cash balances
determined to be owed for prior years. This amount was insignificant to the
Fund's net asset value and total return.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 33
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $10,455,645,980 (including $7,150,962,178 from
RiverSource New Dimensions Fund that was acquired in the fund merger as
described in Note 10) and $4,668,450,149, respectively, for the year ended
July 31, 2006. Realized gains and losses are determined on an identified cost
basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as
follows:
YEAR ENDED JULY 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------
Sold 81,619,158 9,503,444 489,203 5,125,399 3,501,543
Fund merger 924,673,877 234,448,180 5,852,776 17,647,385 232,656,314
Issued for reinvested
distributions 1,513,462 -- -- 120,911 196
Redeemed (193,098,401) (114,705,720) (1,551,449) (11,535,888) (40,622,509)
- -------------------------------------------------------------------------------------------------
Net increase
(decrease) 814,708,096 129,245,904 4,790,530 11,357,807 195,535,544
- -------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ---------------------------------------------------------------------------------------------------
Sold 14,871,934 6,952,759 351,747 7,088,316 117,456
Issued for reinvested
distributions 1,331,830 152,060 2,852 49,063 10,679
Redeemed (89,223,978) (40,853,895) (942,228) (2,204,982) (1,698,241)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) (73,020,214) (33,749,076) (587,629) 4,932,397 (1,570,106)
- ---------------------------------------------------------------------------------------------------
5. STOCK INDEX FUTURES CONTRACTS
At July 31, 2006, investments in securities included securities valued at
$9,292,970 that were pledged as collateral to cover initial margin deposits on
69 open purchase contracts. The notional market value of the open purchase
contracts at July 31, 2006 was $22,111,050 with a net unrealized gain of
$274,324. See "Summary of significant accounting policies" and "Notes to
investments in securities."
6. LENDING OF PORTFOLIO SECURITIES
At July 31, 2006, securities valued at $35,872,608 were on loan to brokers.
For collateral, the Fund received $38,098,800 in cash. Cash collateral
received is invested in short-term securities, which are included in the
short-term section of the "Investments in securities." Income from securities
lending amounted to $939,726 for the year ended July 31, 2006. The risks to
the Fund of securities lending are that the borrower may not provide
additional collateral when required or return the securities when due.
- ------------------------------------------------------------------------------
34 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
7. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written are as
follows:
YEAR ENDED JULY 31, 2006
CALLS
- -------------------------------------------------------------------------------------------------
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------------------------------
Balance July 31, 2005 -- $ --
Opened 2,270 5,284,003
Closed (316) (986,157)
Expired -- --
- -------------------------------------------------------------------------------------------------
Balance July 31, 2006 1,954 $4,297,846
- -------------------------------------------------------------------------------------------------
See "Summary of significant accounting policies."
8. SWAP CONTRACTS
At July 31, 2006, the Fund had the following open total return equity swap
contract:
- ------------------------------------------------------------------------------------------------
UNREALIZED
TERMINATION NOTIONAL APPRECIATION
DATE AMOUNT (DEPRECIATION)
- ------------------------------------------------------------------------------------------------
Receive total return on a basket of securities
and pay a floating rate based on 1-month
LIBOR plus 0.20%.
Counterparty: Citigroup May 7, 2007 $14,080,860 $(709,898)
- ------------------------------------------------------------------------------------------------
9. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate.
Borrowings are payable within 60 days after such loan is executed. The Fund
also pays a commitment fee equal to its pro rata share of the amount of the
credit facility at a rate of 0.07% per annum. Prior to this agreement, the
Fund had a revolving credit agreement that permitted borrowings up to $500
million with The Bank of New York. The Fund had no borrowings outstanding
during the year ended July 31, 2006.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 35
10. FUND MERGER
At the close of business on March 10, 2006, RiverSource Large Cap Equity Fund
acquired the assets and assumed the identified liabilities of RiverSource New
Dimensions Fund. The reorganization was completed after shareholders approved
the plan on Feb. 15, 2006.
The aggregate net assets of RiverSource Large Cap Equity Fund immediately
before the acquisition were $1,392,594,683 and the combined net assets
immediately after the acquisition were $9,137,908,732.
The merger was accomplished by a tax-free exchange of 400,881,844 shares of
RiverSource New Dimensions Fund valued at $7,745,314,049.
In exchange for the RiverSource New Dimensions Fund shares and net assets,
RiverSource Large Cap Equity Fund issued the following number of shares:
SHARES
- -------------------------------------------------------------------------
Class A ................................................... 924,673,877
Class B ................................................... 234,448,180
Class C ................................................... 5,852,776
Class I ................................................... 17,647,385
Class Y ................................................... 232,656,314
RiverSource New Dimensions Fund's net assets after adjustments for any
permanent book-to-tax differences at the merger date were as follows, which
include the following amounts of capital stock, unrealized appreciation,
accumulated net realized loss and undistributed net income.
TOTAL CAPITAL UNREALIZED ACCUMULATED UNDISTRIBUTED
NET ASSETS STOCK APPRECIATION NET REALIZED LOSS NET INCOME
- --------------------------------------------------------------------------------------------------------------
RiverSource
New Dimensions
Fund $7,745,314,049 $7,385,408,991 $472,802,551 $(112,899,579) $2,086
11. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$241,864,902 at July 31, 2006, that if not offset by capital gains will expire
as follows:
2008 2009 2010 2011
- --------------------------------------------------------------------------------
$132,187,540 $76,012,213 $19,803,207 $13,861,942
- --------------------------------------------------------------------------------
RiverSource Large Cap Equity Fund acquired $33,183,702 of capital loss
carry-overs in connection with the RiverSource New Dimensions Fund merger
(Note 10). In addition to the acquired capital loss carry-overs, the Fund also
acquired unrealized capital gains as a result of the mergers. The yearly
utilization of the acquired capital losses as well as the utilization of the
acquired unrealized losses is limited by the Internal Revenue Code. 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.
- --------------------------------------------------------------------------------
36 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
12. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement agreements
with the Securities and Exchange Commission (SEC) and Minnesota Department of
Commerce (MDOC) related to market timing activities. In connection with these
matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC
violated certain provisions of the federal and Minnesota securities laws by
failing to adequately disclose market timing activities by allowing certain
identified market timers to continue to market time contrary to disclosures in
mutual fund and variable annuity product prospectuses. The Orders also alleged
that AEFC failed to implement procedures to detect and prevent market timing
in 401(k) plans for employees of AEFC and related companies and failed to
adequately disclose that there were no such procedures. Pursuant to the MDOC
Order, the MDOC also alleged that AEFC allowed inappropriate market timing to
occur by failing to have written policies and procedures and failing to
properly supervise its employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million. AEFC
also agreed to make presentations at least annually to its board of directors
and the relevant mutual funds' board that include an overview of policies and
procedures to prevent market timing, material changes to these policies and
procedures and whether disclosures related to market timing are consistent
with the SEC order and federal securities laws. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a summary
of actions taken to ensure compliance with applicable laws and regulations and
certification by a senior officer regarding compliance and supervisory
procedures.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 37
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.
- ------------------------------------------------------------------------------
38 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
13. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(a)
Net asset value, beginning of period $ 5.26 $ 4.64 $ 4.53 $ 4.11 $ 5.00
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .06 .04 .01 .01 --
Net gains (losses) (both realized
and unrealized) .12 .61 .32 .41 (.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .18 .65 .33 .42 (.89)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.04) (.02) -- -- --
Distributions from realized gains -- (.01) (.22) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.04) (.03) (.22) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.40 $ 5.26 $ 4.64 $ 4.53 $ 4.11
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
millions) $5,461 $1,030 $1,248 $ 83 $ 11
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.06% 1.11%(d) 1.20%(d) 1.25%(d) 1.25%(d),(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.08% .79% .36% .24% (.11%)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 116% 128% 99% 135% 88%
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(f) 3.51% 13.99% 7.19% 10.22% (17.80%)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from March 28, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 1.16%, 1.23%, 1.84% and 5.12% for the
periods ended July 31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 39
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $ 5.15 $ 4.56 $4.48 $4.10 $ 5.00
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 -- (.01) (.01) (.01)
Net gains (losses) (both realized
and unrealized) .12 .60 .31 .39 (.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .14 .60 .30 .38 (.90)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- (.01) (.22) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.29 $ 5.15 $4.56 $4.48 $ 4.10
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
millions) $1,169 $ 472 $ 572 $36 $ 5
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.84% 1.88%(d) 1.95%(d) 2.01%(d) 2.01%(d),(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .28% .02% (.46%) (.52%) (.86%)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 116% 128% 99% 135% 88%
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(f) 2.72% 13.09% 6.48% 9.27% (18.00%)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from March 28, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 1.93%, 1.98%, 2.60% and 5.88% for the
periods ended July 31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
40 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $5.16 $4.57 $4.49 $4.10 $ 5.00
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 -- (.01) (.01) (.01)
Net gains (losses) (both realized
and unrealized) .12 .60 .31 .40 (.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .14 .60 .30 .39 (.90)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from realized gains -- (.01) (.22) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.30 $5.16 $4.57 $4.49 $ 4.10
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
millions) $ 35 $ 9 $ 11 $ 2 $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.84% 1.88%(d) 1.98%(d) 2.01%(d) 2.01%(d),(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .28% .02% (.43%) (.53%) (.92%)(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 116% 128% 99% 135% 88%
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(f) 2.71% 13.06% 6.46% 9.51% (18.00%)(g)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from March 28, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 1.93%, 2.01%, 2.60% and 5.88% for the
periods ended July 31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 41
CLASS I
- ---------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- ---------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004(b)
Net asset value, beginning of period $ 5.31 $ 4.67 $ 5.08
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10 .05 --
Net gains (losses) (both realized
and unrealized) .12 .63 (.28)
- ---------------------------------------------------------------------------------------
Total from investment operations .22 .68 (.28)
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.03) --
Distributions from realized gains -- (.01) (.13)
- ---------------------------------------------------------------------------------------
Total distributions (.09) (.04) (.13)
- ---------------------------------------------------------------------------------------
Net asset value, end of period $ 5.44 $ 5.31 $ 4.67
- ---------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 105 $ 43 $ 14
- ---------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) .59% .65%(d) .71%(d),(e)
- ---------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.53% 1.24% .74%(e)
- ---------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 116% 128% 99%
- ---------------------------------------------------------------------------------------
Total return(f) 4.06% 14.64% (5.65%)(g)
- ---------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class I would have been 0.70% and 0.72% for the periods ended July
31, 2005 and 2004, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
42 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
CLASS Y
- --------------------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $ 5.28 $ 4.66 $ 4.54 $ 4.11 $ 5.00
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .04 .01 .01 --
Net gains (losses) (both realized
and unrealized) .12 .61 .34 .42 (.89)
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations .21 .65 .35 .43 (.89)
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) (.02) (.01) -- --
Distributions from realized gains -- (.01) (.22) -- --
- --------------------------------------------------------------------------------------------------------------------
Total distributions (.02) (.03) (.23) -- --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.47 $ 5.28 $ 4.66 $ 4.54 $ 4.11
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
millions) $1,069 $ -- $ 8 $ -- $ --
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) .81% .90%(d) 1.00%(d) 1.07%(d) 1.07%(d),(e)
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.41% 1.08% .50% .45% .09%(e)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 116% 128% 99% 135% 88%
- --------------------------------------------------------------------------------------------------------------------
Total return(f) 4.03% 14.06% 7.44% 10.46% (17.80%)(g)
- --------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from March 28, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class Y would have been 0.95%, 1.03%, 1.66% and 4.94% for the
periods ended July 31, 2005, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD AND SHAREHOLDERS
RIVERSOURCE LARGE CAP SERIES, INC.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of RiverSource Large Cap
Equity Fund (a series of RiverSource Large Cap Series, Inc.) as of July 31,
2006, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period ended July 31, 2006, and the financial highlights for each of the years
in the four-year period ended July 31, 2006 and for the period from March 28,
2002 (when shares became publicly available) to July 31, 2002. These financial
statements and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of July 31, 2006, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
RiverSource Large Cap Equity Fund as of July 31, 2006, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2006
- ------------------------------------------------------------------------------
44 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 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, 2006
CLASS A
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 100%
Dividends Received Deduction for corporations ............ 100%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ................................................. $0.02056
March 7, 2006 .................................................. 0.02400
Total distributions ............................................ $0.04456
CLASS I
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 100%
Dividends Received Deduction for corporations ............ 100%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ................................................. $0.03973
March 7, 2006 .................................................. 0.04553
Total distributions ............................................ $0.08526
CLASS Y
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ................ 100%
Dividends Received Deduction for corporations ............ 100%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ................................................. $0.00337
March 7, 2006 .................................................. 0.01964
Total distributions ............................................ $0.02301
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 45
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the six months ended July 31, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values
and actual expenses. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading titled "Expenses paid during the period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
46 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2006 JULY 31, 2006 THE PERIOD(a) EXPENSE RATIO
- ---------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,000.70 $5.01 1.01%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,019.79 $5.06 1.01%
- ---------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------
Actual(b) $1,000 $996.20 $8.86 1.79%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.92 $8.95 1.79%
- ---------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------
Actual(b) $1,000 $996.20 $8.86 1.79%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,015.92 $8.95 1.79%
- ---------------------------------------------------------------------------------------------
Class I
- ---------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,002.80 $2.63 .53%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,022.17 $2.66 .53%
- ---------------------------------------------------------------------------------------------
Class Y
- ---------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,003.60 $3.92 .79%
- ---------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $1,000 $1,020.88 $3.96 .79%
- ---------------------------------------------------------------------------------------------
(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, 2006:
+0.07% for Class A, -0.38% for Class B, -0.38% for Class C, +0.28% for
Class I and +0.36% for Class Y.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 47
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 99
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
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 52
- -----------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards); former Governor
Age 71 of Minnesota
- -----------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College;
Minneapolis, MN 55402 former Dean, McCallum Graduate
Age 55 School of Business, Bentley College
- -----------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 71
- -----------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind Board member Former Managing Director, American Progressive
901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance
Minneapolis, MN 55402
Age 70
- -----------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation
Minneapolis, MN 55402 Carleton College systems)
Age 67
- -----------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
48 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
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 Distribution,
901 S. Marquette Ave. since 2004 Management, Inc. (private real Inc. (transportation,
Minneapolis, MN 55402 estate and asset management distribution and logistics
Age 54 company) consultants)
- -----------------------------------------------------------------------------------------------------------------------------
Vikki L. Pryor Board member President and Chief Executive
901 S. Marquette Ave. since 2006 Officer, SBLI USA Mutual Life
Minneapolis, MN 55402 Insurance Company, Inc. since 1999
Age 53
- -----------------------------------------------------------------------------------------------------------------------------
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 62 Inc. (health management
programs)
- -----------------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
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, Ameriprise Certificate
53600 Ameriprise since 2001, Company since 2006; President -
Financial Center Vice President U.S. Asset Management and Chief
Minneapolis, MN 55474 since 2002, Investment Officer, Ameriprise
Age 46 Acting President Financial, Inc. and President,
since 2006 Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC since 2005; Senior
Vice President - Chief Investment
Officer, Ameriprise Financial, Inc. and
Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC, 2001-2005
- -----------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security
holder and/or employee of RiverSource Investments.
** Paula R. Meyer resigned her position as President for the RiverSource
funds. Mr. Truscott has been appointed Acting President and will be
assuming the responsibilities of President until a permanent replacement
for Ms. Meyer is found.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 49
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 and
Acting President, the Fund's other officers are:
FUND OFFICERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer Vice President - Investment Accounting, Ameriprise Financial,
105 Ameriprise since 2002 Inc., since 2002; Vice President - Finance, American Express
Financial Center Company, 2000-2002
Minneapolis, MN 55474
Age 51
- -----------------------------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed Income, Ameriprise
172 Ameriprise since 2004 Financial, Inc. and RiverSource Investments, LLC since 2006; Vice
Financial Center President - Investments, Ameriprise Certificate Company since 2003;
Minneapolis, MN 55474 Senior Vice President - Fixed Income, Ameriprise Financial, Inc.,
Age 42 2002-2006 and RiverSource Investments, LLC, 2004-2006; Managing
Director, Zurich Global Assets, 2001-2002
- -----------------------------------------------------------------------------------------------------------------------------
Leslie L. Ogg Vice President, President of Board Services Corporation
901 S. Marquette Ave. General Counsel,
Minneapolis, MN 55402 and Secretary
Age 68 since 1978
- -----------------------------------------------------------------------------------------------------------------------------
Edward S. Dryden* Acting Chief Chief Compliance Officer, Ameriprise Certificate Company since
1875 Ameriprise Compliance Officer 2006; Vice President - Asset Management Compliance,
Financial Center since 2006 RiverSource Investments, LLC since 2006; Chief Compliance
Minneapolis, MN 55474 Officer - Mason Street Advisors, LLC, 2002-2006
Age 41
- -----------------------------------------------------------------------------------------------------------------------------
Neysa M. Alecu Anti-Money Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Laundering Officer Ameriprise Financial, Inc. since 2004; Manager Anti-Money
Financial Center since 2004 Laundering, Ameriprise Financial, Inc., 2003-2004;
Minneapolis, MN 55474 Compliance Director and Bank Secrecy Act Officer,
Age 42 American Express Centurion Bank, 2000-2003
- -----------------------------------------------------------------------------------------------------------------------------
* Beth E. Weimer resigned her position as Chief Compliance Officer for the
RiverSource funds. Mr. Dryden has been appointed Acting Chief Compliance
Officer and will be assuming the responsibilities of Chief Compliance
Officer until a permanent replacement for Ms. Weimer is found.
The SAI has additional information about the Fund's directors 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 LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
During the period covered by this report, RiverSource Investments, LLC
("RiverSource Investments" or the "investment manager"), a wholly-owned
subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as
the investment manager to RiverSource funds under an Investment Management
Services Agreement ("IMS Agreement").
The Board of Directors (the "Board") annually determines whether to continue
the IMS Agreement and subadvisory agreements, as applicable, by evaluating the
quality and level of services received and the costs associated with those
services. The Board did not make the specific determination this year as each
fund's IMS Agreement was approved by the vote of a majority of the outstanding
voting securities of the funds at a shareholder meeting held on Feb. 15, 2006.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT 51
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities during
the 12-month period ended June 30, 2006 is available without charge by
visiting riversource.com/funds; or searching the website of the SEC at
www.sec.gov.
- ------------------------------------------------------------------------------
52 RIVERSOURCE LARGE CAP EQUITY FUND -- 2006 ANNUAL REPORT
RIVERSOURCE(SM) LARGE CAP EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
riversource.com/funds
This report must be accompanied or preceded by the
Fund's current prospectus. RiverSource(SM) mutual
RIVERSOURCE [LOGO](SM) funds are distributed by RiverSource Distributors,
INVESTMENTS Inc. and Ameriprise Financial Services, Inc., Members
NASD, and managed by RiverSource Investments, LLC.
These companies are part of Ameriprise Financial, Inc.
S-6244 G (9/06)
Annual Report
RIVERSOURCE [LOGO](SM)
INVESTMENTS
RIVERSOURCE(SM)
LARGE CAP VALUE FUND
- ------------------------------------------------------------------------------
ANNUAL REPORT FOR
THE PERIOD ENDED
JULY 31, 2006
> RIVERSOURCE LARGE CAP VALUE
FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM
GROWTH OF CAPITAL.
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Fund Snapshot ........................................................... 3
Performance Summary ..................................................... 5
Questions & Answers
with Portfolio Management ............................................ 7
The Fund's Long-term Performance ........................................ 12
Investments in Securities ............................................... 14
Financial Statements .................................................... 19
Notes to Financial Statements ........................................... 22
Report of Independent Registered
Public Accounting Firm ............................................... 37
Federal Income Tax Information .......................................... 38
Fund Expenses Example ................................................... 40
Board Members and Officers .............................................. 42
Approval of Investment Management
Services Agreement ................................................... 45
Proxy Voting ............................................................ 45
[LOGO]
DALBAR RATED
2006
FOR COMMUNICATION
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 LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
FUND SNAPSHOT AT JULY 31, 2006
- ------------------------------------------------------------------------------
FUND OVERVIEW
- ------------------------------------------------------------------------------
RiverSource Large Cap Value Fund seeks attractively valued large-cap stocks
with potential for strong earnings growth. Valuation is the key driver of
security selection in this fund, but growth prospects are also an important
consideration. The stock selection process is research-driven and leverages
the talents of an experienced team of analysts. Along with the efforts of a
seasoned portfolio management team, the end result is a broadly diversified
portfolio in both number of holdings and sector exposure, which helps to
mitigate risk in the Fund.
- ------------------------------------------------------------------------------
SECTOR BREAKDOWN*
- ------------------------------------------------------------------------------
Percentage of portfolio assets
Financials 29.9%
Energy 12.4%
Information Technology 9.8%
Consumer Discretionary 9.6% [PIE CHART]
Industrials 8.5%
Health Care 8.3%
Other(1) 21.5%
* 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 Telecommunication Services 7.4%, Consumer Staples 7.3%,
Utilities 4.0% and Materials 2.8%.
- ------------------------------------------------------------------------------
TOP TEN HOLDINGS
- ------------------------------------------------------------------------------
Percentage of portfolio assets
Bank of America 4.3%
Exxon Mobil 4.0
Citigroup 3.5
American Intl Group 2.8
Pfizer 2.6
ConocoPhillips 2.4
Wells Fargo & Co 2.3
Altria Group 2.2
Chevron 1.9
General Electric 1.9
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.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 3
FUND SNAPSHOT AT JULY 31, 2006
- ------------------------------------------------------------------------------
STYLE MATRIX
- ------------------------------------------------------------------------------
[chart] Shading within the style matrix indicates areas in which the
Fund generally invests.
STYLE
VALUE BLEND GROWTH
X LARGE
MEDIUM SIZE
SMALL
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 involve risks including possible loss of principal and
fluctuation in value.
- ------------------------------------------------------------------------------
PORTFOLIO MANAGER
- ------------------------------------------------------------------------------
YEARS IN INDUSTRY
Robert Ewing, CFA 18
- ------------------------------------------------------------------------------
FUND FACTS
- ------------------------------------------------------------------------------
TICKER SYMBOL INCEPTION DATE
Class A ALVAX 6/27/02
Class B ALVBX 6/27/02
Class C -- 6/27/02
Class I ALCIX 3/4/04
Class Y -- 6/27/02
Total net assets $ 96.2 million
Number of holdings 200
- ------------------------------------------------------------------------------
4 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
PERFORMANCE SUMMARY
- ------------------------------------------------------------------------------
PERFORMANCE COMPARISON
For the year ended July 31, 2006
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource Large
Cap Value Fund Russell 1000(R)
Class A (excluding Value Index Lipper Large-Cap
sales charge) (unmanaged) Value Funds Index
+7.39% +11.59% +8.61%
(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.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 5
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (6/27/02) (6/27/02) (6/27/02) (3/4/04) (6/27/02)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5)
AT JULY 31, 2006
- ---------------------------------------------------------------------------------------------------------------
1 year +7.39% +1.21% +6.51% +1.51% +6.56% +5.56% +7.86% +7.55%
- ---------------------------------------------------------------------------------------------------------------
3 years +11.54% +9.36% +10.68% +9.58% +10.75% +10.75% N/A +11.74%
- ---------------------------------------------------------------------------------------------------------------
Since inception +8.85% +7.28% +8.02% +7.64% +8.03% +8.03% +7.61% +9.05%
- ---------------------------------------------------------------------------------------------------------------
AT JUNE 30, 2006
- ---------------------------------------------------------------------------------------------------------------
1 year +7.97% +1.76% +7.28% +2.28% +7.15% +6.15% +8.44% +8.13%
- ---------------------------------------------------------------------------------------------------------------
3 years +11.35% +9.18% +10.48% +9.38% +10.48% +10.48% N/A +11.56%
- ---------------------------------------------------------------------------------------------------------------
Since inception +8.58% +6.98% +7.78% +7.38% +7.74% +7.74% +7.11% +8.79%
- ---------------------------------------------------------------------------------------------------------------
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows:
first year 5%; second and third year 4%; fourth year 3%; fifth year 2%;
sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
- ------------------------------------------------------------------------------
6 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
RiverSource Large Cap Value Fund's Class A shares advanced 7.39%, excluding
sales charge, for the 12 months ended July 31, 2006. The Fund's benchmark, the
Russell 1000(R) Value Index (Russell Index), rose 11.59% during the period.
The Fund's peer group, the Lipper Large-Cap Value Funds Index, gained 8.61%
during the same time frame. Below, Portfolio Manager Robert Ewing discusses
the Fund's results and positioning for fiscal year ended July 31, 2006.
Q: What factors most significantly affected performance for the period?
A: The stock market advanced strongly during the first six months of the
fiscal year. Volatility increased in the second half of the period as
investors worried over rising interest rates, high energy prices,
inflationary pressures and global conflicts. Value stocks delivered
strong gains for the year, significantly outpacing growth stocks. The
Fund benefited from this favorable environment, but did not keep pace
with the double-digit gain of the Russell Index.
Compared to the Russell Index, health care and utilities performed well
for the Fund. Conversely, the information technology and consumer
staples sectors were the largest detractors from relative return.
- ------------------------------------------------------------------------------
VALUE STOCKS DELIVERED STRONG GAINS FOR THE YEAR, SIGNIFICANTLY
OUTPACING GROWTH STOCKS.
- ------------------------------------------------------------------------------
A larger-than-Russell Index position in health care was primarily
responsible for the Fund's strong results in that sector. Within the
health care segment, we have searched for companies with attractive
valuations where we believe consolidation, acquisitions or cost
reductions can create meaningful synergies and sustain earnings growth
even if the economy slows. Although health care stock selection had
little effect on relative results, the Fund's pharmaceutical holdings
did have a favorable impact, most notably Pfizer. Valuations on
pharmaceuticals were quite low, with deteriorating fundamentals already
priced into the stocks. During the quarter, the group experienced a mild
turnaround as their fundamentals matched or beat investors' lowered
expectations.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 7
QUESTIONS & ANSWERS
We kept the Fund underweight relative to the Russell Index in utilities
because valuations had risen significantly on the strength of their
energy exposure. The Fund's position in utilities was advantageous
during this period as a combination of factors -- utility valuations
near historical highs, investors wanting to own less cyclical defensive
stocks and higher interest rates -- caused utilities to underperform,
particularly in the latter part of the period. Stock selection in the
utilities sector was also beneficial.
In the information technology sector, both stock selection and a
larger-than-Russell Index allocation detracted from the Fund's return.
Within information technology, we have focused on companies with good
stock valuations and solid growth stories and have emphasized key
themes. Selected stocks within these themes were among the leading
contributors to relative return, including cell phone maker Nokia, part
of the Fund's ongoing concentration on wireless communications, and
semi-conductor company MEMC Electronic Materials, which we expected to
benefit from growing interest in solar energy. Nokia advanced as sales
of handset units and the average selling price were higher than
expected. MEMC Electronic Materials benefited as demand for polysilicon
used in semi-conductors for solar panels has outpaced supply. These
gains were overshadowed by weaker performance from other information
technology holdings. Dell and Intel, stocks with very attractive
valuations, experienced deteriorating fundamentals due to weaker demand
for personal computers and competitive pressure on PC prices. Both
stocks detracted from the Fund's return.
The Fund's allocation to consumer staples was similar to that of the
Russell index, but stock selection was a significant detractor. Spectrum
Brands, a maker of batteries, fertilizers and other consumer products,
was primarily responsible for the weak results. The company appeared
poised to benefit from consolidation and cost cutting related to a
recent acquisition. Unfortunately, rising raw material costs, which the
company could not pass on to customers, overwhelmed the earnings gains
and prevented the synergies from being fully realized.
- ------------------------------------------------------------------------------
8 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
The Fund's underweight in energy detracted from relative return as crude
oil prices continued to advance despite concerns about inventory growth.
We maintained the energy underweight position relative to the Russell
Index, because we believe that as the economic cycle advances there is
more risk that emerging market countries may experience some slowdown,
which would negatively affect companies with too much inventory. In
addition, the Fund's energy holdings lagged.
A smaller-than-Russell Index position in financials also hampered the
Fund's return as the sector outperformed on the belief that the Federal
Reserve was near the end of its cycle of interest rates hikes. Stock
selection in the sector was also negative. We remained underweight
relative to the Russell Index because valuations weren't compelling to
us and we are concerned about their cyclical exposure. Several of our
themes within the financials sector performed well, for example, the
Fund's insurance holdings. However, we had de-emphasized cyclically
exposed financial companies, such as brokerage firms, many of which
continued to outperform, hampering the Fund's results.
Stock selection in the consumer discretionary sector had a negative
effect on performance. The Fund benefited from reduced exposure to
cyclical groups and a larger-than-Russell Index position in media stocks
where we continued to see attractive valuations, strong free cash flow
and good growth. However, some individual stocks, such as Liberty Media,
detracted from the Fund's return.
Q: What changes did you make to the portfolio and how is it currently
positioned?
A: During the period, we added to the Fund's health care and information
technology positions, while reducing consumer staples and energy.
Information technology underperformed through the period, making
valuations more attractive to us. We added to those companies that
showed an attractive level of potential reward to their inherent risk.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 9
QUESTIONS & ANSWERS
Although consumer staples stocks are generally considered defensive, we
don't think valuations are particularly compelling in that sector. At
the same time, fundamentals have suffered from continued cost pressures.
Consequently, we reduced the Fund's exposure to the group. We also
reduced the energy position, based on our concerns about inventory
growth and the fact that the economic cycle is fairly advanced. In our
view, the reward/risk profile just doesn't seem very appealing.
Q: How do you plan to manage the Fund in the coming months?
A: In terms of the economy, we thought pressures from energy costs and a
softening housing market would build up more quickly, causing the
economy to slow before now. We were early in our anticipation of an
economic slowdown, but the U.S. economy seems to be on the cusp of a
slowdown. Lower housing prices are preventing many consumers from
drawing on their home equity to finance spending and we may see effects
from this over the next few years. Declining home equity could offset
income and job growth that occurred throughout the latest economic
cycle.
Given our current outlook, we have positioned the Fund to be less
exposed to economically sensitive companies. In particular, we want to
de-emphasize groups, such as industrial and material companies, which
tend to underperform late in the economic cycle. Consumer stocks, which
are typically one of the first cyclical stock groups to suffer, have
already underperformed for an extended period and we think value could
begin to emerge in this group.
- ------------------------------------------------------------------------------
GIVEN OUR CURRENT OUTLOOK, WE HAVE POSITIONED THE FUND TO BE LESS
EXPOSED TO ECONOMICALLY SENSITIVE COMPANIES.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
10 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
An emphasis on larger cap stocks and a modest growth tilt are themes
that have remained in place throughout this fiscal period. We continue
to find more opportunities in large-cap stocks, which still appear
inexpensive relative to mid and small-cap stocks, based on the
historical relationships between these groups. Although the prolonged
underperformance of growth stocks is consistent with this stage of the
economic cycle, it does seem a bit extreme to us. With very little
valuation difference between traditional value and growth stocks, we can
expose the portfolio to more growth-oriented stocks, while remaining
firmly committed to our value strategy. If the economy slows and
investors move toward more stable, less cyclically exposed growth
stocks, the Fund may be rewarded for this modest growth bias.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 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 Large Cap Value Fund Class A shares (from 7/1/02 to
7/31/06)* as compared to the performance of two widely cited performance
indices, the Russell 1000 Value Index and the Lipper Large-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 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 June 27, 2002. Russell 1000 Value Index and Lipper
peer group data is from July 1, 2002.
COMPARATIVE RESULTS
Results at July 31, 2006
SINCE
1 YEAR 3 YEARS INCEPTION(3)
RIVERSOURCE LARGE CAP VALUE FUND
(INCLUDES SALES CHARGE)
- ------------------------------------------------------------------------------
Class A Cumulative value of $10,000 $ 10,121 $ 13,079 $ 13,338
- ------------------------------------------------------------------------------
Average annual total return +1.21% +9.36% +7.28%
- ------------------------------------------------------------------------------
RUSSELL 1000 VALUE INDEX(1)
- ------------------------------------------------------------------------------
Cumulative value of $10,000 $ 11,159 $ 15,633 $ 15,703
- ------------------------------------------------------------------------------
Average annual total return +11.59% +16.06% +11.68%
- ------------------------------------------------------------------------------
LIPPER LARGE-CAP VALUE FUNDS INDEX(2)
- ------------------------------------------------------------------------------
Cumulative value of $10,000 $ 10,861 $ 14,387 $ 14,276
- ------------------------------------------------------------------------------
Average annual total return +8.61% +12.89% +9.11%
- ------------------------------------------------------------------------------
Results for other share classes can be found on page 6.
- ------------------------------------------------------------------------------
12 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE LARGE CAP VALUE FUND
[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
RiverSource Large
Cap Value Fund Class A Russell 1000 Value Lipper Large-Cap
(includes sales charge) Index(1) Value Funds Index(2)
7/1/2002 $ 9,425 $10,000 $10,000
7/31/2002 $ 8,695 $ 9,070 $ 9,136
7/31/2003 $ 9,610 $10,045 $ 9,923
7/31/2004 $10,845 $11,821 $11,424
7/31/2005 $12,420 $14,072 $13,144
7/31/2006 $13,338 $15,703 $14,276
(1) The Russell 1000 Value Index, an unmanaged index, measures the
performance of those stocks in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values. The index
reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions or other fees.
(2) The Lipper Large-Cap Value Funds Index includes the 30 largest large-cap
value funds tracked by Lipper Inc. The index's returns include net
reinvested dividends. The Fund's performance is currently measured
against this index for purposes of determining the performance incentive
adjustment.
(3) Fund data is from June 27, 2002. Russell 1000 Value Index and Lipper
peer group data is from July 1, 2002.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 13
INVESTMENTS IN SECURITIES
JULY 31, 2006
(Percentages represent value of investments compared to net assets)
- ------------------------------------------------------------------------------
COMMON STOCKS (99.3%)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
AEROSPACE & DEFENSE (3.9%)
Boeing 5,072 $ 392,674
DRS Technologies 958 44,346
General Dynamics 5,436 364,321
Goodrich 9,088 366,883
Honeywell Intl 21,611 836,345
L-3 Communications
Holdings 1,260 92,799
Lockheed Martin 8,699 693,136
Northrop Grumman 10,227 676,925
United Technologies 5,277 328,177
--------------
Total 3,795,606
- ------------------------------------------------------------------------------
BEVERAGES (1.0%)
Coca-Cola 6,277 279,327
PepsiCo 10,568 669,799
--------------
Total 949,126
- ------------------------------------------------------------------------------
BIOTECHNOLOGY (0.2%)
Amgen 1,372(b) 95,683
Biogen Idec 3,096(b) 130,404
--------------
Total 226,087
- ------------------------------------------------------------------------------
BUILDING PRODUCTS (0.4%)
American Standard
Companies 2,421 93,523
Masco 9,576 255,967
--------------
Total 349,490
- ------------------------------------------------------------------------------
CAPITAL MARKETS (4.0%)
Bank of New York 14,503 487,446
Franklin Resources 3,107 284,135
KKR Private Equity
Investors LP Unit 6,910(b) 162,385
Legg Mason 995 83,053
Lehman Brothers Holdings 13,989 908,585
Merrill Lynch & Co 10,719 780,558
Morgan Stanley 14,783 983,069
State Street 3,400 204,204
--------------
Total 3,893,435
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
CHEMICALS (1.3%)
Dow Chemical 20,829 $ 720,267
Eastman Chemical 3,931 195,096
Lyondell Chemical 9,949 221,564
RPM Intl 5,838 109,404
--------------
Total 1,246,331
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (4.9%)
Commerce Bancorp 8,298 281,883
PNC Financial Services
Group 6,352 449,976
US Bancorp 30,650 980,800
Wachovia 15,826 848,748
Wells Fargo & Co 29,862 2,160,217
--------------
Total 4,721,624
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.5%)
Avery Dennison 2,656 155,721
Cendant 19,158 287,562
--------------
Total 443,283
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT (1.5%)
Alcatel 1,757(b,c) 19,816
Cisco Systems 35,997(b) 642,547
Corning 2,248(b) 42,869
Lucent Technologies 80,981(b) 172,490
Motorola 22,916 521,568
--------------
Total 1,399,290
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (2.6%)
Dell 23,857(b) 517,220
EMC 18,823(b) 191,053
Hewlett-Packard 27,883 889,746
Intl Business Machines 11,348 878,449
--------------
Total 2,476,468
- ------------------------------------------------------------------------------
CONSUMER FINANCE (1.3%)
American Express 6,943 361,453
Capital One Financial 11,158 863,071
--------------
Total 1,224,524
- ------------------------------------------------------------------------------
CONTAINERS & PACKAGING (0.4%)
Temple-Inland 9,023 383,838
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
14 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
DIVERSIFIED FINANCIAL SERVICES (9.5%)
Bank of America 78,868 $ 4,064,068
Citigroup 68,694 3,318,607
JPMorgan Chase & Co 37,519 1,711,617
--------------
Total 9,094,292
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES (4.8%)
AT&T 24,690 740,453
BellSouth 37,990 1,488,068
Chunghwa Telecom ADR 14,823(c) 275,263
Citizens Communications 8,363 107,297
Embarq 4,105(b) 185,751
Verizon Communications 47,740 1,614,568
Windstream 15,814 198,148
--------------
Total 4,609,548
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (2.5%)
Entergy 7,661 590,663
Exelon 14,348 830,749
FPL Group 3,032 130,800
PPL 9,887 336,356
Southern 15,275 515,990
--------------
Total 2,404,558
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%)
Flextronics Intl 18,549(b,c) 210,346
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.8%)
Cameron Intl 3,900(b) 196,599
Halliburton 15,228 508,006
Natl Oilwell Varco 1,539(b) 103,175
Schlumberger 3,580 239,323
TODCO 1,224 46,647
Transocean 2,163(b) 167,048
Weatherford Intl 9,804(b) 459,219
--------------
Total 1,720,017
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (1.4%)
CVS 6,851 224,165
Safeway 18,347 515,184
Wal-Mart Stores 13,159 585,575
--------------
Total 1,324,924
- ------------------------------------------------------------------------------
FOOD PRODUCTS (1.5%)
Cadbury Schweppes 10,303(c) 100,742
Campbell Soup 5,179 189,966
General Mills 7,410 384,579
Hershey 1,963 107,906
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
FOOD PRODUCTS (CONT.)
Kellogg 11,373 $ 547,838
Kraft Foods Cl A 3,233 104,749
--------------
Total 1,435,780
- ------------------------------------------------------------------------------
GAS UTILITIES (0.4%)
ONEOK 10,450 388,845
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.8%)
Bausch & Lomb 2,094 99,046
Baxter Intl 5,080 213,360
Boston Scientific 25,155(b) 427,887
--------------
Total 740,293
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (1.6%)
Aetna 3,951 124,417
Brookdale Senior Living 1,164 54,126
Cardinal Health 6,956 466,052
CIGNA 5,056 461,360
Humana 4,691(b) 262,368
UnitedHealth Group 3,409 163,052
--------------
Total 1,531,375
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE (0.6%)
Carnival Unit 1,240 48,310
Marriott Intl Cl A 8,111 285,345
McDonald's 7,004 247,872
--------------
Total 581,527
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (0.1%)
DR Horton 4,168 89,320
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (1.2%)
Colgate-Palmolive 6,019 357,047
Procter & Gamble 8,481 476,632
Spectrum Brands 46,089(b) 312,023
--------------
Total 1,145,702
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (2.4%)
General Electric 54,330 1,776,047
Tyco Intl 20,284(c) 529,210
--------------
Total 2,305,257
- ------------------------------------------------------------------------------
INSURANCE (6.2%)
ACE 14,843(c) 764,860
Allied World
Assurance Holdings 3,400(b,c) 118,660
American Intl Group 44,155 2,678,883
Aon 8,762 299,923
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 15
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
INSURANCE (CONT.)
Arch Capital Group 1,689(b,c) $ 102,793
Aspen Insurance
Holdings 8,372(c) 197,579
Chubb 8,543 430,738
Endurance Specialty Holdings 4,789(c) 145,394
Hartford Financial
Services Group 6,536 554,514
Max Re Capital 8,209(c) 184,703
Natl Financial Partners 1,077 48,508
Prudential Financial 2,777 218,383
XL Capital Cl A 3,075(c) 195,878
--------------
Total 5,940,816
- ------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.2%)
Liberty Media Holding -
Interactive Cl A 12,904(b,d) 212,529
- ------------------------------------------------------------------------------
IT SERVICES (1.2%)
Affiliated Computer
Services Cl A 8,406(b) 428,118
Automatic Data Processing 7,695 336,733
Computer Sciences 1,336(b) 69,993
First Data 6,797 277,657
--------------
Total 1,112,501
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS (0.1%)
Mattel 5,464 98,571
- ------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES (--%)
PerkinElmer 2,246 40,495
- ------------------------------------------------------------------------------
MACHINERY (1.3%)
Caterpillar 6,785 480,853
Deere & Co 2,829 205,301
Flowserve 859(b) 44,496
Illinois Tool Works 4,510 206,242
Ingersoll-Rand Cl A 5,102(c) 182,652
ITT 2,799 141,489
--------------
Total 1,261,033
- ------------------------------------------------------------------------------
MEDIA (6.8%)
Cablevision Systems Cl A 1,918 42,676
CBS Cl B 10,925 299,673
Clear Channel
Communications 3,280 94,956
Comcast Cl A 16,175(b) 556,097
Comcast Special Cl A 29,091(b) 997,240
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
MEDIA (CONT.)
EchoStar
Communications Cl A 6,388(b) $ 223,899
Liberty Global Cl A 6,828(b) 149,192
Liberty Global Series C 6,924(b) 146,650
Liberty Media Holding -
Capital Series A 2,581(b,d) 210,635
News Corp Cl A 42,780 823,087
NTL 36,370 831,055
Time Warner 44,050 726,825
Viacom Cl B 18,911(b) 659,048
Vivendi 10,909(c) 369,392
Walt Disney 14,825 440,154
--------------
Total 6,570,579
- ------------------------------------------------------------------------------
METALS & MINING (0.2%)
Alcan 1,622(c) 74,223
Alcoa 3,978 119,141
--------------
Total 193,364
- ------------------------------------------------------------------------------
MULTILINE RETAIL (1.2%)
Federated
Department Stores 9,672 339,584
JC Penney 2,912 183,340
Nordstrom 1,303 44,693
Target 13,590 624,052
--------------
Total 1,191,669
- ------------------------------------------------------------------------------
MULTI-UTILITIES (1.1%)
Dominion Resources 10,755 844,052
Xcel Energy 10,572 211,863
--------------
Total 1,055,915
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (10.4%)
Anadarko Petroleum 6,161 281,804
Aventine Renewable
Energy Holdings 180(b) 5,328
BP ADR 5,862(c) 425,112
Chesapeake Energy 3,255 107,090
Chevron 28,168 1,852,891
ConocoPhillips 33,074 2,270,199
Devon Energy 6,604 426,883
Exxon Mobil 55,701 3,773,187
Hess 4,880 258,152
Kerr-McGee 1,921 134,854
Newfield Exploration 5,937(b) 275,358
Royal Dutch Shell ADR 4,655(c) 329,574
--------------
Total 10,140,432
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
16 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
PAPER & FOREST PRODUCTS (0.9%)
Bowater 6,166 $ 125,046
Intl Paper 9,512 326,547
Weyerhaeuser 6,630 388,916
--------------
Total 840,509
- ------------------------------------------------------------------------------
PHARMACEUTICALS (5.6%)
Bristol-Myers Squibb 29,933 717,494
GlaxoSmithKline ADR 5,161(c) 285,558
Merck & Co 20,486 824,971
Novartis ADR 5,832(c) 327,875
Pfizer 94,062 2,444,671
Schering-Plough 25,386 518,890
Watson Pharmaceuticals 5,508(b) 123,324
Wyeth 3,363 163,005
--------------
Total 5,405,788
- ------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS (REITS) (0.6%)
Apartment Investment &
Management Cl A 3,563 171,345
Equity Office
Properties Trust 9,569 362,760
HomeBanc 6,314 51,775
--------------
Total 585,880
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.9%)
Agere Systems 6,175(b) 89,908
Credence Systems 6,852(b) 19,323
Cypress Semiconductor 16,248(b) 246,807
Elpida Memory 2,100(b,c) 84,081
Freescale
Semiconductor Cl A 10,608(b) 303,707
Freescale
Semiconductor Cl B 2,498(b) 71,243
Infineon
Technologies ADR 10,399(b,c) 111,893
Integrated Device
Technology 21,263(b) 328,939
Intel 18,979 341,621
Texas Instruments 6,422 191,247
--------------
Total 1,788,769
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------
ISSUER SHARES VALUE(a)
SOFTWARE (2.5%)
Cadence Design Systems 25,338(b) $ 410,222
Compuware 25,821(b) 180,489
McAfee 2,047(b) 44,113
Microsoft 35,158 844,847
Oracle 30,365(b) 454,564
Symantec 18,376(b) 319,191
TIBCO Software 19,880(b) 158,245
--------------
Total 2,411,671
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.4%)
Gap 5,473 94,957
Home Depot 5,767 200,172
Urban Outfitters 6,905(b) 100,744
--------------
Total 395,873
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (3.2%)
Countrywide Financial 32,815 1,175,761
Fannie Mae 18,673 894,623
Freddie Mac 13,436 777,407
Washington Mutual 5,045 225,512
--------------
Total 3,073,303
- ------------------------------------------------------------------------------
TOBACCO (2.2%)
Altria Group 26,234 2,097,933
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES (2.5%)
ALLTEL 15,295 843,825
Sprint Nextel 63,046 1,248,311
Vodafone Group ADR 14,725(c) 319,227
--------------
Total 2,411,363
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $88,680,327) $ 95,519,879
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $88,680,327)(e) $ 95,519,879
==============================================================================
See accompanying notes to investments in securities.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 17
- ------------------------------------------------------------------------------
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, 2006,
the value of foreign securities represented 5.6% of net assets.
(d) Shareholders of tracking stocks have a financial interest only in a unit
or division of the company. Unlike the common stock of the company
itself, a tracking stock usually has limited or no voting rights. In the
event of a company's liquidation, tracking stock shareholders typically
do not have a legal claim on the company's assets.
(e) At July 31, 2006, the cost of securities for federal income tax purposes
was $89,815,393 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $ 9,229,785
Unrealized depreciation (3,525,299)
------------------------------------------------------------------------
Net unrealized appreciation $ 5,704,486
------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
18 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2006
ASSETS
Investments in securities, at value (Note 1)
(identified cost $88,680,327) $ 95,519,879
Cash in bank on demand deposit 308,395
Capital shares receivable 702
Dividends and accrued interest receivable 156,272
Receivable for investment securities sold 314,444
- -----------------------------------------------------------------------------------------------------------
Total assets 96,299,692
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 12,874
Payable for investment securities purchased 47,876
Accrued investment management services fee 4,759
Accrued distribution fee 2,952
Accrued transfer agency fee 684
Accrued administrative services fee 476
Other accrued expenses 39,520
- -----------------------------------------------------------------------------------------------------------
Total liabilities 109,141
- -----------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 96,190,551
===========================================================================================================
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 163,848
Additional paid-in capital 76,796,298
Undistributed net investment income 662,124
Accumulated net realized gain (loss) 11,728,729
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 6,839,552
- -----------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $ 96,190,551
===========================================================================================================
Net assets applicable to outstanding shares: Class A $ 62,855,365
Class B $ 18,984,583
Class C $ 1,108,078
Class I $ 13,208,587
Class Y $ 33,938
Net asset value per share of outstanding capital stock: Class A shares 10,692,320 $ 5.88
Class B shares 3,261,457 $ 5.82
Class C shares 190,515 $ 5.82
Class I shares 2,234,787 $ 5.91
Class Y shares 5,753 $ 5.90
- -----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 19
STATEMENT OF OPERATIONS
Year ended July 31, 2006
INVESTMENT INCOME
Income:
Dividends $ 3,258,571
Interest 97,741
Less foreign taxes withheld (21,939)
- ------------------------------------------------------------------------------------------------------------
Total income 3,334,373
- ------------------------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 715,200
Distribution fee
Class A 170,730
Class B 240,605
Class C 12,172
Transfer agency fee 164,826
Incremental transfer agency fee
Class A 11,718
Class B 7,913
Class C 467
Service fee -- Class Y 90
Administrative services fees and expenses 78,248
Compensation of board members 8,997
Custodian fees 52,550
Printing and postage 53,770
Registration fees 53,445
Audit fees 21,000
Other 4,907
- ------------------------------------------------------------------------------------------------------------
Total expenses 1,596,638
Earnings and bank fee credits on cash balances (Notes 2) (8,165)
- ------------------------------------------------------------------------------------------------------------
Total net expenses 1,588,473
- ------------------------------------------------------------------------------------------------------------
Investment income (loss) -- net 1,745,900
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 12,600,931
Foreign currency transactions 48
Reimbursement from affiliate (Note 2) 182
- ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 12,601,161
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (5,201,720)
- ------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 7,399,441
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 9,145,341
============================================================================================================
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
20 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED JULY 31, 2006 2005
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 1,745,900 $ 1,378,478
Net realized gain (loss) on investments 12,601,161 8,924,943
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (5,201,720) 7,691,556
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 9,145,341 17,994,977
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net Investment income
Class A (878,948) (546,048)
Class B (101,985) (10,205)
Class C (5,946) --
Class I (815,837) (382,906)
Class Y (1,721) (1,186)
Net realized gain
Class A (3,373,386) (3,015,777)
Class B (1,215,159) (1,148,832)
Class C (63,394) (57,627)
Class I (2,287,588) (1,527,915)
Class Y (5,789) (5,242)
- ------------------------------------------------------------------------------------------------------------
Total distributions (8,749,753) (6,695,738)
- ------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 11,203,132 17,758,111
Class B shares 1,923,861 7,075,931
Class C shares 172,850 380,110
Class I shares 13,890,983 35,295,804
Class Y shares 1,022 81,000
Reinvestment of distributions at net asset value
Class A shares 4,161,490 3,502,995
Class B shares 1,301,183 1,145,619
Class C shares 67,763 56,012
Class I shares 3,103,080 1,910,566
Class Y shares 6,764 5,863
Payments for redemptions
Class A shares (27,249,234) (20,411,526)
Class B shares (Note 2) (12,824,832) (7,218,949)
Class C shares (Note 2) (534,833) (563,631)
Class I shares (41,255,992) (18,207,821)
Class Y shares (114,743) (17,206)
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (46,147,506) 20,792,878
- ------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (45,751,918) 32,092,117
Net assets at beginning of year 141,942,469 109,850,352
- ------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 96,190,551 $141,942,469
============================================================================================================
Undistributed net investment income $ 662,124 $ 750,831
- ------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 21
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource Large Cap Series, Inc. (formerly AXP
Growth Series, Inc.) and is registered under the Investment Company Act of
1940 (as amended) as a diversified, open-end management investment company.
RiverSource Large Cap Series, Inc. has 10 billion authorized shares of capital
stock that can be allocated among the separate series as designated by the
Board. The Fund invests primarily in equity securities of companies with a
market capitalization greater than $5 billion.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth year
of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At July 31, 2006, Ameriprise Financial, Inc.
(Ameriprise Financial) and the affiliated funds-of-funds owned 100% of Class I
shares, which represents 13.73% of the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from
actual results.
- ------------------------------------------------------------------------------
22 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Pursuant to procedures adopted by the Board of Directors of the funds,
Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are
made in good faith in accordance with these procedures. If a development or
event is so significant that there is a reasonably high degree of certainty
that the effect of the development or event has actually caused the closing
price to no longer reflect the actual value, the closing prices, as determined
at the close of the applicable foreign market, may be adjusted to reflect the
fair value of the affected foreign securities as of the close of the New York
Stock Exchange. Significant events include material movements in the U.S.
securities markets prior to the opening of foreign markets on the following
trading day. FVP results in an estimated price that reasonably reflects the
current market conditions in order to value the portfolio holdings such that
shareholder transactions receive a fair net asset value. Short-term securities
maturing in more than 60 days from the valuation date are valued at the market
price or approximate market value based on current interest rates; those
maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a
put option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option
is that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option or the cost of a security for a
purchased put or call option is adjusted by the amount of premium received or
paid.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 23
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to
the purchase or sale of securities and income and expenses are translated at
the exchange rate on the transaction date. The effect of changes in foreign
exchange rates on realized and unrealized security gains or losses is
reflected as a component of such gains or losses. In the statement of
operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date
on securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such claims.
- ------------------------------------------------------------------------------
24 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
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 $30,170 and accumulated net realized gain has been increased by
$30,170.
The tax character of distributions paid for the years indicated is as
follows:
YEAR ENDED JULY 31, 2006 2005
- ---------------------------------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income ............................ $ 1,836,908 $ 1,523,416
Long-term capital gain ..................... 2,415,525 2,038,409
CLASS B
Distributions paid from:
Ordinary income ............................ 447,025 382,524
Long-term capital gain ..................... 870,119 776,513
CLASS C
Distributions paid from:
Ordinary income ............................ 23,946 18,676
Long-term capital gain ..................... 45,394 38,951
CLASS I
Distributions paid from:
Ordinary income ............................ 1,465,389 878,081
Long-term capital gain ..................... 1,638,036 1,032,740
CLASS Y
Distributions paid from:
Ordinary income ............................ 3,365 2,885
Long-term capital gain ..................... 4,145 3,543
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 25
At July 31, 2006, the components of distributable earnings on a tax basis are
as follows:
Undistributed ordinary income ............................... $ 3,009,242
Accumulated long-term gain (loss) ........................... $10,516,677
Unrealized appreciation (depreciation) ...................... $ 5,704,486
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (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, that will result from the adoption of FIN 48.
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.
- ------------------------------------------------------------------------------
26 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. Prior to Oct. 1, 2005, investment management services were
provided by Ameriprise Financial. The management fee is a percentage of the
Fund's average daily net assets that declines from 0.60% to 0.375% annually as
the Fund's assets increase. Prior to March 1, 2006, the management fee
percentage of the Fund's average daily net assets declined from 0.60% to 0.48%
annually as the Fund's assets increased. The fee may be adjusted upward or
downward by a performance incentive adjustment based on a comparison of the
performance of Class A shares of the Fund to the Lipper Large-Cap Value Funds
Index. In certain circumstances, the Board may approve a change in the index.
The maximum adjustment is 0.12% per year. If the performance difference is
less than 0.50%, the adjustment will be zero. The adjustment decreased the fee
by $65,158 for the year ended July 31, 2006.
Under the current Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage of
the Fund's average daily net assets that declines from 0.06% to 0.03% annually
as the Fund's assets increase. Prior to Oct. 1, 2005, the fee percentage of
the Fund's average daily net assets declined from 0.05% to 0.02% annually as
the Fund's assets increased. A minor portion of additional administrative
service expenses paid by the Fund are consultants' fees and fund office
expenses. Under this agreement, the Fund also pays taxes, audit and certain
legal fees, registration fees for shares, compensation of board members,
corporate filing fees and any other expenses properly payable by the Fund and
approved by the Board.
Under a Deferred Compensation Plan (the Plan), non-interested board members
may defer receipt of their compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Fund or
other RiverSource funds. The Fund's liability for these amounts is adjusted
for market value changes and remains in the Fund until distributed in
accordance with the Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund pays
the Transfer Agent an annual fee per shareholder account for this service as
follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 27
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by the Distributor and other servicing agents
with respect to those shares. The fee is calculated at a rate of 0.10% of the
Fund's average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$86,201 for Class A, $36,903 for Class B and $108 for Class C for the year
ended July 31, 2006.
Effective as of Oct. 1, 2005, the Investment Manager and its affiliates have
agreed to waive certain fees and expenses until July 31, 2007, unless sooner
terminated by the Board, such that net expenses, before giving effect to any
performance incentive adjustment, will not exceed 1.29% for Class A, 2.05% for
Class B, 2.06% for Class C, 0.94% for Class I and 1.12% for Class Y of the
Fund's average daily net assets.
During the year ended July 31, 2006, the Fund's custodian and transfer agency
fees were reduced by $8,165 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.
In addition, the Fund received a one time reimbursement of $182 by Ameriprise
Financial for additional earnings from overnight cash balances determined to
be owed for prior years. This amount was insignificant to the Fund's net asset
value and total return.
- ------------------------------------------------------------------------------
28 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $58,372,304 and $105,788,907, respectively, for the
year ended July 31, 2006. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as
follows:
YEAR ENDED JULY 31, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------
Sold 1,942,339 336,668 30,218 2,383,522 175
Issued for reinvested
distributions 743,124 233,606 12,166 552,149 1,204
Redeemed (4,706,798) (2,243,828) (93,245) (7,154,110) (19,573)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) (2,021,335) (1,673,554) (50,861) (4,218,439) (18,194)
- -------------------------------------------------------------------------------------------------
YEAR ENDED JULY 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------
Sold 3,185,715 1,283,395 69,124 6,285,074 14,833
Issued for reinvested
distributions 628,904 206,791 10,111 341,783 1,049
Redeemed (3,634,034) (1,298,146) (101,928) (3,228,175) (3,074)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) 180,585 192,040 (22,693) 3,398,682 12,808
- -------------------------------------------------------------------------------------------------
5. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the
temporary funding of shareholder redemptions or for other temporary or
emergency purposes. The agreement went into effect Sept. 20, 2005. The Fund
must maintain asset coverage for borrowings of at least 300%. The agreement,
which enables the Fund to participate with other RiverSource funds, permits
borrowings up to $500 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate.
Borrowings are payable within 60 days after such loan is executed. The Fund
also pays a commitment fee equal to its pro rata share of the amount of the
credit facility at a rate of 0.07% per annum. Prior to this agreement, the
Fund had a revolving credit agreement that permitted borrowings up to $500
million with The Bank of New York. The Fund had no borrowings outstanding
during the year ended July 31, 2006.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 29
6. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement agreements
with the Securities and Exchange Commission (SEC) and Minnesota Department of
Commerce (MDOC) related to market timing activities. In connection with these
matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC
violated certain provisions of the federal and Minnesota securities laws by
failing to adequately disclose market timing activities by allowing certain
identified market timers to continue to market time contrary to disclosures in
mutual fund and variable annuity product prospectuses. The Orders also alleged
that AEFC failed to implement procedures to detect and prevent market timing
in 401(k) plans for employees of AEFC and related companies and failed to
adequately disclose that there were no such procedures. Pursuant to the MDOC
Order, the MDOC also alleged that AEFC allowed inappropriate market timing to
occur by failing to have written policies and procedures and failing to
properly supervise its employees.
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million. AEFC
also agreed to make presentations at least annually to its board of directors
and the relevant mutual funds' board that include an overview of policies and
procedures to prevent market timing, material changes to these policies and
procedures and whether disclosures related to market timing are consistent
with the SEC order and federal securities laws. AEFC also agreed to retain an
independent distribution consultant to assist in developing a plan for
distribution of all disgorgement and civil penalties ordered by the SEC in
accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a summary
of actions taken to ensure compliance with applicable laws and regulations and
certification by a senior officer regarding compliance and supervisory
procedures.
- ------------------------------------------------------------------------------
30 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
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.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 31
7. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
- -----------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -----------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $ 5.83 $ 5.34 $ 4.98 $ 4.52 $ 4.90
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .09 .06 .04 .03 --
Net gains (losses)
(both realized and unrealized) .32 .70 .59 .44 (.38)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .41 .76 .63 .47 (.38)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.04) (.03) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.36) (.27) (.27) (.01) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.88 $ 5.83 $ 5.34 $ 4.98 $ 4.52
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 63 $ 74 $ 67 $ 31 $ 4
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.21% 1.29% 1.24%(d) 1.25%(d) 1.19%(d),(e)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.35% 1.07% .95% 1.01% .23%(e)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 46% 57% 59% 77% 9%
- -----------------------------------------------------------------------------------------------------------
Total return(f) 7.39% 14.52% 12.85% 10.52% (7.75%)(g)
- -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class A would have been 1.54%, 2.64% and 20.50% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
32 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
CLASS B
- -----------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -----------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $ 5.77 $ 5.29 $ 4.95 $ 4.52 $ 4.90
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .01 -- .01 --
Net gains (losses)
(both realized and unrealized) .32 .70 .59 .43 (.38)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .36 .71 .59 .44 (.38)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- (.01) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.31) (.23) (.25) (.01) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.82 $ 5.77 $ 5.29 $ 4.95 $ 4.52
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 19 $ 28 $ 25 $ 13 $ 1
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.97% 2.05% 2.00%(d) 2.00%(d) 1.95%(d),(e)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .59% .30% .16% .25% (.49%)(e)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 46% 57% 59% 77% 9%
- -----------------------------------------------------------------------------------------------------------
Total return(f) 6.51% 13.66% 12.00% 9.66% (7.75%)(g)
- -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 2.30%, 3.40% and 21.26% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 33
CLASS C
- --------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- --------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $ 5.77 $ 5.29 $ 4.94 $ 4.52 $ 4.90
- --------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .01 -- .01 --
Net gains (losses)
(both realized and unrealized) .32 .70 .60 .42 (.38)
- --------------------------------------------------------------------------------------------------------
Total from investment operations .36 .71 .60 .43 (.38)
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.02) -- (.01) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- --------------------------------------------------------------------------------------------------------
Total distributions (.31) (.23) (.25) (.01) --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.82 $ 5.77 $ 5.29 $ 4.94 $ 4.52
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 1 $ 1 $ 1 $ 1 $ --
- --------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.98% 2.06% 2.00%(d) 2.00%(d) 1.95%(d),(e)
- --------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .58% .30% .19% .26% (.45%)(e)
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 46% 57% 59% 77% 9%
- --------------------------------------------------------------------------------------------------------
Total return(f) 6.56% 13.62% 12.19% 9.50% (7.75%)(g)
- --------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class C would have been 2.30%, 3.40% and 21.26% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- --------------------------------------------------------------------------------
34 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
CLASS I
- -------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004(b)
Net asset value, beginning of period $ 5.86 $ 5.36 $ 5.57
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .12 .07 .03
Net gains (losses)
(both realized and unrealized) .32 .72 (.24)
- -------------------------------------------------------------------------------
Total from investment operations .44 .79 (.21)
- -------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.06) --
Distributions from realized gains (.29) (.23) --
- -------------------------------------------------------------------------------
Total distributions (.39) (.29) --
- -------------------------------------------------------------------------------
Net asset value, end of period $ 5.91 $ 5.86 $ 5.36
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 13 $ 38 $ 16
- -------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) .75% .86% .93%(d),(e)
- -------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.85% 1.50% 1.33%(e)
- -------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 46% 57% 59%
- -------------------------------------------------------------------------------
Total return(f) 7.86% 14.97% (3.77%)(g)
- -------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class I would have been 1.02% for the period ended July 31, 2004.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 35
CLASS Y
- -----------------------------------------------------------------------------------------------------------
PER SHARE INCOME AND CAPITAL CHANGES(a)
- -----------------------------------------------------------------------------------------------------------
Fiscal period ended July 31, 2006 2005 2004 2003 2002(b)
Net asset value, beginning of period $ 5.85 $ 5.36 $ 4.99 $ 4.52 $ 4.90
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .10 .07 .04 .03 --
Net gains (losses)
(both realized and unrealized) .32 .70 .61 .45 (.38)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations .42 .77 .65 .48 (.38)
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.05) (.04) (.01) --
Distributions from realized gains (.29) (.23) (.24) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.37) (.28) (.28) (.01) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.90 $ 5.85 $ 5.36 $ 4.99 $ 4.52
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ -- $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average
daily net assets(c) 1.00% 1.11% 1.06%(d) .95%(d) 1.01%(d),(e)
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.69% 1.25% 1.12% 1.30% .31%(e)
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 46% 57% 59% 77% 9%
- -----------------------------------------------------------------------------------------------------------
Total return(f) 7.55% 14.67% 13.14% 10.76% (7.75%)(g)
- -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest
cent.
(b) For the period from June 27, 2002 (when shares became publicly
available) to July 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class Y would have been 1.36%, 2.46% and 20.32% for the periods
ended July 31, 2004, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
- ------------------------------------------------------------------------------
36 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD AND SHAREHOLDERS
RIVERSOURCE LARGE CAP SERIES, INC.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments in securities, of RiverSource Large Cap
Value Fund (a series of RiverSource Large Cap Series, Inc.) as of July 31,
2006, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period ended July 31, 2006, and the financial highlights for each of the years
in the four-year period ended July 31, 2006, and for the period from June 27,
2002 (when shares became publicly available) to July 31, 2002. These financial
statements and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of July 31, 2006, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
RiverSource Large Cap Value Fund as of July 31, 2006, and the results of its
operations, changes in its net assets and the financial highlights for each of
the periods stated in the first paragraph above, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
September 20, 2006
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 37
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, 2006
CLASS A
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ...................... 80.91%
Dividends Received Deduction for corporations .................. 73.41%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.15668
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.20598
Total distributions ............................................... $ 0.36266
CLASS B
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ...................... 80.91%
Dividends Received Deduction for corporations .................. 73.41%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.10582
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.20598
Total distributions ............................................... $ 0.31180
- ------------------------------------------------------------------------------
38 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
CLASS C
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ...................... 80.91%
Dividends Received Deduction for corporations .................. 73.41%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.10866
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.20598
Total distributions ............................................... $ 0.31464
CLASS I
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ...................... 80.91%
Dividends Received Deduction for corporations .................. 73.41%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.18427
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.20598
Total distributions ............................................... $ 0.39025
CLASS Y
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals ...................... 80.91%
Dividends Received Deduction for corporations .................. 73.41%
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.16718
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain.
PAYABLE DATE PER SHARE
Dec. 21, 2005 ..................................................... $ 0.20598
Total distributions ............................................... $ 0.37316
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 39
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the six months ended July 31, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values
and actual expenses. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading titled "Expenses paid during the period"
to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
- ------------------------------------------------------------------------------
40 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
FEB. 1, 2006 JULY 31, 2006 THE PERIOD(a) EXPENSE RATIO
- -----------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------
Actual(b) $ 1,000 $ 1,029.80 $ 6.29 1.25%
- -----------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $ 1,000 $ 1,018.60 $ 6.26 1.25%
- -----------------------------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------------------------
Actual(b) $ 1,000 $ 1,024.60 $ 10.09 2.01%
- -----------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $ 1,000 $ 1,014.83 $ 10.04 2.01%
- -----------------------------------------------------------------------------------------------------------
Class C
- -----------------------------------------------------------------------------------------------------------
Actual(b) $ 1,000 $ 1,024.60 $ 10.14 2.02%
- -----------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $ 1,000 $ 1,014.78 $ 10.09 2.02%
- -----------------------------------------------------------------------------------------------------------
Class I
- -----------------------------------------------------------------------------------------------------------
Actual(b) $ 1,000 $ 1,031.40 $ 3.88 .77%
- -----------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $ 1,000 $ 1,020.98 $ 3.86 .77%
- -----------------------------------------------------------------------------------------------------------
Class Y
- -----------------------------------------------------------------------------------------------------------
Actual(b) $ 1,000 $ 1,029.70 $ 5.18 1.03%
- -----------------------------------------------------------------------------------------------------------
Hypothetical
(5% return before expenses) $ 1,000 $ 1,019.69 $ 5.16 1.03%
- -----------------------------------------------------------------------------------------------------------
(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, 2006:
+2.98% for Class A, +2.46% for Class B, +2.46% for Class C, +3.14% for
Class I and +2.97% for Class Y.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 41
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 99
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
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 52
- -------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member Chair, Board Services Corporation
901 S. Marquette Ave. since 1999 (provides administrative services
Minneapolis, MN 55402 to boards); former Governor
Age 71 of Minnesota
- -------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College;
Minneapolis, MN 55402 former Dean, McCallum Graduate
Age 55 School of Business, Bentley College
- -------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 71
- -------------------------------------------------------------------------------------------------------------
Jeffrey Laikind Board member Former Managing Director, American Progressive
901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance
Minneapolis, MN 55402
Age 70
- -------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Board member President Emeritus and Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation
Minneapolis, MN 55402 Carleton College systems)
Age 67
- -------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
42 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
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 Distribution,
901 S. Marquette Ave. since 2004 Management, Inc. (private real Inc. (transportation,
Minneapolis, MN 55402 estate and asset management distribution and logistics
Age 54 company) consultants)
- -------------------------------------------------------------------------------------------------------------
Vikki L. Pryor Board member President and Chief Executive
901 S. Marquette Ave. since 2006 Officer, SBLI USA Mutual Life
Minneapolis, MN 55402 Insurance Company, Inc. since 1999
Age 53
- -------------------------------------------------------------------------------------------------------------
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 62 Inc. (health management
programs)
- -------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
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, Ameriprise Certificate
53600 Ameriprise since 2001, Company since 2006; President -
Financial Center Vice President U.S. Asset Management and Chief
Minneapolis, MN 55474 since 2002, Investment Officer, Ameriprise
Age 46 Acting President Financial, Inc. and President,
since 2006 Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC since 2005; Senior
Vice President - Chief Investment
Officer, Ameriprise Financial, Inc.
and Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC, 2001-2005
- -------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security
holder and/or employee of RiverSource Investments.
** Paula R. Meyer resigned her position as President for the RiverSource
funds. Mr. Truscott has been appointed Acting President and will be
assuming the responsibilities of President until a permanent replacement
for Ms. Meyer is found.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 43
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 and
Acting President, the Fund's other officers are:
FUND OFFICERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer Vice President - Investment Accounting, Ameriprise Financial,
105 Ameriprise since 2002 Inc., since 2002; Vice President - Finance, American Express
Financial Center Company, 2000-2002
Minneapolis, MN 55474
Age 51
- -------------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed Income,
172 Ameriprise since 2004 Ameriprise Financial, Inc. and RiverSource Investments, LLC
Financial Center since 2006; Vice President - Investments, Ameriprise
Minneapolis, MN 55474 Certificate Company since 2003; Senior Vice President - Fixed
Age 42 Income, Ameriprise Financial, Inc., 2002-2006 and
RiverSource Investments, LLC, 2004-2006; Managing Director,
Zurich Global Assets, 2001-2002
- -------------------------------------------------------------------------------------------------------------
Leslie L. Ogg Vice President, President of Board Services Corporation
901 S. Marquette Ave. General Counsel,
Minneapolis, MN 55402 and Secretary
Age 68 since 1978
- -------------------------------------------------------------------------------------------------------------
Edward S. Dryden* Acting Chief Chief Compliance Officer, Ameriprise Certificate Company since
1875 Ameriprise Compliance Officer 2006; Vice President - Asset Management Compliance,
Financial Center since 2006 RiverSource Investments, LLC since 2006; Chief Compliance
Minneapolis, MN 55474 Officer - Mason Street Advisors, LLC, 2002-2006
Age 41
- -------------------------------------------------------------------------------------------------------------
Neysa M. Alecu Anti-Money Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Laundering Officer Ameriprise Financial, Inc. since 2004; Manager Anti-Money
Financial Center since 2004 Laundering, Ameriprise Financial, Inc., 2003-2004;
Minneapolis, MN 55474 Compliance Director and Bank Secrecy Act Officer,
Age 42 American Express Centurion Bank, 2000-2003
- -------------------------------------------------------------------------------------------------------------
* Beth E. Weimer resigned her position as Chief Compliance Officer for the
RiverSource funds. Mr. Dryden has been appointed Acting Chief Compliance
Officer and will be assuming the responsibilities of Chief Compliance
Officer until a permanent replacement for Ms. Weimer is found.
The SAI has additional information about the Fund's directors and is
available, without charge, upon request by calling RiverSource Funds at (888)
791-3380; contacting your financial institution; or visiting
riversource.com/funds.
- ------------------------------------------------------------------------------
44 RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
During the period covered by this report, RiverSource Investments, LLC
("RiverSource Investments" or the "investment manager"), a wholly-owned
subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as
the investment manager to RiverSource funds under an Investment Management
Services Agreement ("IMS Agreement").
The Board of Directors (the "Board") annually determines whether to continue
the IMS Agreement and subadvisory agreements, as applicable, by evaluating the
quality and level of services received and the costs associated with those
services. The Board did not make the specific determination this year as each
fund's IMS Agreement was approved by the vote of a majority of the outstanding
voting securities of the funds at a shareholder meeting held on Feb. 15, 2006.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling RiverSource Funds at (888) 791-3380; contacting your financial
institution; visiting riversource.com/funds; or searching the website of the
Securities and Exchange Commission (SEC) at http://www.sec.gov. Information
regarding how the Fund voted proxies relating to portfolio securities during
the 12-month period ended June 30, 2006 is available without charge by
visiting riversource.com/funds; or searching the website of the SEC at
www.sec.gov.
- ------------------------------------------------------------------------------
RIVERSOURCE LARGE CAP VALUE FUND - 2006 ANNUAL REPORT 45
RIVERSOURCE(SM) LARGE CAP VALUE FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
riversource.com/funds
This report must be accompanied or preceded by the
Fund's current prospectus. RiverSource(SM) mutual funds
RIVERSOURCE [LOGO](SM) are distributed by RiverSource Distributors, Inc. and
INVESTMENTS Ameriprise Financial Services, Inc., Members NASD,
and managed by RiverSource Investments, LLC. These
companies are part of Ameriprise Financial, Inc.
S-6246 G (9/06)
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 paid for the years ended July 31, to KPMG LLP
for professional services rendered for the audits of the annual
financial statements for RiverSource Large Cap Series, Inc. were as
follows:
2006 - $93,000; 2005 - $70,000
(b) Audit - Related Fees. The fees paid for the years ended July 31, to
KPMG LLP for additional professional services rendered in connection
with the registrant's security count pursuant to Rule 17f-2 for
RiverSource Large Cap Series, Inc. were as follows:
2006 - $3,577; 2005 - $1,077
(c) Tax Fees. The fees paid for the years ended July 31, to KPMG LLP for
tax compliance related services for RiverSource Large Cap Series,
Inc. were as follows:
2006 - $29,820; 2005 - $10,467
(d) All Other Fees. The fees paid for the years ended July 31, to KPMG
LLP for additional professional services rendered in connection to
proxy filing for RiverSource Large Cap Series, Inc. were as follows:
2006 - $10,981; 2005 - $3,239
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by KPMG 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 2006 and 2005 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees paid for the years ended July 31, by the
registrant for non-audit services to KPMG LLP were as follows:
2006 -$70,301; 2005 - $139,156
The fees paid for the years ended July 31, to KPMG LLP 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:
2006 - $29,500; 2005 - $125,450
(h) 100% of the services performed in item (g) above during 2006 and 2005
were pre-approved by the audit committee.
*2005 represents bills paid 8/1/04 - 7/31/05
2006 represents bills paid 8/1/05 - 7/31/06
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 Large Cap Series, Inc.
By /s/ William F. Truscott
-----------------------
William F. Truscott
President and Principal Executive Officer
Date October 4, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ William F. Truscott
-----------------------
William F. Truscott
President and Principal Executive Officer
Date October 4, 2006
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date October 4, 2006