-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GiCdmAga/23twBPKzJ/P6LK+pqtF9QZijfHA7oX33jSzn/55M4XKLWfnzM/o3n1U gkA1xyomcmVoOx8I/3PNlA== 0001365335-06-000083.txt : 20060628 0001365335-06-000083.hdr.sgml : 20060628 20060628151208 ACCESSION NUMBER: 0001365335-06-000083 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060430 FILED AS OF DATE: 20060628 DATE AS OF CHANGE: 20060628 EFFECTIVENESS DATE: 20060628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. CENTRAL INDEX KEY: 0001140531 IRS NUMBER: 412009895 STATE OF INCORPORATION: MN FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-10427 FILM NUMBER: 06929822 BUSINESS ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126714321 MAIL ADDRESS: STREET 1: 50606 AMERIPRISE FINANCIAL CENTER STREET 2: H27/5228 CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: AXP PARTNERS INTERNATIONAL SERIES INC DATE OF NAME CHANGE: 20010514 0001140531 S000003412 RiverSource International Aggressive Growth Fund C000009427 RiverSource International Aggressive Growth Fund Class C C000009428 RiverSource International Aggressive Growth Fund Class Y C000009429 RiverSource International Aggressive Growth Fund Class A AXGAX C000009430 RiverSource International Aggressive Growth Fund Class B APIBX C000009431 RiverSource International Aggressive Growth Fund Class I AIGGX 0001140531 S000003413 RiverSource International Equity Fund C000009432 RiverSource International Equity Fund Class C C000009433 RiverSource International Equity Fund Class I AILIX C000009434 RiverSource International Equity Fund Class Y C000009435 RiverSource International Equity Fund Class A AAICX C000009436 RiverSource International Equity Fund Class B APCBX 0001140531 S000003414 RiverSource International Select Value Fund C000009437 RiverSource International Select Value Fund Class Y C000009438 RiverSource International Select Value Fund Class A APIAX C000009439 RiverSource International Select Value Fund Class B AXIBX C000009440 RiverSource International Select Value Fund Class C APICX C000009441 RiverSource International Select Value Fund Class I APRIX 0001140531 S000003415 RiverSource International Small Cap Fund C000009442 RiverSource International Small Cap Fund Class C C000009443 RiverSource International Small Cap Fund Class I C000009444 RiverSource International Small Cap Fund Class Y C000009445 RiverSource International Small Cap Fund Class A AISCX C000009446 RiverSource International Small Cap Fund Class B APNBX N-CSRS 1 intl-managers6_06.txt RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. 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 811-10427 ------------ RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 330-9283 ----------------- Date of fiscal year end: 10/31 -------------- Date of reporting period: 4/30 -------------- Semiannual Report RIVERSOURCE [LOGO](SM) INVESTMENTS RIVERSOURCE(SM) INTERNATIONAL AGGRESSIVE GROWTH FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2006 > RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. - -------------------------------------------------------------------------------- TABLE OF CONTENTS Fund Snapshot..................................................................2 Performance Summary............................................................4 Questions & Answers with Portfolio Management..................................6 Investments in Securities.....................................................10 Financial Statements..........................................................21 Notes to Financial Statements.................................................24 Fund Expenses Example.........................................................38 Approval of Investment Management Services Agreement..........................40 Proxy Voting..................................................................41 Results of Meeting of Shareholders............................................42 [Dalbar LOGO] RiverSource Funds' 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. - -------------------------------------------------------------------------------- 1 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND SNAPSHOT AT APRIL 30, 2006 - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS - -------------------------------------------------------------------------------- COLUMBIA WANGER ASSET MANAGEMENT, L.P.
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY Zachary Egan, CFA 5/03 6 Louis Mendes, CFA 5/03 14
PRINCIPAL GLOBAL INVESTORS, LLC
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY John Pihlblad, CFA 4/06 29 Steven Larson, CFA 4/06 14
- -------------------------------------------------------------------------------- FUND OBJECTIVE - -------------------------------------------------------------------------------- The Fund seeks to provide shareholders with long-term capital growth. Inception dates by class A: 9/28/01 B: 9/28/01 C: 9/28/01 I: 3/4/04 Y: 9/28/01 Ticker symbols by class A: AXGAX B: APIBX C: -- I: AIGGX Y: -- Total net assets $468.6 million Number of holdings 368
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS - -------------------------------------------------------------------------------- Percentage of portfolio assets GlaxoSmithKline (United Kingdom) 1.2% - -------------------------------------------------------------------------------- BP (United Kingdom) 1.0 - -------------------------------------------------------------------------------- Total (France) 0.9 - -------------------------------------------------------------------------------- Mitsubishi UFJ Financial Group (Japan) 0.9 - -------------------------------------------------------------------------------- Tullow Oil (United Kingdom) 0.9 - -------------------------------------------------------------------------------- Royal Dutch Shell Series A (Netherlands) 0.8 - -------------------------------------------------------------------------------- Fugro (Netherlands) 0.8 - -------------------------------------------------------------------------------- Toyota Motor (Japan) 0.8 - -------------------------------------------------------------------------------- Sanofi-Aventis (France) 0.7 - -------------------------------------------------------------------------------- USG People (Netherlands) 0.7 - --------------------------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Investments in Securities." Investment products involve risks including possible loss of principal and fluctuation in value. Stocks of small- and mid-capitalization companies involve substantial risk. Historically, these stocks have experienced greater price volatility than stocks of larger companies, and they can be expected to do so in the future. International investing involves increased risk and volatility, not typically associated with domestic investing, due to potential political and economic instability, limited liquidity, volatile prices, lack of accounting, auditing, and financial reporting standards, changes in currency exchange rates, and differences in how trades are cleared and settled. Risks are particularly significant in emerging markets due to the dramatic pace of economic, social, and political changes. 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. - -------------------------------------------------------------------------------- 2 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND SNAPSHOT - -------------------------------------------------------------------------------- STYLE MATRIX - -------------------------------------------------------------------------------- [STYLE BOX OMITTED] Shading within the style matrix indicates areas in which the Fund generally invests. - -------------------------------------------------------------------------------- COUNTRY COMPOSITION - -------------------------------------------------------------------------------- Percentage of portfolio assets at April 30, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.] Japan 19.9% United Kingdom 12.9% France 7.8% Germany 7.0% Netherlands 6.5% Canada 5.9% Switzerland 5.0% Australia 4.2% Italy 3.2% Ireland 2.9% Sweden 2.7% Cash & Short-Term Securities 2.3% Spain 2.3% South Korea 2.1% Brazil 1.7% Hong Kong 1.7% Belgium 1.4% Finland 1.3% South Africa 1.0% Other* 8.2% * Includes Austria, Chile, China, Czechoslovia Federated Republic, Denmark, Greece, India, Indonesia, Luxembourg, Mexico, New Zealand, Norway, Russia, Singapore, Taiwan, and United States. - -------------------------------------------------------------------------------- 3 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON For the six-month period ended April 30, 2006 [BAR CHART OMITTED] 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 www.riversource.com/funds. (1) The Morgan Stanley Capital International (MSCI) EAFE Growth Index, an unmanaged index, is compiled from a composite of securities markets in Europe, Australia and the Far East. The index represents the growth half of the market capitalizations of each country index, determined by price/book value, from the standard MSCI country indices. The index covers the full range of developed, emerging and MSCI All Country indices, including Free indices where applicable. The Country Growth indices are aggregated into regional Growth indices to create the composite. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper International Multi-Cap Growth Funds Index includes the 10 largest international multi-cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 4 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS - --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y (INCEPTION DATES) (9/28/01) (9/28/01) (9/28/01) (3/4/04) (9/28/01) AFTER AFTER NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5) AT APRIL 30, 2006 - ------------------------------------------------------------------------------------------------------ 6 months* +27.07% +19.77% +26.47% +21.47% +26.62% +25.62% +27.32% +27.18% - ------------------------------------------------------------------------------------------------------ 1 year +39.17% +31.18% +37.93% +32.93% +38.11% +37.11% +39.88% +39.42% - ------------------------------------------------------------------------------------------------------ 3 years +31.22% +28.66% +30.26% +29.47% +30.26% +30.26% N/A +31.44% - ------------------------------------------------------------------------------------------------------ Since inception +16.72% +15.22% +15.82% +15.56% +15.81% +15.81% +24.28% +16.91% - ------------------------------------------------------------------------------------------------------ AT MARCH 31, 2006 - ------------------------------------------------------------------------------------------------------ 6 months* +17.74% +10.98% +17.33% +12.33% +17.32% +16.32% +17.92% +17.89% - ------------------------------------------------------------------------------------------------------ 1 year +29.44% +21.99% +28.49% +23.49% +28.48% +27.48% +30.03% +29.71% - ------------------------------------------------------------------------------------------------------ 3 years +32.78% +30.19% +31.80% +31.03% +31.79% +31.79% N/A +33.00% - ------------------------------------------------------------------------------------------------------ Since inception +15.87% +14.35% +14.98% +14.71% +14.98% +14.98% +22.59% +16.07% - ------------------------------------------------------------------------------------------------------
(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. * Not annualized. - -------------------------------------------------------------------------------- 5 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT PERFORMANCE SUMMARY RiverSource International Aggressive Growth Fund rose 27.07% (Class A shares, excluding sales charge) for the six months ended April 30, 2006, outperforming its benchmark, the Morgan Stanley Capital International EAFE Growth Index (MSCI EAFE Growth Index), which advanced 22.43%. The Fund also outpaced its peer group, as represented by the Lipper International Multi-Cap Growth Funds Index, which increased 26.84% for the period. RiverSource International Aggressive Growth Fund is managed by two independent money management firms that each invest a portion of Fund assets in growth stocks of international companies across all market capitalizations. On April 24, 2006, Principal Global Investors, LLC (Principal) replaced American Century Global Investment Management, Inc. (ACGIM) as subadviser to the Fund. Principal and Columbia Wanger Asset Management, L.P. (Columbia Wanger) each managed approximately 55% and 45% of the Fund's assets, respectively, as of April 30, 2006. Below, each subadviser discusses results and positioning for their portion of the Fund for the first half of the fiscal year. Q: What factors affected performance the most for your portion of the Fund for the six-month period ended April 30, 2006?* ACGIM: Our portion of the Fund's portfolio, which invests primarily in large growth companies, achieved strong performance during a period in which small companies outperformed large, and the value style of investing topped growth. Also during the period, many of the world's markets demonstrated their resiliency in the face of rising interest rates in the U.S. and Europe, and continued high energy prices. Against that backdrop, every sector in which our portion of the Fund was invested contributed to the portfolio's return, with our holdings in the financials sector, the portfolio's heaviest weighting, contributing most. Our stake in telecommunications services also outperformed, providing the second-largest contribution to performance. * ACGIM provided Fund commentary through their management tenure ended April 21, 2006. - -------------------------------------------------------------------------------- 6 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS > OUR INVESTMENTS IN COMPANIES IN JAPAN CONTRIBUTED MOST TO THE PORTFOLIO DURING THE PERIOD AND ALSO OUTPERFORMED THE MSCI EAFE GROWTH INDEX. -- ACGIM The gains in the financials sector, and for the portfolio overall, were mostly due to good stock selection. The portfolio's holdings among capital markets companies were the biggest source of excess performance, led by a large position in the United Kingdom's Man Group, an asset manager benefiting from strong investment results. The portfolio's holdings among commercial banks were the second-biggest source of strong performance, led by a large position in Italy's Banco Popolare di Verona, which advanced on better-than-anticipated fee and interest income. Our position in the telecommunications services sector made the second-largest contribution to performance, mostly due to effective security selection in the wireless telecommunication services industry. The portfolio benefited from a smaller-than-MSCI EAFE Growth Index position in Vodafone Group, which retreated during the period. We also gained from a position in America Movil, Latin America's biggest mobile phone telephone company, which saw its stock advance during the period. The materials sector detracted most from the portfolio's returns. The Fund's small position in the materials sector's metals and mining industry slowed the performance against the MSCI EAFE Growth Index. COLUMBIA WANGER: Our portion of the Fund posted the highest returns in continental Europe, where we had about 40% of our assets invested. Returns in this part of the world, in fact, exceeded our portion of the Fund's returns in Japan by a factor of three. Brazil, where less than 4% of our assets were invested, also generated relatively high returns. The Fund's energy-related investments continued to benefit from rising prices and increased demand. France's Vallourec and Luxembourg's Tenaris, both seamless tube manufacturers supplying to energy producers, were up - -------------------------------------------------------------------------------- 7 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS > THE FUND'S ENERGY-RELATED INVESTMENTS CONTINUED TO BENEFIT FROM RISING PRICES AND INCREASED DEMAND. -- COLUMBIA WANGER for the six-month period on continued strong earnings growth and contributed positively to performance. Indonesia's Perusahaan Gas Negara, a natural gas pipeline operator, rose as confidence in gas volumes and pricing over the next few years increased. Tullow Oil, an oil and gas producer based in the U.K., was also strong during the semiannual period and contributed to performance. Investor focus on Europe, in general, and European industrial stocks, in particular, also supported positive performance for our portion of the Fund. Signs of continued strength in the European economy pushed up the stock of Aalberts Industries, a Dutch manufacturer of flow control and heat treatment equipment. USG People, a provider of temporary staffing also based in the Netherlands, gained on strong earnings. In addition, Hexagon, a Swedish manufacturer of measurement equipment and polymers, was up during the period. Notable disappointments that detracted from performance included Hong Kong's Techtronic Industries, a power tools and motorized appliances manufacturer that fell on profit downgrades due to higher than expected costs following recent acquisitions. In Japan, Bank of Yokohama fell on general weakness in the financial sector. Finally, Jupiter Telecommunications, the largest cable service provider in Japan, fell as higher costs and taxes hindered company growth. Q: What changes did you make to your portion of the Fund and how is it currently positioned?* ACGIM: We invest in individual companies whose revenue and earnings are improving, and the portfolio's weight in a sector, industry or country is the result of our bottom-up process. Therefore, during the period, our process led us to increase our portion of the Fund's weighting in Japan to take * ACGIM provided Fund commentary through their management tenure ended April 21, 2006. - -------------------------------------------------------------------------------- 8 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS advantage of what we felt were attractive growth opportunities. A continuing economic recovery -- coupled with years of corporate restructuring and cost-cutting -- has changed the earnings picture in Japan significantly. Many Japanese companies are reporting strong earnings, which has played to our strength as bottom-up growth investors. Our investments in companies in Japan contributed most to the portfolio during the period and also outperformed the MSCI EAFE Growth Index. COLUMBIA WANGER: While our portion of the Fund held an average 6% weight in energy stocks throughout the reporting period, we did reduce this exposure during the period on the basis of valuations. We expect to continue increasing exposure to Japan, which constitutes an important part of our investment universe by market capitalization, and where we believe valuations are reasonable and fundamentals are improving. We also modestly increased the Fund's basic materials exposure. Q: How do you intend to manage your portion of the Fund in the coming months? COLUMBIA WANGER: Our portion of the Fund remains with a large exposure to Irish and Dutch stocks, owing to the superior business models at reasonable prices that we have found in these markets. These larger positions are funded mainly through the Fund's persistently small exposure in the United Kingdom, where industrials, in particular, loom as an uninspiring category of stocks. PRINCIPAL: Our international growth equity investment philosophy is based on the belief that superior stock selection and disciplined risk management provide consistent outperformance. We focus on companies with improving and sustainable business fundamentals, rising investor expectations and attractive relative valuations. Going forward, we will continue to focus our efforts on larger, more established international companies that exhibit growth potential. - -------------------------------------------------------------------------------- 9 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES RiverSource International Aggressive Growth Fund APRIL 30, 2006 (UNAUDITED) (Percentages represent value of investments compared to net assets) - -------------------------------------------------------------------------------- COMMON STOCKS (97.1%)(C) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) AUSTRALIA (4.2%) CAPITAL MARKETS (0.2%) Perpetual Trustees Australia 20,000 $1,062,061 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.3%) ABC Learning Centres 221,512 1,236,878 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.3%) Rinker Group 85,500 1,377,032 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.2%) Australian Stock Exchange 32,000 798,597 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.2%) WorleyParsons 57,300 848,851 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.2%) Woolworths 81,500 1,155,344 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.2%) Cochlear 21,000 842,355 - -------------------------------------------------------------------------------- INSURANCE (0.4%) Promina Group 183,500 790,426 QBE Insurance Group 63,450 1,078,783 ---------- Total 1,869,209 - -------------------------------------------------------------------------------- IT SERVICES (0.2%) Computershare 133,000 796,196 - -------------------------------------------------------------------------------- METALS & MINING (1.3%) BHP Billiton 134,531 2,994,553 Jubilee Mines 125,000 763,499 Rio Tinto 29,140 1,741,127 Sino Gold 72,600(b) 286,802 Zinifex 70,000 550,403 ---------- Total 6,336,384 - -------------------------------------------------------------------------------- REAL ESTATE (0.2%) Macquarie Goodman Group 197,000 770,754 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.3%) Billabong Intl 160,000 1,874,331 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.2%) Macquarie Airports 318,500 793,643 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) AUSTRIA (0.8%) BUILDING PRODUCTS (0.2%) Wienerberger 16,500 $ 872,277 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%) Telekom Austria 44,500 1,091,773 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.2%) Verbund 2,350 1,116,826 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.2%) OMV 11,700 813,334 - -------------------------------------------------------------------------------- BELGIUM (1.4%) BEVERAGES (0.2%) InBev 23,000 1,159,908 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) KBC Groep 13,000 1,507,814 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Eurofins Scientific 17,000(b) 1,070,474 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.2%) Option 25,870(b) 740,756 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.2%) Fortis 30,000 1,124,286 - -------------------------------------------------------------------------------- METALS & MINING (0.2%) Umicore 5,100 813,149 - -------------------------------------------------------------------------------- BRAZIL (1.5%) COMMERCIAL SERVICES & SUPPLIES (0.1%) American BankNote 80,000(b) 676,894 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.2%) Diagnosticos da America 32,000(b) 813,039 - -------------------------------------------------------------------------------- INSURANCE (0.2%) Porto Seguro 54,900 1,115,896 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.3%) Suzano Bahia Sul Papel e Celulose 188,700 1,336,097 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) BRAZIL (CONT.) PERSONAL PRODUCTS (0.5%) Natura Cosmeticos 140,000 $1,791,946 - -------------------------------------------------------------------------------- ROAD & RAIL (0.2%) All America Latina Logistica Unit 15,000 949,257 Localiza Rent A Car 5,300 111,793 ---------- Total 1,061,050 - -------------------------------------------------------------------------------- CANADA (5.9%) COMMERCIAL BANKS (0.3%) Royal Bank of Canada 37,500 1,604,651 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.9%) Ensign Energy Services 20,600 863,984 Precision Drilling Trust Unit 22,800 809,624 ShawCor Cl A 67,000 1,198,569 Trican Well Service 24,500(b) 1,187,527 ---------- Total 4,059,704 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.4%) Alimentation Couche-Tard Series B 40,000 916,279 Van Houtte 47,000 816,825 ---------- Total 1,733,104 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (--%) Four Seasons Hotels 2,000 108,040 - -------------------------------------------------------------------------------- INSURANCE (0.1%) ING Canada 11,400 613,744 - -------------------------------------------------------------------------------- MACHINERY (0.1%) RailPower Technologies 79,500(b) 314,302 - -------------------------------------------------------------------------------- MEDIA (0.4%) Alliance Atlantis Communications Series B 53,000(b) 1,690,027 - -------------------------------------------------------------------------------- METALS & MINING (1.2%) Barrick Gold 24,500 745,081 Falconbridge 25,000 995,080 IPSCO 9,000 928,819 Ivanhoe Mines 60,000(b) 584,973 Kinross Gold 75,000(b) 915,698 Major Drilling Group Intl 37,000(b) 843,918 Northern Orion Resources 145,000(b) 750,939 ---------- Total 5,764,508 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) CANADA (CONT.) OIL, GAS & CONSUMABLE FUELS (1.7%) Husky Energy 19,500 $1,147,674 Imperial Oil 11,400 1,238,705 Nexen 18,500 1,081,042 Suncor Energy 22,500 1,926,789 Talisman Energy 45,400 2,564,004 ---------- Total 7,958,214 - -------------------------------------------------------------------------------- ROAD & RAIL (0.2%) Canadian Natl Railway 25,000 1,120,975 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.4%) RONA 80,000(b) 1,650,089 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.2%) Gildan Activewear 21,600(b) 1,034,598 - -------------------------------------------------------------------------------- CHILE (0.5%) CHEMICALS (0.2%) Sociedad Quimica y Minera de Chile ADR 10,000 1,162,500 - -------------------------------------------------------------------------------- METALS & MINING (0.2%) Antofagasta 19,000 815,579 - -------------------------------------------------------------------------------- CHINA (0.1%) COMMUNICATIONS EQUIPMENT Foxconn Intl Holdings 319,000(b) 687,136 - -------------------------------------------------------------------------------- CZECHOSLOVAKIA FEDERATED REPUBLIC (0.3%) COMMERCIAL BANKS Komercni Banka 8,500 1,347,651 - -------------------------------------------------------------------------------- DENMARK (0.2%) CHEMICALS Novozymes Series B 13,600 1,061,404 - -------------------------------------------------------------------------------- FINLAND (1.3%) COMMUNICATIONS EQUIPMENT (0.5%) Nokia 125,000 2,846,034 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.3%) Jaakko Poyry Group 104,000 1,227,897 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.2%) Fortum 33,600 848,508 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) FINLAND (CONT.) INSURANCE (0.2%) Sampo Series A 35,500 $ 732,596 - -------------------------------------------------------------------------------- METALS & MINING (0.1%) Rautaruukki 15,300 536,524 - -------------------------------------------------------------------------------- FRANCE (7.9%) AIR FREIGHT & LOGISTICS (0.2%) Groupe Norbert Dentressangle 15,000 1,134,314 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) Societe Generale 10,823 1,653,273 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Bacou-Dalloz 8,000 1,033,339 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.7%) Ciments Francais 12,500 2,114,422 Imerys 12,600 1,082,357 ---------- Total 3,196,779 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.5%) ALSTOM 11,220(b) 1,016,179 Carbone Lorraine 15,000 865,446 Legrand 8,900(b) 260,454 ---------- Total 2,142,079 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.3%) Groupe Danone 11,940 1,489,544 - -------------------------------------------------------------------------------- GAS UTILITIES (0.4%) Rubis 22,000 1,734,425 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.3%) Essilor Intl 13,700 1,373,854 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.2%) Pierre & Vacances 11,000 1,057,305 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.2%) Kaufman & Broad 16,400 972,287 - -------------------------------------------------------------------------------- INSURANCE (0.6%) APRIL Group 37,800 2,009,750 Euler Hermes 6,450 802,213 ---------- Total 2,811,963 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.4%) Iliad 20,100 2,066,362 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.2%) Trigano 20,000 1,150,144 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) FRANCE (CONT.) MACHINERY (0.5%) Vallourec 1,845 $2,397,101 - -------------------------------------------------------------------------------- MEDIA (0.5%) M6-Metropole Television 29,100 907,391 Vivendi 38,110 1,391,202 ---------- Total 2,298,593 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.3%) Neopost 12,900 1,458,790 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.0%) Total 15,890 4,393,567 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.8%) Sanofi-Aventis 36,530 3,444,401 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.2%) Soitec 33,000(b) 1,076,870 - -------------------------------------------------------------------------------- GERMANY (6.2%) AUTO COMPONENTS (0.3%) Continental 10,120 1,204,668 - -------------------------------------------------------------------------------- AUTOMOBILES (0.2%) BMW 17,950 976,102 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.4%) Deutsche Bank 12,000 1,473,113 Deutsche Beteiligungs 15,000 323,549 ---------- Total 1,796,662 - -------------------------------------------------------------------------------- CHEMICALS (0.2%) K+S 12,500 1,128,953 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) DEPFA Bank 93,500 1,754,960 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) GFK 22,800 1,044,560 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.5%) Wincor Nixdorf 15,400 2,214,513 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.1%) Bilfinger Berger 10,000 636,881 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.6%) Deutsche Boerse 13,800 1,995,401 Grenkeleasing 14,300 1,091,300 ---------- Total 3,086,701 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) GERMANY (CONT.) ELECTRIC UTILITIES (0.4%) E.ON 16,500 $2,009,088 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.5%) Rhon-Klinikum 50,100 2,331,938 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.3%) Siemens 15,350 1,452,187 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Takkt 49,000 766,427 - -------------------------------------------------------------------------------- MACHINERY (0.4%) MAN 14,500 1,099,064 Vossloh 18,000 947,488 ---------- Total 2,046,552 - -------------------------------------------------------------------------------- MEDIA (0.3%) CTS Eventim 44,000 1,526,294 - -------------------------------------------------------------------------------- METALS & MINING (0.2%) Salzgitter 10,300 817,223 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (0.2%) RWE 8,700 754,146 - -------------------------------------------------------------------------------- SOFTWARE (0.5%) SAP 9,800 2,141,050 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.3%) Adidas-Salomon 6,370 1,344,677 - -------------------------------------------------------------------------------- GREECE (0.6%) COMMERCIAL BANKS (0.2%) Piraeus Bank 23,000 724,725 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.3%) Intralot-Integrated Lottery Systems & Services 50,000 1,614,592 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.1%) Cosmote Mobile Telecommunications 26,500 649,823 - -------------------------------------------------------------------------------- HONG KONG (1.7%) DIVERSIFIED FINANCIAL SERVICES (0.4%) Hong Kong Exchanges and Clearing 280,000 2,013,440 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.3%) Global Bio-Chem Technology Group 2,500,000 1,305,963 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) HONG KONG (CONT.) HOUSEHOLD DURABLES (0.3%) Techtronic Inds 750,000 $1,257,594 - -------------------------------------------------------------------------------- REAL ESTATE (0.6%) K Wah Intl Holdings 2,215,000 671,394 Sino Land 438,000 728,785 Swire Pacific Series A 89,000 910,331 Wheelock & Co 330,000 612,932 ---------- Total 2,923,442 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.1%) GOME Electrical Appliances Holding 639,000 552,219 - -------------------------------------------------------------------------------- INDIA (0.4%) THRIFTS & MORTGAGE FINANCE Housing Development Finance 60,000 1,738,275 - -------------------------------------------------------------------------------- INDONESIA (0.3%) GAS UTILITIES Perusahaan Gas Negara 1,000,000 1,413,911 - -------------------------------------------------------------------------------- IRELAND (2.9%) BEVERAGES (0.2%) C&C Group 130,000 1,008,489 - -------------------------------------------------------------------------------- BUILDING PRODUCTS (0.2%) Kingspan Group 65,000 1,074,082 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.8%) Anglo Irish Bank 132,200 2,179,515 Bank of Ireland 100,000 1,874,440 ---------- Total 4,053,955 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.6%) IAWS Group 147,000 2,616,358 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.4%) United Drug 409,526 1,931,994 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.2%) Paddy Power 42,000 747,001 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.5%) Grafton Group Unit 160,000(b) 2,236,210 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) ITALY (3.2%) AUTOMOBILES (0.1%) Ducati Motor Holding 300,000(b) $ 368,013 - -------------------------------------------------------------------------------- BEVERAGES (0.2%) Davide Campari-Milano 113,400 1,108,581 - -------------------------------------------------------------------------------- BUILDING PRODUCTS (--%) GranitiFiandre 12,000 129,420 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.2%) Banca Monte dei Paschi Siena 127,000 752,129 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.2%) Cementir 112,000 905,584 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.3%) Banca Italease 21,000 1,276,789 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.2%) Terna 345,000 947,611 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) SABAF 38,500 1,144,651 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.2%) Amplifon 9,000 827,604 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.3%) Compagnie Industriali Riunite 445,200 1,403,938 - -------------------------------------------------------------------------------- INSURANCE (0.3%) Assicurazioni Generali 35,500 1,330,405 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.7%) Eni 104,320 3,184,460 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.1%) Recordati 83,500 648,814 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.2%) Luxottica Group 31,820 946,448 - -------------------------------------------------------------------------------- JAPAN (20.0%) AIR FREIGHT & LOGISTICS (0.2%) Kintetsu World Express 17,800 438,551 Yusen Air & Sea Service 24,200 654,686 ----------- Total 1,093,237 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) JAPAN (CONT.) AUTO COMPONENTS (1.2%) Aisin Seiki 25,400 $ 954,870 DENSO 30,000 1,177,865 FCC 26,000 576,636 Keihin 31,000 923,057 NGK Spark Plug 27,000 592,885 Nippon Seiki 39,000 847,826 ----------- Total 5,073,139 - -------------------------------------------------------------------------------- AUTOMOBILES (0.8%) Toyota Motor 63,700 3,726,325 - -------------------------------------------------------------------------------- BEVERAGES (0.5%) Ito En 39,000 1,435,310 KIRIN Beverage 31,800 846,324 ----------- Total 2,281,634 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.8%) Nomura Holdings 71,300 1,612,626 RISA Partners 170 901,888 SPARX Asset Management 1,075 1,388,011 ----------- Total 3,902,525 - -------------------------------------------------------------------------------- CHEMICALS (1.3%) Daicel Chemical Inds 96,000 824,664 Japan Pure Chemical 100 772,069 JSR 46,000 1,418,182 Kansai Paint 117,000 1,155,099 Shin-Etsu Chemical 29,100 1,681,844 ----------- Total 5,851,858 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (2.6%) Bank of Fukuoka 96,000 827,194 Chiba Bank 130,000 1,177,251 Hiroshima Bank 139,800 895,162 Mitsubishi UFJ Financial Group 258 4,056,389 Mizuho Financial Group 200 1,705,753 Resona Holdings 180(b) 613,439 Sumitomo Mitsui Financial Group 140 1,537,110 Sumitomo Trust & Banking 83,000 883,584 ----------- Total 11,695,882 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.7%) Meitec 24,000 817,918 Park24 48,000 1,737,023 SATO 39,000 947,167 ----------- Total 3,502,108 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) JAPAN (CONT.) CONSTRUCTION & ENGINEERING (0.2%) Chiyoda 34,000 $ 764,515 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.2%) Taiheiyo Cement 206,000 1,002,407 - -------------------------------------------------------------------------------- CONSUMER FINANCE (0.3%) ORIX 5,250 1,577,075 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.6%) Shoei 21,100 706,113 Sumitomo Electric Inds 33,000 524,058 Ushio 75,000 1,729,249 ---------- Total 2,959,420 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.8%) Hoya 55,500 2,247,300 Murata Mfg 13,900 1,012,130 TOYO 44,600 671,448 ---------- Total 3,930,878 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.4%) AEON 52,800 1,314,783 Ain Pharmaciez 29,000 603,689 ---------- Total 1,918,472 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.2%) T. Hasegawa 60,000 971,278 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.6%) Asahi Pretec 20,500 741,853 Hogy Medical 26,700 1,411,805 Olympus 29,000 830,391 ---------- Total 2,984,049 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.1%) Nagaileben 21,300 585,586 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.9%) Daito Trust Construction 47,300 2,459,518 Kenwood 382,000 946,192 Touei Housing 31,500 687,549 ---------- Total 4,093,259 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.2%) Unicharm 14,700 843,136 - -------------------------------------------------------------------------------- IT SERVICES (0.4%) CSK Holdings 16,500 791,304 NTT Data 190 879,491 ---------- Total 1,670,795 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) JAPAN (CONT.) LEISURE EQUIPMENT & PRODUCTS (0.6%) Sega Sammy Holdings 26,900 $1,072,692 Shimano 49,000 1,613,966 ---------- Total 2,686,658 - -------------------------------------------------------------------------------- MACHINERY (0.6%) Hitachi Construction Machinery 25,700 702,038 Komatsu 73,000 1,561,308 Kubota 68,000 768,696 ---------- Total 3,032,042 - -------------------------------------------------------------------------------- MEDIA (0.5%) Jupiter Telecommunications 3,100(b) 2,257,268 - -------------------------------------------------------------------------------- METALS & MINING (0.2%) Sumitomo Metal Mining 76,000 1,104,787 - -------------------------------------------------------------------------------- MULTILINE RETAIL (0.1%) Mitsukoshi 117,000 680,316 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.6%) Canon 38,000 2,907,159 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.2%) Japan Petroleum Exploration 10,300 753,614 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.9%) Rohto Pharmaceutical 84,000 1,022,609 Takeda Pharmaceutical 37,000 2,261,923 Tsumura 28,000 745,191 ---------- Total 4,029,723 - -------------------------------------------------------------------------------- REAL ESTATE (0.9%) AEON Mall 25,000 1,251,646 ARDEPRO 320 514,361 Creed 130 703,382 Kenedix 250 1,288,976 KK DaVinci Advisors 525(b) 585,639 ---------- Total 4,344,004 - -------------------------------------------------------------------------------- ROAD & RAIL (0.5%) Central Japan Railway 115 1,181,819 East Japan Railway 145 1,132,235 ---------- Total 2,314,054 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.3%) Shinko Electric Inds 22,500 616,601 Tokyo Electron 12,500 900,307 ---------- Total 1,516,908 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) JAPAN (CONT.) SPECIALTY RETAIL (0.5%) Fast Retailing 12,000 $1,140,448 USS 18,800 1,406,905 ---------- Total 2,547,353 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.5%) ITOCHU 133,000 1,207,923 Mitsubishi 50,400 1,219,605 ---------- Total 2,427,528 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.1%) Kamigumi 55,000 438,647 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.5%) KDDI 146 900,237 NTT DoCoMo 920 1,373,737 ---------- Total 2,273,974 - -------------------------------------------------------------------------------- LUXEMBOURG (0.6%) ENERGY EQUIPMENT & SERVICES (0.2%) Tenaris ADR 19,000 872,100 - -------------------------------------------------------------------------------- MEDIA (0.4%) SES Global FDR 116,600 1,910,559 - -------------------------------------------------------------------------------- MEXICO (0.8%) HOUSEHOLD DURABLES (0.5%) Consorcio ARA 240,000 1,269,631 Urbi Desarrollos Urbanos 100,000(b) 818,149 ---------- Total 2,087,780 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.3%) Grupo Aeroportuario del Pacifico ADR 3,000 99,840 Grupo Aeroportuario del Sureste ADR 34,300 1,329,812 ---------- Total 1,429,652 - -------------------------------------------------------------------------------- NETHERLANDS (6.6%) COMMERCIAL BANKS (0.3%) ABN AMRO Holding 49,000 1,464,246 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.7%) USG People 37,800 3,256,607 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.5%) Imtech 22,100 1,216,551 Koninklijke BAM Groep 8,800 945,192 ---------- Total 2,161,743 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) NETHERLANDS (CONT.) DIVERSIFIED FINANCIAL SERVICES (0.4%) ING Groep 44,418 $1,807,491 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.8%) Fugro 92,096 3,866,134 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.3%) Sligro Food Group 24,557 1,289,229 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.4%) OPG Groep 19,000 1,799,892 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.6%) Aalberts Inds 31,710 2,583,935 - -------------------------------------------------------------------------------- MEDIA (0.2%) Wolters Kluwer 32,000 833,533 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.3%) Royal Dutch Shell Series A 113,800 3,892,968 Royal Dutch Shell Series B 69,300 2,478,087 ---------- Total 6,371,055 - -------------------------------------------------------------------------------- SOFTWARE (0.3%) Unit 4 Agresso 54,000(b) 1,215,863 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.3%) Ten Cate 55,428 1,615,080 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.2%) Univar 17,000 946,100 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.3%) Smit Intl 17,800 1,580,686 - -------------------------------------------------------------------------------- NEW ZEALAND (0.4%) HOTELS, RESTAURANTS & LEISURE Sky City Entertainment Group 513,864 1,780,479 - -------------------------------------------------------------------------------- NORWAY (1.0%) COMMERCIAL BANKS (0.2%) DNB NOR 76,000 1,056,603 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Tomra Systems 75,000 746,963 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.1%) Telenor 57,860 672,692 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.2%) Aker Kvaerner ASA 8,072 787,525 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) NORWAY (CONT.) FOOD PRODUCTS (0.3%) Cermaq 47,000(b) $ 691,637 Pan Fish 615,000(b) 626,010 ---------- Total 1,317,647 - -------------------------------------------------------------------------------- RUSSIA (0.7%) IT SERVICES (0.4%) RBC Information Systems ADR 45,250(b) 1,683,300 - -------------------------------------------------------------------------------- METALS & MINING (0.3%) Mechel ADR 21,000 569,100 Novolipetsk Steel GDR 37,500(b) 825,375 ---------- Total 1,394,475 - -------------------------------------------------------------------------------- SINGAPORE (0.5%) AIRLINES (0.2%) Singapore Airlines 79,000 709,731 - -------------------------------------------------------------------------------- MACHINERY (0.1%) MMI Holdings 1,550,000 666,835 - -------------------------------------------------------------------------------- ROAD & RAIL (0.2%) ComfortDelGro 770,000 784,322 - -------------------------------------------------------------------------------- SOUTH AFRICA (1.0%) METALS & MINING (0.7%) Anglo American 30,000 1,277,362 Impala Platinum Holdings 8,000 1,521,648 Randgold Resources ADR 15,800(b) 384,572 ---------- Total 3,183,582 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.3%) Edgars Consolidated Stores 250,000 1,585,050 - -------------------------------------------------------------------------------- SOUTH KOREA (2.1%) AUTO COMPONENTS (0.3%) Hyundai Mobis 14,000 1,236,823 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) Industrial Bank of Korea 33,000 664,970 Woori Finance Holdings 45,000 1,016,544 ---------- Total 1,681,514 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.2%) Daewoo Engineering & Construction 57,000 985,364 - -------------------------------------------------------------------------------- DISTRIBUTORS (0.1%) Lotte Shopping GDR 28,000(b,e) 584,816 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) SOUTH KOREA (CONT.) INTERNET SOFTWARE & SERVICES (0.4%) Neowiz 8,650 $ 968,756 NHN 2,700(b) 959,275 ---------- Total 1,928,031 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.4%) Samsung Electronics 3,220 2,199,257 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.3%) LG Telecom 105,000(b) 1,180,401 - -------------------------------------------------------------------------------- SPAIN (2.3%) COMMERCIAL BANKS (0.9%) Banco Bilbao Vizcaya Argentaria 120,000 2,650,453 Banco Santander Central Hispano 113,500 1,759,546 Bankinter 6,300 437,075 ---------- Total 4,847,074 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.3%) ACS Actividades de Construccion y Servicios 30,800 1,278,590 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.6%) Iberdrola 47,000 1,530,759 Red Electrica de Espana 33,800 1,178,867 ---------- Total 2,709,626 - -------------------------------------------------------------------------------- REAL ESTATE (0.2%) Inmobiliaria Urbis 32,500 789,163 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.3%) Inditex 31,510 1,281,831 - -------------------------------------------------------------------------------- SWEDEN (2.7%) COMMERCIAL BANKS (0.4%) Nordea Bank 98,500 1,270,747 Svenska Handelsbanken Series A 26,700 768,892 ---------- Total 2,039,639 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.3%) Telefonaktiebolaget LM Ericsson Series B 382,000 1,362,725 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.1%) Sweco Series B 17,000 548,581 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) TELE2 Series B 120,000 1,523,610 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) SWEDEN (CONT.) HEALTH CARE PROVIDERS & SERVICES (0.2%) Gambro Series A 64,700 $ 973,442 - -------------------------------------------------------------------------------- MACHINERY (0.9%) Atlas Copco Series A 26,800 793,666 Hexagon 18,904(b) 702,684 Hexagon Series B 63,700 2,367,805 ---------- Total 3,864,155 - -------------------------------------------------------------------------------- MEDIA (0.2%) Modern Times Group Series B 18,000(b) 990,142 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.3%) Nobia 44,000 1,392,898 - -------------------------------------------------------------------------------- SWITZERLAND (4.9%) BUILDING PRODUCTS (0.4%) Geberit 1,675 1,954,301 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.6%) UBS 23,266 2,757,702 - -------------------------------------------------------------------------------- CHEMICALS (0.6%) Givaudan 1,200 1,007,257 Sika 1,350(b) 1,578,374 ---------- Total 2,585,631 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.1%) Logitech Intl 10,000(b) 415,256 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.2%) BKW FMB Energie 7,300 753,427 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.6%) Nestle 9,450 2,882,166 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.8%) Nobel Biocare Holding 3,700 914,409 Phonak Holding 17,500 1,086,518 Synthes 14,500 1,800,517 ---------- Total 3,801,444 - -------------------------------------------------------------------------------- MACHINERY (0.2%) Schindler Holding 16,500 904,693 - -------------------------------------------------------------------------------- MARINE (0.4%) Kuehne & Nagel Intl 5,250 1,903,876 - -------------------------------------------------------------------------------- PHARMACEUTICALS (1.1%) Novartis 48,610 2,788,745 Roche Holding 18,248 2,805,913 ---------- Total 5,594,658 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) TAIWAN (1.0%) COMPUTERS & PERIPHERALS (0.2%) Advantech 400,000 $1,097,179 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) Phoenixtec Power 900,000 945,141 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%) Wah Lee Industrial 400,000 919,122 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.2%) Novatek Microelectronics 150,000 893,417 - -------------------------------------------------------------------------------- SOFTWARE (0.2%) Springsoft 490,716 781,454 - -------------------------------------------------------------------------------- UNITED KINGDOM (13.0%) AEROSPACE & DEFENSE (0.1%) Chemring Group 11,300 237,170 - -------------------------------------------------------------------------------- AIRLINES (0.1%) British Airways 89,000(b) 545,705 - -------------------------------------------------------------------------------- BEVERAGES (0.5%) Diageo 79,310 1,308,827 SABMiller 47,000 991,601 ---------- Total 2,300,428 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.3%) Man Group 28,100 1,294,844 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) Barclays 99,000 1,236,607 HSBC Holdings 40,000 691,106 ---------- Total 1,927,713 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.6%) Michael Page Intl 170,500 1,190,773 RPS Group 420,000 1,516,422 ---------- Total 2,707,195 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.2%) CSR 35,000(b) 771,614 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.1%) Keller Group 65,000 592,637 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.1%) Viridian Group 36,000 631,186 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%) Wolfson Microelectronics 102,000(b) 876,046 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) UNITED KINGDOM (CONT.) ENERGY EQUIPMENT & SERVICES (0.3%) Expro Intl Group 95,000 $ 1,285,385 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.2%) Unilever 91,500 971,903 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.4%) Enterprise Inns 55,500 944,237 Punch Taverns 53,000 846,614 ------------ Total 1,790,851 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.2%) Persimmon 44,500 1,063,009 - -------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.3%) Reckitt Benckiser 40,161 1,463,939 - -------------------------------------------------------------------------------- MACHINERY (0.2%) Charter 63,700(b) 928,094 - -------------------------------------------------------------------------------- MEDIA (0.8%) Bloomsbury Publishing 120,000 758,758 Taylor Nelson Sofres 150,000 708,430 Ulster Television 120,000 904,821 WPP Group 116,000 1,432,031 ------------ Total 3,804,040 - -------------------------------------------------------------------------------- METALS & MINING (0.5%) BHP Billiton 77,500 1,595,516 Rio Tinto 14,600 802,953 ------------ Total 2,398,469 - -------------------------------------------------------------------------------- MULTILINE RETAIL (0.3%) Marks & Spencer Group 138,610 1,479,883 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (0.2%) Intl Power 178,500 969,160 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.3%) BG Group 127,670 1,715,782 BP 367,985 4,539,453 Tullow Oil 538,000 4,036,992 ------------ Total 10,292,227 - -------------------------------------------------------------------------------- PHARMACEUTICALS (1.9%) AstraZeneca 58,340 3,223,404 GlaxoSmithKline 204,900 5,813,762 ------------ Total 9,037,166 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - --------------------------------------------------------------------------------
ISSUER SHARES VALUE(A) UNITED KINGDOM (CONT.) REAL ESTATE (0.2%) Workspace Group 175,000 $ 1,033,127 - -------------------------------------------------------------------------------- ROAD & RAIL (0.3%) Northgate 66,500 1,333,890 - -------------------------------------------------------------------------------- SOFTWARE (0.2%) Sage Group 175,000 797,781 - -------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.0%) Kensington Group 40,000 825,681 Northern Rock 100,000 1,932,910 Paragon Group of Companies 160,000 2,077,330 ------------ Total 4,835,921 - -------------------------------------------------------------------------------- TOBACCO (0.7%) British American Tobacco 67,040 1,713,909 Imperial Tobacco Group 50,500 1,569,158 ------------ Total 3,283,067 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.2%) Wolseley 46,500 1,164,204 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.2%) BBA Group 200,000 957,337 - -------------------------------------------------------------------------------- UNITED STATES (0.2%) FOOD & STAPLES RETAILING Central European Distribution 19,000(b) 779,950 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $367,989,366) $454,883,623 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PREFERRED STOCKS (1.0%)(C) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(A) UNITED KINGDOM (CONT.) BRAZIL (0.2%) Caemi Mineracao e Metalurgica 585,000 $ 1,076,894 - -------------------------------------------------------------------------------- GERMANY (0.8%) Porsche 2,580 2,572,612 Hugo Boss 25,000 1,182,562 ------------ Total 3,755,174 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost: $3,199,059) $ 4,832,068 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 19 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHORT-TERM SECURITIES (2.3%) - --------------------------------------------------------------------------------
ISSUER EFFECTIVE AMOUNT VALUE(A) YIELD PAYABLE AT MATURITY COMMERCIAL PAPER Gemini Securitization 05-01-06 4.82% $5,400,000(d) $ 5,397,831 General Electric Capital 05-01-06 4.83 5,600,000 5,597,746 - ------------------------------------------------------------------ TOTAL SHORT-TERM SECURITIES (Cost: $10,997,051) $ 10,995,577 - ------------------------------------------------------------------ TOTAL INVESTMENTS IN SECURITIES (Cost: $382,185,476)(f) $470,711,268 ==================================================================
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. (D) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2006, the value of these securities amounted to $5,397,831 or 1.2% of net assets. (E) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. 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 April 30, 2006, the value of these securities amounted to $584,816 or 0.1% of net assets. (F) At April 30, 2006, the cost of securities for federal income tax purposes was approximately $382,185,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 91,718,000 Unrealized depreciation (3,192,000) -------------------------------------------------------------------------- Net unrealized appreciation $ 88,526,000 -------------------------------------------------------------------------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (I) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (II) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (III) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (IV) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 20 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RiverSource International Aggressive Growth Fund APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------- ASSETS - --------------------------------------------------------------------------------------------------------------- Investments in securities, at value (Note 1) (identified cost $382,185,476) $470,711,268 Cash in bank on demand deposit 1,268,224 Foreign currency holdings (identified cost $3,805,968) (Note 1) 3,843,868 Capital shares receivable 235,735 Dividends and accrued interest receivable 927,074 Receivable for investment securities sold 6,722,220 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 138,521 - --------------------------------------------------------------------------------------------------------------- Total assets 483,846,910 - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------------------------------------------------------- Capital shares payable 57,173 Payable for investment securities purchased 15,047,771 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 55,814 Accrued investment management services fee 12,637 Accrued distribution fee 4,047 Accrued service fee 2 Accrued transfer agency fee 1,213 Accrued administrative services fee 1,023 Other accrued expenses 114,832 - --------------------------------------------------------------------------------------------------------------- Total liabilities 15,294,512 - --------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $468,552,398 =============================================================================================================== - --------------------------------------------------------------------------------------------------------------- REPRESENTED BY - --------------------------------------------------------------------------------------------------------------- Capital stock -- $.01 par value (Note 1) $ 499,384 Additional paid-in capital 312,259,694 Excess of distributions over net investment income (2,153,789) Accumulated net realized gain (loss) 69,357,133 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 88,589,976 - --------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $468,552,398 =============================================================================================================== Net assets applicable to outstanding shares: Class A $280,608,235 Class B $ 73,718,050 Class C $ 4,443,724 Class I $109,036,159 Class Y $ 746,230 Net asset value per share of outstanding capital stock: Class A shares 29,824,711 $ 9.41 Class B shares 8,061,707 $ 9.14 Class C shares 485,987 $ 9.14 Class I shares 11,487,021 $ 9.49 Class Y shares 78,928 $ 9.45 - ---------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS RiverSource International Aggressive Growth Fund SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
- ----------------------------------------------------------------------------------------------- INVESTMENT INCOME - ----------------------------------------------------------------------------------------------- Income: Dividends $ 3,220,069 Interest 208,414 Fee income from securities lending (Note 3) 2,399 Less foreign taxes withheld (300,996) - ----------------------------------------------------------------------------------------------- Total income 3,129,886 - ----------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 1,894,030 Distribution fee Class A 302,669 Class B 323,543 Class C 18,742 Transfer agency fee 313,396 Incremental transfer agency fee Class A 24,998 Class B 13,042 Class C 694 Service fee -- Class Y 299 Administrative services fees and expenses 160,897 Compensation of board members 5,475 Custodian fees 123,529 Printing and postage 62,590 Registration fees 37,159 Audit fees 11,000 Other 21,015 - ----------------------------------------------------------------------------------------------- Total expenses 3,313,078 Earnings credits on cash balances (Note 2) (4,907) - ----------------------------------------------------------------------------------------------- Total net expenses 3,308,171 Investment income (loss) -- net (178,285) - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET - ----------------------------------------------------------------------------------------------- Net realized gain (loss) on: Security transactions (Note 3) 72,278,235 Foreign currency transactions (142,503) - ----------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 72,135,732 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,668,729 - ----------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 100,804,461 - ----------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 100,626,176 ===============================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS RiverSource International Aggressive Growth Fund
APRIL 30, 2006 OCT. 31, 2005 SIX MONTHS ENDED YEAR ENDED (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS AND DISTRIBUTIONS - ---------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net $ (178,285) $ 992,981 Net realized gain (loss) on investments 72,135,732 26,778,405 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,668,729 21,638,580 - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 100,626,176 49,409,966 - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net Investment income Class A (1,844,615) (231,176) Class B (82,729) (91,817) Class C (4,225) (498) Class I (1,116,152) -- Class Y (5,241) -- Net realized gain Class A (16,961,181) (3,059,531) Class B (4,727,673) (910,373) Class C (266,313) (55,085) Class I (6,858,477) (511,221) Class Y (38,745) (3,753) - ---------------------------------------------------------------------------------------------------------------------- Total distributions (31,905,351) (4,863,454) - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) - ---------------------------------------------------------------------------------------------------------------------- Proceeds from sales Class A shares (Note 2) 33,279,139 70,760,178 Class B shares 8,930,606 18,857,566 Class C shares 768,231 804,929 Class I shares 17,988,287 58,977,112 Class Y shares 151,205 293,093 Reinvestment of distributions at net asset value Class A shares 18,411,163 3,224,329 Class B shares 4,739,718 897,535 Class C shares 266,034 54,174 Class I shares 7,973,544 602,799 Class Y shares 42,563 3,942 Payments for redemptions Class A shares (27,365,402) (38,010,772) Class B shares (Note 2) (8,500,085) (13,707,069) Class C shares (Note 2) (484,137) (796,488) Class I shares (16,321,528) (5,338,245) Class Y shares (65,839) (18,603) - ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 39,813,499 96,604,480 - ---------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 108,534,324 141,150,992 Net assets at beginning of period 360,018,074 218,867,082 - ---------------------------------------------------------------------------------------------------------------------- Net assets at end of period $468,552,398 $360,018,074 ====================================================================================================================== Undistributed (excess of distributions over) net investment income $ (2,153,789) $ 1,077,458 - ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements - -------------------------------------------------------------------------------- 23 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS RiverSource International Aggressive Growth Fund (Unaudited as to April 30, 2006) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of RiverSource International Managers Series, Inc. (formerly AXP Partners International Series, Inc.) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource International Managers 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 foreign issuers that offer strong growth potential. 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. 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 April 30, 2006, Ameriprise Financial, Inc. (Ameriprise Financial) and the affiliated funds-to-funds owned 100% of Class I shares, which represents 23.27% 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. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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 - -------------------------------------------------------------------------------- 24 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. - -------------------------------------------------------------------------------- 25 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2006, foreign currency holdings consisted of multiple denominations. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete its contract obligations. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. - -------------------------------------------------------------------------------- 26 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. 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 Investment, LLC (the Investment Manager) determines which securities will be purchased, held or sold. The management fee is a percentage of the Fund's average daily net assets that declines from 1.00% to 0.875% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper International Multi-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. The adjustment decreased the fee by $144,394 for the six months ended April 30, 2006. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. 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. The Investment Manager has Subadvisory Agreements with Columbia Wanger Asset Management, L.P. and Principal Global Investors, LLC (Principal). Effective April 24, 2006, Principal replaced American Century Global Investment Management, Inc. as subadviser to the Fund. New investments in the Fund, net of any redemptions, are allocated in accordance with the Investment Manager's determination of the allocation that is in the best interests of the Fund's shareholders. Each subadviser's proportionate share of investments in the Fund will vary due to market fluctuations. - -------------------------------------------------------------------------------- 27 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Under a separate Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: o Class A $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. The Transfer Agent charges an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $376,838 for Class A, $54,888 for Class B and $155 for Class C for the six months ended April 30, 2006. During the six months ended April 30, 2006, the Fund's custodian and transfer agency fees were reduced by $4,907 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $334,987,435 and $327,858,477, respectively, for the six months ended April 30, 2006. Realized gains and losses are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with the subadvisers were $8,189 for the six months ended April 30, 2006. Income from securities lending amounted to $2,399 for the six months ended April 30, 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. - -------------------------------------------------------------------------------- 28 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2006 CLASS A CLASS B CLASS C CLASS I CLASS Y - ------------------------------------------------------------------------------------------------------------------- Sold 3,886,672 1,071,777 92,471 2,107,561 17,611 Issued for reinvested distributions 2,307,163 610,002 34,238 992,969 5,313 Redeemed (3,189,622) (1,017,909) (58,097) (1,768,543) (7,733) - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) 3,004,213 663,870 68,612 1,331,987 15,191 - ------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - ------------------------------------------------------------------------------------------------------------------- Sold 9,296,137 2,544,007 108,973 7,713,932 37,367 Issued for reinvested distributions 443,511 126,235 7,620 82,350 540 Redeemed (4,981,355) (1,823,857) (107,794) (695,565) (2,507) - ------------------------------------------------------------------------------------------------------------------- Net increase (decrease) 4,758,293 846,385 8,799 7,100,717 35,400 - -------------------------------------------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2006, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------------ May 1, 2006 1,699,627 1,277,916 $ -- $13,291 Australian Dollar U.S. Dollar May 1, 2006 2,050,914 1,542,041 -- 16,038 Australian Dollar U.S. Dollar May 1, 2006 3,069,608 2,307,977 -- 24,004 Australian Dollar U.S. Dollar May 1, 2006 56,015 74,500 583 -- U.S. Dollar Australian Dollar May 1, 2006 568,842 756,560 5,916 -- U.S. Dollar Australian Dollar May 1, 2006 777,463 1,034,025 8,086 -- U.S. Dollar Australian Dollar May 1, 2006 778,836 1,035,851 8,100 -- U.S. Dollar Australian Dollar May 1, 2006 809,208 1,076,247 8,416 -- U.S. Dollar Australian Dollar May 1, 2006 809,754 1,076,973 8,422 -- U.S. Dollar Australian Dollar May 1, 2006 810,836 1,078,411 8,433 -- U.S. Dollar Australian Dollar May 1, 2006 842,741 1,120,845 8,765 -- U.S. Dollar Australian Dollar
- -------------------------------------------------------------------------------- 29 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------------------- May 1, 2006 851,301 1,132,229 $ 8,854 $ -- U.S. Dollar Australian Dollar May 1, 2006 1,094,879 1,456,188 11,387 -- U.S. Dollar Australian Dollar May 1, 2006 1,163,225 1,547,089 12,098 -- U.S. Dollar Australian Dollar May 1, 2006 1,413,546 1,880,016 14,702 -- U.S. Dollar Australian Dollar May 1, 2006 58,636 6,723,828 422 -- U.S. Dollar Japanese Yen May 1, 2006 708,283 1,121,091 7,086 -- U.S. Dollar New Zealand Dollar May 2, 2006 23,931 31,596 73 -- U.S. Dollar Australian Dollar May 2, 2006 214,853 120,416 4,726 -- U.S. Dollar British Pound May 2, 2006 70,792 79,499 317 -- U.S. Dollar Canadian Dollar May 2, 2006 249,209 312,234 -- 2,118 European Monetary Unit U.S. Dollar May 2, 2006 54,342 43,571 619 -- U.S. Dollar European Monetary Unit May 2, 2006 93,340 74,917 1,161 -- U.S. Dollar European Monetary Unit May 2, 2006 420,115 337,195 5,223 -- U.S. Dollar European Monetary Unit May 2, 2006 525,818 422,036 6,537 -- U.S. Dollar European Monetary Unit May 2, 2006 554,877 445,359 6,899 -- U.S. Dollar European Monetary Unit May 2, 2006 39,545 4,508,109 52 -- U.S. Dollar Japanese Yen May 2, 2006 60,128 37,876 -- 165 Singapore Dollar U.S. Dollar May 3, 2006 261,856 344,684 -- -- U.S. Dollar Australian Dollar May 3, 2006 592,152 662,796 689 -- U.S. Dollar Canadian Dollar May 3, 2006 138,890 110,846 943 -- U.S. Dollar European Monetary Unit May 3, 2006 63,752 40,260 -- 76 Singapore Dollar U.S. Dollar May 4, 2006 36,597 28,967 -- 58 U.S. Dollar European Monetary Unit
- -------------------------------------------------------------------------------- 30 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - -------------------------------------------------------------------------------------------------- May 4, 2006 48,044 30,385 $ -- $ 12 Singapore Dollar U.S. Dollar May 8, 2006 1,612,019 14,172 12 -- Japanese Yen U.S. Dollar May 8, 2006 59,131 6,726,170 -- 52 U.S. Dollar Japanese Yen - -------------------------------------------------------------------------------------------------- Total $138,521 $55,814 - --------------------------------------------------------------------------------------------------
6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for temporary funding of shareholder redemptions or for other temporary or emergency purposes. 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. The Fund had no borrowings outstanding during the six months ended April 30, 2006. 7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. - -------------------------------------------------------------------------------- 31 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal or arbitration proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal or arbitration proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory 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. - -------------------------------------------------------------------------------- 32 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results. CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(A) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(G) 2005 2004 2003 2002 Net asset value, beginning of period $ 8.05 $ 6.85 $ 5.80 $ 4.56 $ 5.25 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- .02 -- .01 .01 Net gains (losses) (both realized and unrealized) 2.06 1.33 1.05 1.23 (.70) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.06 1.35 1.05 1.24 (.69) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.07) (.01) -- -- -- Distributions from realized gains (.63) (.14) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.70) (.15) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 9.41 $ 8.05 $ 6.85 $ 5.80 $ 4.56 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 281 $ 216 $ 151 $ 109 $ 72 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 1.60%(c) 1.74%(d) 1.75%(d) 1.75%(d) 1.72%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.08%)(c) .37% .17% .23% .29% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 80% 67% 87% 116% 141% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 27.07%(f) 19.89% 18.15% 27.26% (13.14%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 1.79%, 1.85%, 2.05% and 2.35% for the years ended Oct. 31, 2005, 2004, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 33 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(A) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(G) 2005 2004 2003 2002 Net asset value, beginning of period $ 7.82 $ 6.69 $ 5.71 $ 4.53 $ 5.25 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.02) (.02) (.02) (.01) Net gains (losses) (both realized and unrealized) 1.99 1.29 1.00 1.20 (.71) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.96 1.27 .98 1.18 (.72) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- -- -- -- Distributions from realized gains (.63) (.14) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.64) (.14) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 9.14 $ 7.82 $ 6.69 $ 5.71 $ 4.53 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 74 $ 58 $ 44 $ 36 $ 24 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 2.37%(c) 2.51%(d) 2.51%(d) 2.52%(d) 2.52%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.85%)(c) (.39%) (.59%) (.52%) (.46%) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 80% 67% 87% 116% 141% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 26.47%(f) 19.13% 17.16% 26.05% (13.71%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 2.56%, 2.62%, 2.82% and 3.12% for the years ended Oct. 31, 2005, 2004, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 34 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(A) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(G) 2005 2004 2003 2002 Net asset value, beginning of period $ 7.81 $ 6.69 $ 5.71 $ 4.52 $ 5.25 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.02) (.02) (.02) (.01) Net gains (losses) (both realized and unrealized) 2.00 1.28 1.00 1.21 (.72) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.97 1.26 .98 1.19 (.73) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- -- -- -- Distributions from realized gains (.63) (.14) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.64) (.14) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 9.14 $ 7.81 $ 6.69 $ 5.71 $ 4.52 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 4 $ 3 $ 3 $ 2 $ 1 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 2.36%(c) 2.51%(d) 2.51%(d) 2.52%(d) 2.52%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.84%)(c) (.41%) (.60%) (.52%) (.41%) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 80% 67% 87% 116% 141% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 26.62%(f) 18.98% 17.16% 26.27% (13.90%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 2.55%, 2.61%, 2.82% and 3.12% for the years ended Oct. 31, 2005, 2004, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 35 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS I
- ------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(A) - ------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(H) 2005 2004(B) Net asset value, beginning of period $ 8.13 $ 6.90 $6.62 - ------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .03 .02 Net gains (losses) (both realized and unrealized) 2.07 1.36 .26 - ------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.09 1.39 .28 - ------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.02) -- Distributions from realized gains (.63) (.14) -- - ------------------------------------------------------------------------------------------------------------------ Total distributions (.73) (.16) -- - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 9.49 $ 8.13 $6.90 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 109 $ 83 $ 21 - ------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c) 1.13%(d) 1.28% 1.35%(d),(e) - ------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .41%(d) .95% .55%(d) - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 80% 67% 87% - ------------------------------------------------------------------------------------------------------------------ Total return(f) 27.32%(g) 20.42% 4.23%(g) - ------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses for Class I would have been 1.36% for the period ended Oct. 31, 2004. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 36 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(A) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(G) 2005 2004 2003 2002 Net asset value, beginning of period $ 8.09 $ 6.88 $ 5.82 $ 4.57 $ 5.25 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .02 .01 .02 .01 Net gains (losses) (both realized and unrealized) 2.06 1.34 1.05 1.23 (.69) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.07 1.36 1.06 1.25 (.68) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.01) -- -- -- Distributions from realized gains (.63) (.14) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.71) (.15) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 9.45 $ 8.09 $ 6.88 $ 5.82 $ 4.57 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 1 $ 1 $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 1.42%(c) 1.57%(d) 1.58%(d) 1.56%(d) 1.52%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .11%(c) .58% .40% .28% .41% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 80% 67% 87% 116% 141% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 27.18%(f) 20.07% 18.29% 27.47% (12.94%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 1.61%, 1.69%, 1.88% and 9.17% for the years ended Oct. 31, 2005, 2004, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 37 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 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 INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2005 APRIL 30, 2006 THE PERIOD(A) EXPENSE RATIO - ----------------------------------------------------------------------------------------------------------------------- Class A - ----------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,270.70 $8.91 1.60% - ----------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.67 $7.91 1.60% - ----------------------------------------------------------------------------------------------------------------------- Class B - ----------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,264.70 $13.16 2.37% - ----------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.90 $11.70 2.37% - ----------------------------------------------------------------------------------------------------------------------- Class C - ----------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,266.20 $13.11 2.36% - ----------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.95 $11.65 2.36% - ----------------------------------------------------------------------------------------------------------------------- Class I - ----------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,273.20 $6.30 1.13% - ----------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.98 $5.59 1.13% - ----------------------------------------------------------------------------------------------------------------------- Class Y - ----------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,271.80 $7.91 1.42% - ----------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.56 $7.02 1.42% - -----------------------------------------------------------------------------------------------------------------------
(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 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2006: +27.07% for Class A, +26.47% for Class B, +26.62% for Class C, +27.32% for Class I and +27.18% for Class Y. - -------------------------------------------------------------------------------- 39 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL 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/Trustees (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. The Fund operates under an order from the Securities and Exchange Commission that permits the investment manager, subject to the approval of the Board, to appoint unaffiliated subadvisers or change the terms of subadvisory agreements without first obtaining shareholder approval. As a basis for making its determination, the Board monitors the investment performance of the Fund throughout the year using a number of benchmarks and comparison periods of one, three and five years, as well as, the entire period during which the subadviser has managed its portion of the investment portfolio. On an annual basis the Board assesses the operating capabilities of the subadviser, such as adherence to the investment strategies of the Fund, compliance with its code of ethics and all applicable legal requirements, and its working relationship with the investment manager, through reports prepared by the investment manager. During the year, if there is a change in the composition of the subadviser's management team or if other circumstances so require, the Board will re-assess the operating capabilities. The Board also considers the fees paid by the investment manager to the subadviser and any business relationships that exist between the investment manager and its affiliates and the subadviser. Based on its review and evaluation, at a meeting of the Board held on April 12-13, 2006, the Board, including all of its independent members, determined to approve the continuation of the subadvisory agreement with Columbia Wanger Asset Management, L.P. and to terminate the subadvisory agreement with American Century Global Investment Management, Inc. ("ACGIM") and approve a new subadvisory agreement with Principal Global Investors, LLC ("Principal Global"). The recommendation to replace ACGIM with Principal Global was made by RiverSource Investments in the ordinary course of its ongoing evaluation of the subadvisers. - -------------------------------------------------------------------------------- 40 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- In evaluating the recommendation to hire Principal Global as a subadviser for the Fund, the Board considered, among other factors: o The favorable history, reputation, qualification and background of the subadviser, as well as the qualifications of the subadviser's personnel and its financial condition. o The expertise that the subadviser offers in providing portfolio management services to other similar portfolios and the performance history of those portfolios. o The subadviser's proposed investment strategy for the Fund. o The subadviser's long- and short-term performance relative to comparable mutual funds and unmanaged indexes. o The compliance program of the subadviser. Based on the foregoing analysis, the Board concluded that the approval of a new subadvisory agreement with Principal Global is in the best interests of the Fund and its shareholders. 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 www.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 most recent 12-month period ended June 30 is available without charge by visiting www.riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 41 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RESULTS OF MEETING OF SHAREHOLDERS RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006 (UNAUDITED) A brief description of each proposal voted upon at the meeting and the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each proposal is set forth below. A vote is based on total dollar interest in a fund. ELECTION OF BOARD MEMBERS
AFFIRMATIVE WITHHOLD - -------------------------------------------------------------------------------- Kathleen Blatz 316,795,755.48 10,217,717.86 - -------------------------------------------------------------------------------- Arne H. Carlson 316,781,464.98 10,232,008.36 - -------------------------------------------------------------------------------- Patricia M. Flynn 317,188,932.67 9,824,540.67 - -------------------------------------------------------------------------------- Anne P. Jones 316,477,075.31 10,536,398.03 - -------------------------------------------------------------------------------- Jeffrey Laikind 316,500,141.24 10,513,332.10 - -------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 317,009,706.00 10,003,767.34 - -------------------------------------------------------------------------------- Catherine James Paglia 317,057,922.85 9,955,550.49 - -------------------------------------------------------------------------------- Vikki L. Pryor 317,459,983.94 9,553,489.40 - -------------------------------------------------------------------------------- Alan K. Simpson 315,358,844.25 11,654,629.09 - -------------------------------------------------------------------------------- Alison Taunton-Rigby 317,205,767.59 9,807,705.75 - -------------------------------------------------------------------------------- William F. Truscott 316,940,775.53 10,072,697.81 - --------------------------------------------------------------------------------
AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 311,548,142.76 10,000,267.65 5,465,062.93 0.00 - --------------------------------------------------------------------------------
APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE INVESTMENTS, LLC
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 313,880,720.48 8,012,998.85 5,119,754.01 0.00 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 42 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES DIVERSIFICATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 312,863,920.76 7,786,397.20 6,363,155.38 0.00 - --------------------------------------------------------------------------------
LENDING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 310,823,673.50 10,299,114.46 5,890,685.38 0.00 - --------------------------------------------------------------------------------
BORROWING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 312,369,932.83 8,947,295.36 5,696,245.15 0.00 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 43 - RIVERSOURCE INTERNATIONAL AGGRESSIVE GROWTH FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RIVERSOURCE(SM) INTERNATIONAL AGGRESSIVE GROWTH FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 RIVERSOURCE.COM/FUNDS [RiverSource Investments] This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are RIVERSOURCE [LOGO](SM) managed by RiverSource Investments, LLC and distributed INVESTMENTS by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6254 F (6/06) Semiannual Report [RIVERSOURCE INVESTMENTS logo] RIVERSOURCE(SM) INTERNATIONAL EQUITY FUND - ---------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2006 > RIVERSOURCE INTERNATIONAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. - ---------------------------------------------------------------------------- TABLE OF CONTENTS Fund Snapshot................................................2 Performance Summary..........................................3 Questions & Answers with Portfolio Management................5 Investments in Securities....................................8 Financial Statements........................................14 Notes to Financial Statements...............................17 Fund Expenses Example.......................................30 Approval of Investment Management Services Agreement........32 Proxy Voting................................................32 Results of Meeting of Shareholders..........................33
[DALBAR logo] RiverSource Funds' 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. - -------------------------------------------------------------------------------- 1 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND SNAPSHOT AT APRIL 30, 2006 PORTFOLIO MANAGERS <
THE BOSTON COMPANY ASSET MANAGEMENT, LLC PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY D. Kirk Henry, CFA 10/02 24 Clifford A. Smith, CFA 10/02 19 MARSICO CAPITAL MANAGEMENT, LLC PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY James G. Gendelman 10/04 18
FUND OBJECTIVE < The Fund seeks to provide shareholders with long-term growth of capital. Inception dates by class A: 10/3/02 B: 10/3/02 C: 10/3/02 I: 3/4/04 Y: 10/3/02 Ticker symbols by class A: AAICX B: APCBX C: -- I: AILIX Y: -- Total net assets $198.7 million Number of holdings 172 STYLE MATRIX < [STYLE/SIZE box] Shading within the style matrix indicates areas in which the Fund generally invests. COUNTRY COMPOSITION [pie chart] Percentage of portfolio assets Japan 24.3% United Kingdom 13.8% Switzerland 10.5% France 10.3% Germany 8.8% Mexico 4.7% Canada 4.0% Netherlands 3.1% Brazil 2.1% Hong Kong 2.1% Singapore 2.1% Australia 1.9% Italy 1.9% South Korea 1.9% Ireland 1.2% Spain 1.2% Austria 1.0% Other* 5.1% * Includes Belgium, China, Finland, Greece, India, South Africa, Sweden, Taiwan and Cash & Short-Term Securities. TOP TEN HOLDINGS < Percentage of portfolio assets UBS (Switzerland) 2.7% America Movil ADR Series L (Mexico) 2.1 CEMEX ADR (Mexico) 2.1 Continental (Germany) 2.0 Vallourec (France) 1.7 Talisman Energy (Canada) 1.6 Mitsubishi UFJ Financial Group (Japan) 1.6 Hypo Real Estate Holding (Germany) 1.5 ABB (Switzerland) 1.5 BP (United Kingdom) 1.5
For further detail about these holdings, please refer to the section entitled "Investments in Securities." Investment products involve risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility, not typically associated with domestic investing, due to potential political and economic instability, limited liquidity, volatile prices, lack of accounting, auditing, and financial reporting standards, changes in currency exchange rates, and differences in how trades are cleared and settled. Risks are particularly significant in emerging markets due to the dramatic pace of economic, social, and political changes. 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. - -------------------------------------------------------------------------------- 2 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY PERFORMANCE COMPARISON For the six-month period ended April 30, 2006 [graph] RiverSource International Equity Fund Class A (excluding sales charge) +25.45% Morgan Stanley Capital International (MSCI) EAFE Index(1) (unmanaged) +23.10% Lipper International Funds Index(2) +24.13%
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 www.riversource.com/funds. (1) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper International Funds Index includes the 30 largest international funds (growth and value) tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. See "Fund Management and Compensation" for more information. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 3 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY AVERAGE ANNUAL TOTAL RETURNS <
CLASS A CLASS B CLASS C CLASS I CLASS Y (INCEPTION DATES) (10/3/02) (10/3/02) (10/3/02) (3/4/04) (10/3/02) AFTER AFTER NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5) AT APRIL 30, 2006 6 months* +25.45% +18.24% +24.92% +19.92% +24.86% +23.86% +25.77% +25.46% 1 year +37.64% +29.73% +36.62% +31.62% +36.55% +35.55% +38.33% +37.82% 3 years +26.93% +24.45% +25.93% +25.09% +25.89% +25.89% N/a +27.09% Since inception +23.34% +21.31% +22.38% +21.87% +22.34% +22.34% +20.42% +23.55% AT MARCH 31, 2006 6 months* +17.21% +10.48% +16.61% +11.61% +16.70% +15.70% +17.40% +17.24% 1 year +27.95% +20.58% +26.89% +21.89% +26.79% +25.79% +28.46% +27.96% 3 years +28.88% +26.36% +27.85% +27.03% +27.86% +27.86% N/a +29.07% Since inception +22.36% +20.30% +21.36% +20.83% +21.37% +21.37% +18.64% +22.53%
(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. * Not annualized. - -------------------------------------------------------------------------------- 4 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT RiverSource International Equity Fund rose 25.45% for the six-month period ending April 30, 2006 (Class A shares, excluding sales charge), outperforming its benchmark, the MSCI EAFE Index, which rose 23.10% during the same period. The Fund also outperformed the Lipper International Funds Index, which increased 24.13%. RiverSource International Equity Fund's portfolio is managed by two independent money management firms that each invest a portion of the Fund's assets in a blend of growth and value stocks of foreign companies to seek long-term growth of capital. The Boston Company Asset Management, LLC (The Boston Company) and Marsico Capital Management, LLC (Marsico) each managed approximately 50% of the Fund's assets as of April 30, 2006. Below, each subadviser discusses results and positioning for their portion of the Fund for the first half of the fiscal year. Q: What factors affected performance for this period? THE BOSTON COMPANY: The international markets extended a three-year rally during the period as merger activity and earnings announcements overshadowed a hawkish tone in global monetary policy. Our portion of the Fund's strategy slightly trailed the MSCI EAFE Index during the last six months despite solid performance in the Netherlands, Hong Kong and Italy. Office equipment maker Canon delivered results that were well ahead of Wall Street forecasts. UniCredito Italiano shares advanced as their acquisition of HVB was finalized during the period. Rohm shares appreciated largely due to a string of upgrades from Wall Street analysts after results in November. Nissan Motor advanced after selling a portion of its stake in Nissan Diesel to Volvo to promote joint commercial vehicle development. French bank Credit Agricole issued a bright outlook for 2006 after exceeding consensus forecasts. Country allocation was positive during the period, primarily driven by our smaller-than-MSCI EAFE Index position in the United Kingdom and Australia. As both countries performed below the broader MSCI EAFE Index, our smaller positions proved to be beneficial. This was partially offset by our small position in oil rich Norway. Telecommunication services exposure detracted from sector allocation. Specific company events, ranging from unexpected acquisitions to reduced guidance, have damaged investor sentiment. France Telecom announced a management change and organization reshuffle in response to last quarter's profit warning. Negative sentiment has hit the telecom sector despite high cash flow generation and generally prudent - -------------------------------------------------------------------------------- 5 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS > ENERGY INVESTMENTS AND REAL ESTATE POSITIONS ACROSS THE GLOBE WERE STRONG PERFORMERS FOR THE FUND DURING THE SIX-MONTH PERIOD. -- MARSICO capital management. Finally, Nippon Express declined during the period after a disappointing set of results, mainly driven by a poor performance in their trucking business. MARSICO: Latin American mobile communications provider America Movil, benefited the Fund, as did positions in French steel producer Vallourec SA, the largest individual contributor. Swiss power and automation technologies company ABB Ltd. was a strong contributor during the period. Consumer discretionary positions, such as German tire and auto components manufacturer Continental, telecommunications equipment and services retailer Carphone Warehouse Group based in the U.K., Japanese automobile manufacturer Toyota Motor, and British pub and restaurant operator Enterprise Inns, also combined to benefit results. Energy investments and real estate positions across the globe were strong performers for the Fund during the six-month period. Q: What changes did you make to the portfolio during the period? THE BOSTON COMPANY: Amidst the euphoria surrounding mergers and acquisition activity within the European utilities sector, the stocks of certain acquirers have been discounted. As a result, two new names have been added to the portfolio in this group: Gas Natural of Spain and Enel of Italy. During this uncertain period, we feel Gas Natural has been overly discounted, thus we have established a position in the portfolio. Similarly, we have added Enel which has been relatively weak due to concern over the Italian election, in addition to their potential to launch a hostile counter-bid for Suez of France. - -------------------------------------------------------------------------------- 6 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS > COUNTRY ALLOCATION WAS POSITIVE DURING THE PERIOD, PRIMARILY DRIVEN BY OUR SMALLER-THAN-MSCI EAFE INDEX POSITION IN THE UNITED KINGDOM AND AUSTRALIA. -- BOSTON COMPANY MARSICO: On a sector allocation basis, there were a few significant shifts during the reporting period. (The Fund's sector weightings are a residual result of the entire investment process, not a central decision-making tool.) As the investment team identifies macroeconomic themes and companies with the litany of attributes we look for, individual stocks are purchased and sold. The shifts identified in this section may have resulted from macroeconomic thematic changes as well as finding new investment ideas for inclusion into the mix. The most dramatic sector increases were in the industrials, materials and energy sectors. The largest shifts that involved downsizing sector allocations included health care and information technology. Allocations in the remaining economic sectors remained largely the same during the reporting period. Q: How are you positioning the fund going forward? THE BOSTON COMPANY: We continue to adhere to our strict sell discipline as Fuji Heavy Inds and Shin-Etsu Chemical have all been sold from the portfolio due to significant share price appreciation. Despite another strong start in 2006 for the developed international equity markets, we continue to source ideas that fit our time-tested value investment approach. MARSICO: As of April 30, 2006, the Fund had exposure to all 10 sectors, with an emphasis on investments within the financials, consumer discretionary, industrials and materials sectors. Compared to the MSCI EAFE Index, the Fund was significantly overweighted in the consumer discretionary and materials sectors and significantly underweighted in financials and health care. - -------------------------------------------------------------------------------- 7 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES RiverSource International Equity Fund APRIL 30, 2006 (UNAUDITED) (Percentages represent value of investments compared to net assets) COMMON STOCKS (98.3%)(c)
ISSUER SHARES VALUE(a) AUSTRALIA (1.9%) BEVERAGES (--%) Coca-Cola Amatil 15,960 $88,269 - ----------------------------------------------------------------------------- BIOTECHNOLOGY (0.7%) CSL 28,908 1,267,173 - ----------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) Natl Australia Bank 30,867 881,942 - ----------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.4%) Amcor 132,786 729,345 - ----------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.3%) Tabcorp Holdings 45,110 524,332 - ----------------------------------------------------------------------------- INSURANCE (0.1%) Insurance Australia Group 60,780 260,886 - ----------------------------------------------------------------------------- AUSTRIA (1.0%) COMMERCIAL BANKS Erste Bank der Oesterreichischen Sparkassen 33,804 2,051,001 - ----------------------------------------------------------------------------- BELGIUM (0.5%) COMMERCIAL BANKS Fortis 25,230 946,479 - ----------------------------------------------------------------------------- BRAZIL (2.1%) COMMERCIAL BANKS (0.7%) UNIBANCO - Uniao de Bancos Brasileiros ADR 18,420 1,461,627 - ----------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (--%) Telecomunicacoes Brasileiras ADR 490 18,057 - ----------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.2%) Petroleo Brasileiro ADR 22,372 2,211,025 - ----------------------------------------------------------------------------- REAL ESTATE (0.2%) Gafisa 47,625(b) 486,296 - ----------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) CANADA (4.0%) FOOD & STAPLES RETAILING (1.1%) Shoppers Drug Mart 57,349 $2,272,416 - ----------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.7%) Talisman Energy 55,833 3,153,216 - ----------------------------------------------------------------------------- ROAD & RAIL (1.2%) Canadian Natl Railway 54,806 2,461,337 - ----------------------------------------------------------------------------- CHINA (0.5%) OIL, GAS & CONSUMABLE FUELS CNOOC ADR 12,456 1,029,862 - ----------------------------------------------------------------------------- FINLAND (0.7%) COMMUNICATIONS EQUIPMENT (0.2%) Nokia 3,900 88,796 Nokia ADR 9,940 225,241 ------------ Total 314,037 - ----------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.5%) M-real Series B 68,070 443,056 UPM - Kymmene 23,684 555,674 ------------ Total 998,730 - ----------------------------------------------------------------------------- FRANCE (10.2%) AUTO COMPONENTS (0.5%) Valeo 22,657 970,561 - ----------------------------------------------------------------------------- AUTOMOBILES (0.3%) Peugeot 9,540 626,959 - ----------------------------------------------------------------------------- COMMERCIAL BANKS (1.0%) BNP Paribas 10,450 987,304 BNP Paribas-New 1,045(b) 95,369 Credit Agricole 21,900 882,332 ------------ Total 1,965,005 - ----------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.3%) Lafarge 4,210 517,773 - ----------------------------------------------------------------------------- See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 8 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) FRANCE (CONT.) DIVERSIFIED TELECOMMUNICATION SERVICES (0.8%) France Telecom 68,560 $1,600,773 - ----------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.9%) Carrefour 30,810 1,786,954 - ----------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.3%) Thomson 27,080 560,203 - ----------------------------------------------------------------------------- MACHINERY (1.7%) Vallourec 2,506 3,255,900 - ----------------------------------------------------------------------------- MEDIA (0.5%) JC Decaux 36,410(b) 1,088,483 - ----------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (1.3%) Veolia Environnement 44,248 2,643,371 - ----------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.0%) Total 7,018 1,940,469 - ----------------------------------------------------------------------------- PHARMACEUTICALS (0.5%) Sanofi-Aventis 11,220 1,057,930 - ----------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.1%) LVMH Moet Hennessy Louis Vuitton 21,208 2,232,435 - ----------------------------------------------------------------------------- GERMANY (8.6%) AIR FREIGHT & LOGISTICS (0.8%) Deutsche Post 59,970 1,598,403 - ----------------------------------------------------------------------------- AIRLINES (0.4%) Deutsche Lufthansa 41,780 770,493 - ----------------------------------------------------------------------------- AUTO COMPONENTS (1.8%) Continental 32,545 3,874,102 - ----------------------------------------------------------------------------- AUTOMOBILES (0.2%) Volkswagen 5,610 433,150 - ----------------------------------------------------------------------------- CAPITAL MARKETS (0.5%) Deutsche Bank 8,670 1,064,324 - ----------------------------------------------------------------------------- DISTRIBUTORS (0.1%) Medion 7,600 111,205 - ----------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%) Deutsche Telekom 46,830 845,902 - ----------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) GERMANY (CONT.) ELECTRIC UTILITIES (0.3%) E.ON 4,830 $588,114 - ----------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.9%) Metro 30,091 1,704,260 - ----------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.4%) Siemens 7,680 726,566 - ----------------------------------------------------------------------------- INSURANCE (0.8%) Allianz 3,990 667,877 Hannover Rueckversicherung 23,190 859,713 ------------ Total 1,527,590 - ----------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.5%) Infineon Technologies 74,580(b) 911,589 - ----------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.5%) Hypo Real Estate Holding 43,168 3,017,736 - ----------------------------------------------------------------------------- GREECE (0.3%) ELECTRIC UTILITIES Public Power 21,760 557,196 - ----------------------------------------------------------------------------- HONG KONG (2.0%) COMMERCIAL BANKS (0.4%) Bank of East Asia 191,095 798,602 - ----------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.8%) Shangri-La Asia 886,000 1,571,348 - ----------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.1%) Citic Pacific 64,100 230,674 - ----------------------------------------------------------------------------- SPECIALTY RETAIL (0.7%) Esprit Holdings 180,500 1,441,132 - ----------------------------------------------------------------------------- INDIA (0.8%) COMMERCIAL BANKS ICICI Bank ADR 54,366 1,491,259 - ----------------------------------------------------------------------------- IRELAND (1.2%) COMMERCIAL BANKS Anglo Irish Bank 61,253 1,009,847 Bank of Ireland 72,810 1,367,536 ------------ Total 2,377,383 - ----------------------------------------------------------------------------- See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 9 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ITALY (1.9%) COMMERCIAL BANKS (0.6%) UniCredito Italiano 158,360 $1,192,539 - ----------------------------------------------------------------------------- ELECTRIC UTILITIES (0.1%) Enel 23,110 199,684 - ----------------------------------------------------------------------------- INSURANCE (0.3%) Unipol 164,580 552,219 - ----------------------------------------------------------------------------- MEDIA (0.3%) Mediaset 46,790 591,980 - ----------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.6%) Eni 39,400 1,202,720 - ----------------------------------------------------------------------------- JAPAN (23.9%) AUTO COMPONENTS (0.2%) Toyoda Gosei 16,900 466,105 - ----------------------------------------------------------------------------- AUTOMOBILES (2.0%) Nissan Motor 108,500 1,426,653 Toyota Motor 42,500 2,486,166 ------------ Total 3,912,819 - ----------------------------------------------------------------------------- BUILDING PRODUCTS (0.3%) JS Group 28,400 632,358 - ----------------------------------------------------------------------------- CHEMICALS (0.3%) Kuraray 45,000 555,336 - ----------------------------------------------------------------------------- COMMERCIAL BANKS (3.0%) 77 Bank 83,400 656,358 Mitsubishi UFJ Financial Group 196 3,081,598 Shinsei Bank 127,000 889,056 Sumitomo Mitsui Financial Group 125 1,372,420 ------------ Total 5,999,432 - ----------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.1%) Sohgo Security Services 14,197 232,190 - ----------------------------------------------------------------------------- CONSUMER FINANCE (2.0%) Aiful 14,154 845,386 Credit Saison 29,000 1,520,686 ORIX 540 162,213 SFCG 1,710 391,565 Takefuji 16,980 1,103,663 ------------ Total 4,023,513 - ----------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) JAPAN (CONT.) ELECTRONIC EQUIPMENT & INSTRUMENTS (2.3%) Mabuchi Motor 11,600 $654,124 Murata Mfg 18,000 1,310,672 Nippon Electric Glass 76,000 1,715,590 TDK 9,600 803,584 ------------ Total 4,483,970 - ----------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.3%) AEON 24,500 610,079 Matsumotokiyoshi 18,900 551,146 Seiyu 583,000(b) 1,433,816 ------------ Total 2,595,041 - ----------------------------------------------------------------------------- FOOD PRODUCTS (0.2%) Ajinomoto 32,600 406,033 - ----------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.3%) Skylark 34,300 626,649 - ----------------------------------------------------------------------------- HOUSEHOLD DURABLES (2.0%) Funai Electric 7,100 734,010 Misawa Homes Holdings 15,800(b) 835,450 Rinnai 19,400 535,055 Sekisui Chemical 107,400 928,253 Sekisui House 61,200 947,699 ------------ Total 3,980,467 - ----------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.4%) Kao 28,000 752,569 - ----------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (1.6%) Fuji Photo Film 39,500 1,342,688 Sega Sammy Holdings 48,341 1,927,695 ------------ Total 3,270,383 - ----------------------------------------------------------------------------- MACHINERY (0.9%) FANUC 9,939 940,212 Hino Motors 100,700 613,841 Minebea 35,700 231,101 ------------ Total 1,785,154 - ----------------------------------------------------------------------------- MEDIA (0.4%) Dentsu 218 758,261 - ----------------------------------------------------------------------------- OFFICE ELECTRONICS (0.9%) Canon 12,404 948,958 Ricoh 46,700 927,027 ------------ Total 1,875,985 - ----------------------------------------------------------------------------- See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) JAPAN (CONT.) PAPER & FOREST PRODUCTS (0.2%) Nippon Paper Group 96 $410,646 - ----------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Astellas Pharma 11,900 496,487 - ----------------------------------------------------------------------------- REAL ESTATE (1.2%) Leopalace21 34,596 1,349,198 Sumitomo Realty & Development 36,000 954,941 ------------ Total 2,304,139 - ----------------------------------------------------------------------------- ROAD & RAIL (0.7%) Nippon Express 268,900 1,419,490 - ----------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.6%) Rohm 11,800 1,256,179 - ----------------------------------------------------------------------------- SPECIALTY RETAIL (0.9%) Yamada Denki 16,700 1,820,351 - ----------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.3%) Marubeni 440,000 2,535,266 - ----------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.6%) KDDI 178 1,097,549 - ----------------------------------------------------------------------------- MEXICO (4.6%) BEVERAGES (0.2%) Coca-Cola Femsa ADR 14,900 479,780 - ----------------------------------------------------------------------------- CONSTRUCTION MATERIALS (2.0%) CEMEX ADR 59,493 4,016,967 - ----------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%) Telefonos de Mexico ADR Cl L 19,940 438,481 - ----------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.2%) America Movil ADR Series L 113,971 4,206,670 - ----------------------------------------------------------------------------- NETHERLANDS (3.0%) BEVERAGES (0.6%) Heineken 29,447 1,192,708 - ----------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) ABN AMRO Holding 26,236 783,999 - ----------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) NETHERLANDS (CONT.) HOUSEHOLD DURABLES (0.6%) Koninklijke Philips Electronics 32,910 $1,135,339 - ----------------------------------------------------------------------------- INSURANCE (0.4%) Aegon 42,895 782,939 - ----------------------------------------------------------------------------- MEDIA (0.3%) VNU 11,220 385,101 Wolters Kluwer 5,035 131,151 ------------ Total 516,252 - ----------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.7%) Royal Dutch Shell Series A 45,950 1,574,974 - ----------------------------------------------------------------------------- SINGAPORE (2.1%) COMMERCIAL BANKS (1.3%) DBS Group Holdings 147,820 1,664,682 United Overseas Bank 96,800 998,254 ------------ Total 2,662,936 - ----------------------------------------------------------------------------- REAL ESTATE (0.8%) CapitaLand 486,000 1,506,643 - ----------------------------------------------------------------------------- SOUTH AFRICA (0.9%) COMMERCIAL BANKS (0.3%) Nedbank Group 25,664 537,602 - ----------------------------------------------------------------------------- METALS & MINING (0.6%) Anglo American 28,145 1,198,378 - ----------------------------------------------------------------------------- SOUTH KOREA (1.9%) DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) KT ADR 23,400 544,518 - ----------------------------------------------------------------------------- ELECTRIC UTILITIES (0.2%) Korea Electric Power ADR 19,350 441,180 - ----------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%) Samsung Electronics 3,050 2,083,147 - ----------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.3%) SK Telecom ADR 24,080 642,936 - ----------------------------------------------------------------------------- See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SPAIN (1.1%) COMMERCIAL BANKS (0.3%) Banco Santander Central Hispano 36,080 $559,334 - ----------------------------------------------------------------------------- ELECTRIC UTILITIES (0.0%) Iberdrola 1,900 61,882 - ----------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.1%) Gamesa Tecnologica 11,660 253,418 - ----------------------------------------------------------------------------- GAS UTILITIES (0.2%) Gas Natural SDG 10,020 305,617 - ----------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.5%) Repsol YPF 28,020 836,956 Repsol YPF ADR 8,700 259,782 ------------ Total 1,096,738 - ----------------------------------------------------------------------------- SWEDEN (0.7%) COMMUNICATIONS EQUIPMENT (0.4%) Telefonaktiebolaget LM Ericsson ADR 27,760 984,647 - ----------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.3%) Svenska Cellulosa Series B 10,940 496,772 - ----------------------------------------------------------------------------- SWITZERLAND (10.4%) CAPITAL MARKETS (2.7%) UBS 45,192 5,356,575 - ----------------------------------------------------------------------------- CHEMICALS (3.3%) Ciba Specialty Chemicals 18,397 1,128,860 Clariant 28,330(b) 440,872 Lonza Group 36,115 2,562,586 Syngenta 16,848(b) 2,350,189 ------------ Total 6,482,507 - ----------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.5%) ABB 210,885(b) 3,009,727 - ----------------------------------------------------------------------------- FOOD PRODUCTS (0.8%) Nestle 4,972 1,516,415 - ----------------------------------------------------------------------------- INSURANCE (0.5%) Swiss Reinsurance 14,210 1,036,934 - ----------------------------------------------------------------------------- PHARMACEUTICALS (1.6%) Novartis 19,900 1,141,659 Roche Holding 13,267 2,040,006 ------------ Total 3,181,665 - ----------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TAIWAN (0.3%) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT United Microelectronics ADR 183,640 $692,323 - ----------------------------------------------------------------------------- UNITED KINGDOM (13.7%) AUTO COMPONENTS (0.2%) GKN 64,860 370,783 - ----------------------------------------------------------------------------- BEVERAGES (1.4%) Diageo 174,212 2,874,963 - ----------------------------------------------------------------------------- COMMERCIAL BANKS (2.0%) Barclays 90,791 1,134,068 HSBC Holdings 56,716 979,920 Royal Bank of Scotland Group 50,840 1,660,377 ------------ Total 3,774,365 - ----------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (--%) Rentokil Initial 17,440 50,803 - ----------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) BT Group 148,437 593,455 - ----------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.6%) Stolt Offshore 78,113(b) 1,276,501 - ----------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.5%) Boots Group 45,866 586,293 J Sainsbury 74,496 454,057 ------------ Total 1,040,350 - ----------------------------------------------------------------------------- FOOD PRODUCTS (0.6%) Unilever 108,516 1,152,645 - ----------------------------------------------------------------------------- GAS UTILITIES (0.6%) Centrica 203,240 1,107,191 - ----------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.6%) Enterprise Inns 71,175 1,210,918 - ----------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.2%) Reckitt Benckiser 65,123 2,373,848 - ----------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.4%) Smiths Group 38,530 716,295 - ----------------------------------------------------------------------------- MEDIA (0.6%) Reed Elsevier 67,250 668,336 Trinity Mirror 51,690 517,469 ------------ Total 1,185,805 - ----------------------------------------------------------------------------- METALS & MINING (0.5%) BHP Billiton 48,896 1,006,637 - ----------------------------------------------------------------------------- See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) OIL, GAS & CONSUMABLE FUELS (1.5%) BP 243,887 $3,008,584 - ----------------------------------------------------------------------------- PHARMACEUTICALS (1.2%) GlaxoSmithKline 87,173 2,473,417 - ----------------------------------------------------------------------------- SPECIALTY RETAIL (0.7%) Carphone Warehouse Group 184,388 1,128,897 Travis Perkins 6,050 173,536 ------------ Total 1,302,433 - ----------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.8%) Vodafone Group 682,076 1,610,676 - ----------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $156,233,376) $195,389,060 - ----------------------------------------------------------------------------- SHORT-TERM SECURITIES (0.3%) ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY COMMERCIAL PAPER Gemini Securitization 05-01-06 4.82% $500,000(d) $499,799 - ----------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITIES (Cost: $499,866) $499,799 - ----------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $156,733,242)(e) $195,888,859 =============================================================================
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. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2006, the value of these securities amounted to $499,799 or 0.3% of net assets. (e) At April 30, 2006, the cost of securities for federal income tax purposes was approximately $156,733,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $40,393,000 Unrealized depreciation (1,237,000) ----------------------------------------------------------------------- Net unrealized appreciation $39,156,000 -----------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 13 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RiverSource International Equity Fund APRIL 30, 2006 (UNAUDITED) ASSETS Investments in securities, at value (Note 1) (identified cost $156,733,242) $195,888,859 Cash in bank on demand deposit 42,534 Foreign currency holdings (identified cost $1,523,114) (Note 1) 1,532,622 Capital shares receivable 64,963 Dividends and accrued interest receivable 444,227 Receivable for investment securities Sold 2,902,944 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 15,667 - ------------------------------------------------------------------------------------------------------------------------ Total assets 200,891,816 - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES Capital shares payable 26,471 Payable for investment securities purchased 2,056,858 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 156 Accrued investment management services fee 5,270 Accrued distribution fee 1,559 Accrued service fee 1 Accrued transfer agency fee 331 Accrued administrative services fee 435 Other accrued expenses 69,320 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 2,160,401 - ------------------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $198,731,415 ======================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 236,815 Additional paid-in capital 142,993,444 Excess of distributions over net investment income (206,406) Accumulated net realized gain (loss) 16,521,730 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 39,185,832 - ------------------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $198,731,415 ======================================================================================================================== Net assets applicable to outstanding shares: Class A $103,987,656 Class B $ 29,257,164 Class C $ 1,775,014 Class I $ 63,487,684 Class Y $ 223,897 Net asset value per share of outstanding capital stock: Class A shares 12,381,682 $ 8.40 Class B shares 3,526,539 $ 8.30 Class C shares 213,748 $ 8.30 Class I shares 7,532,886 $ 8.43 Class Y shares 26,667 $ 8.40 - ------------------------------------------------------------------------------------------------------------------------ See accompanying notes to financial statements.
- -------------------------------------------------------------------------------- 14 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS RiverSource International Equity Fund SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED) Investment income Income: Dividends $ 1,902,854 Interest 61,734 Less foreign taxes withheld (153,491) - ------------------------------------------------------------------------------------------------------ Total income 1,811,097 - ------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 851,905 Distribution fee Class A 119,895 Class B 132,174 Class C 7,735 Transfer agency fee 120,389 Incremental transfer agency fee Class A 9,077 Class B 5,271 Class C 326 Service fee -- Class Y 76 Administrative services fees and expenses 72,699 Compensation of board members 4,692 Custodian fees 64,830 Printing and postage 33,110 Registration fees 21,225 Audit fees 10,500 Other 2,587 - ------------------------------------------------------------------------------------------------------ Total expenses 1,456,491 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (9,243) - ------------------------------------------------------------------------------------------------------ 1,447,248 Earnings credits on cash balances (Note 2) (2,315) - ------------------------------------------------------------------------------------------------------ Total net expenses 1,444,933 - ------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 366,164 - ------------------------------------------------------------------------------------------------------ Realized and unrealized gain (loss) -- net Net realized gain (loss) on: Security transactions (Note 3) 17,344,739 Foreign currency transactions (5,199) - ------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 17,339,540 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 23,403,849 - ------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 40,743,389 - ------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $41,109,553 ====================================================================================================== See accompanying notes to financial statements.
- -------------------------------------------------------------------------------- 15 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS RiverSource International Equity Fund
APRIL 30, 2006 OCT. 31, 2005 SIX MONTHS ENDED YEAR ENDED (UNAUDITED) Operations and distributions Investment income (loss) -- net $ 366,164 $ 861,289 Net realized gain (loss) on investments 17,339,540 15,183,813 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 23,403,849 6,463,767 - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 41,109,553 22,508,869 - -------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net Investment income Class A (753,800) (1,253,898) Class B (25,488) (122,931) Class C (721) (8,024) Class I (647,101) (414,331) Class Y (1,400) (1,215) Net realized gain Class A (7,774,435) (9,179,533) Class B (2,150,509) (2,090,538) Class C (124,742) (142,248) Class I (4,219,032) (2,339,204) Class Y (10,738) (7,591) - -------------------------------------------------------------------------------------------------------------------- Total distributions (15,707,966) (15,559,513) - -------------------------------------------------------------------------------------------------------------------- Capital share transactions (Note 4) Proceeds from sales Class A shares (Note 2) 11,285,310 23,041,476 Class B shares 3,359,094 7,220,863 Class C shares 230,703 404,157 Class I shares 9,846,341 24,665,418 Class Y shares 100,086 -- Reinvestment of distributions at net asset value Class A shares 7,613,968 7,416,121 Class B shares 2,153,921 2,188,789 Class C shares 121,098 144,989 Class I shares 4,865,078 2,752,451 Class Y shares 10,687 7,306 Payments for redemptions Class A shares (19,667,645) (40,711,099) Class B shares (Note 2) (4,053,898) (8,469,283) Class C shares (Note 2) (256,730) (690,357) Class I shares (4,263,320) (5,737,247) Class Y shares (3,085) -- - -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 11,341,608 12,233,584 - -------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 36,743,195 19,182,940 Net assets at beginning of period 161,988,220 142,805,280 - -------------------------------------------------------------------------------------------------------------------- Net assets at end of period $198,731,415 $161,988,220 ==================================================================================================================== Undistributed (excess of distributions over) net investment income $ (206,406) $ 855,940 - -------------------------------------------------------------------------------------------------------------------- See accompanying notes to financial statements.
- -------------------------------------------------------------------------------- 16 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS RiverSource International Equity Fund (Unaudited as to April 30, 2006) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of RiverSource International Managers Series, Inc. (formerly AXP Partners International Series, Inc.) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource International Managers 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 foreign issuers. 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 April 30, 2006, Ameriprise Financial, Inc. (Ameriprise Financial) and the affiliated funds-of-funds owned 100% of Class I shares, which represents 31.95% of the Fund's net assets. At April 30, 2006, Ameriprise Financial and the affiliated funds-of-funds owned approximately 34% of the total outstanding Fund shares. All classes of shares have identical voting, dividend and liquidation rights. The distribution fee, transfer agency fees and service fee (class specific expenses) differ among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. The Fund's significant accounting policies are summarized below: USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. - -------------------------------------------------------------------------------- 17 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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. - -------------------------------------------------------------------------------- 18 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL 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 April 30, 2006, foreign currency holdings consisted of multiple denominations. 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. - -------------------------------------------------------------------------------- 19 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. 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. The management fee is a percentage of the Fund's average daily net assets that declines from 0.97% to 0.845% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper International Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment decreased the fee by $17,153 for the six months ended April 30, 2006. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. 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. - -------------------------------------------------------------------------------- 20 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL 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. The Investment Manager has Subadvisory Agreements with The Boston Company Asset Management, LLC and Marsico Capital Management, LLC. New investments in the Fund, net of any redemptions, are allocated in accordance with the Investment Manager's determination of the allocation that is in the best interests of the Fund's shareholders. Each subadviser's proportionate share of investments in the Fund will vary due to market fluctuations. 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 American Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $126,459 for Class A, $19,955 for Class B and $104 for Class C for the six months ended April 30, 2006. - -------------------------------------------------------------------------------- 21 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- For the six months ended April 30, 2006, the Investment Manager and its affiliates waived certain fees and expenses to 1.63% for Class A, 2.41% for Class B, 2.41% for Class C and 1.46% 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 $8,136, $1,033, $73 and $1, respectively. In addition, the Investment Manager and its affiliates have agreed to waive certain fees and expenses until Oct. 31, 2006. Under this agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.65% for Class A, 2.43% for Class B, 2.43% for Class C, 1.30% for Class I and 1.48% for Class Y of the Fund's average daily net assets. During the six months ended April 30, 2006, the Fund's custodian and transfer agency fees were reduced by $2,315 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $77,214,149 and $80,236,993, respectively, for the six months ended April 30, 2006. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2006 CLASS A CLASS B CLASS C CLASS I CLASS Y - ---------------------------------------------------------------------------------------------------------- Sold 1,453,009 439,893 29,660 1,274,363 12,800 Issued for reinvested distributions 1,040,169 297,084 16,703 663,721 1,462 Redeemed (2,532,606) (529,115) (33,679) (528,839) (403) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) (39,428) 207,862 12,684 1,409,245 13,859 - ---------------------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - ---------------------------------------------------------------------------------------------------------- Sold 3,263,694 1,042,312 58,126 3,489,973 -- Issued for reinvested distributions 1,085,816 322,830 21,385 402,405 1,070 Redeemed (5,807,671) (1,215,028) (99,587) (826,320) -- - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) (1,458,161) 150,114 (20,076) 3,066,058 1,070 - ----------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 22 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 5. FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2006, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
EXCHANGE DATE CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------------------- May 2, 2006 493,910 276,533 $10,348 $ -- U.S. Dollar British Pound May 2, 2006 23,891 13,349 450 -- U.S. Dollar British Pound May 2, 2006 34,369 215,164 618 -- U.S. Dollar Norwegian Krone May 3, 2006 177,888 158,956 -- 156 Canadian Dollar U.S. Dollar May 3, 2006 340,417 188,772 3,817 -- U.S. Dollar British Pound May 4, 2006 500,736 274,840 434 -- U.S. Dollar British Pound - ------------------------------------------------------------------------------------------------------------- Total $15,667 $156 - -------------------------------------------------------------------------------------------------------------
6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The 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. The Fund had no borrowings outstanding during the six months ended April 30, 2006. - -------------------------------------------------------------------------------- 23 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal or arbitration proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal or arbitration proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. - -------------------------------------------------------------------------------- 24 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
CLASS A PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $7.34 $7.03 $6.34 $5.20 $5.03 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .04 .05 .02 -- Net gains (losses) (both realized and unrealized) 1.74 1.01 .90 1.13 .17 - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.76 1.05 .95 1.15 .17 - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.09) (.09) (.01) -- Distributions from realized gains (.64) (.65) (.17) -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (.70) (.74) (.26) (.01) -- - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.40 $7.34 $7.03 $6.34 $5.20 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $104 $91 $98 $63 $22 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c) 1.63%(d),(e) 1.63%(d) 1.73% 1.74%(d) 1.67%(d),(e) - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .37%(e) .59% .51% .73% (1.01%)(e) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 43% 110% 111% 58% 2% - ----------------------------------------------------------------------------------------------------------------------------------- Total return(f) 25.45%(g) 15.65% 15.39% 22.26% 3.38%(g) - -----------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 1.65% for the six months ended April 30, 2006 and 1.64%, 2.21% and 5.51% for the periods ended Oct. 31, 2005, 2003 and 2002, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 25 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS B PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $7.24 $6.94 $6.29 $5.20 $5.03 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- -- -- -- -- Net gains (losses) (both realized and unrealized) 1.71 .98 .89 1.10 .17 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.71 .98 .89 1.10 .17 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.03) (.07) (.01) -- Distributions from realized gains (.64) (.65) (.17) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.65) (.68) (.24) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.30 $7.24 $6.94 $6.29 $5.20 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $29 $24 $22 $13 $1 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c) 2.41%(d),(e) 2.41%(d) 2.51% 2.52%(d) 2.52%(d),(e) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.39%)(e) (.18%) (.22%) .04% (1.46%)(e) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 43% 110% 111% 58% 2% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 24.92%(g) 14.86% 14.41% 21.23% 3.38%(g) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 2.42% for the six months ended April 30, 2006 and 2.42%, 2.98% and 6.28% for the periods ended Oct. 31, 2005, 2003 and 2002, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 26 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS C PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $7.24 $6.95 $6.29 $5.20 $5.03 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- -- -- -- -- Net gains (losses) (both realized and unrealized) 1.71 .97 .89 1.10 .17 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.71 .97 .89 1.10 .17 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.03) (.06) (.01) -- Distributions from realized gains (.64) (.65) (.17) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.65) (.68) (.23) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.30 $7.24 $6.95 $6.29 $5.20 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 $2 $1 $-- - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c) 2.41%(d),(e) 2.41%(d) 2.51% 2.52%(d) 2.51%(d),(e) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.39%)(e) (.21%) (.24%) (.01%) (1.60%)(e) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 43% 110% 111% 58% 2% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 24.86%(g) 14.67% 14.54% 21.23% 3.38%(g) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 2.42% for the six months ended April 30, 2006 and 2.42%, 2.98% and 6.28% for the periods ended Oct. 31, 2005, 2003 and 2002, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 27 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS I PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2006(g) 2005 2004(b) Net asset value, beginning of period $7.38 $7.06 $6.91 - ------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .06 -- Net gains (losses) (both realized and unrealized) 1.76 1.02 .15 - ------------------------------------------------------------------------------------------------------ Total from investment operations 1.79 1.08 .15 - ------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.11) -- Distributions from realized gains (.64) (.65) -- - ------------------------------------------------------------------------------------------------------ Total distributions (.74) (.76) -- - ------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.43 $7.38 $7.06 - ------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $63 $45 $22 - ------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c) 1.18%(d) 1.19% 1.29%(d) - ------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .88%(d) .96% .78%(d) - ------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 43% 110% 111% - ------------------------------------------------------------------------------------------------------ Total return(e) 25.77%(f) 16.17% 2.17%(f) - ------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 28 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS Y PER SHARE INCOME AND CAPITAL CHANGES(a) FISCAL PERIOD ENDED OCT. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $7.36 $7.05 $6.35 $5.20 $5.03 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .05 .06 .03 -- Net gains (losses) (both realized and unrealized) 1.74 1.01 .91 1.13 .17 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.77 1.06 .97 1.16 .17 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.10) (.10) (.01) -- Distributions from realized gains (.64) (.65) (.17) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.73) (.75) (.27) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.40 $7.36 $7.05 $6.35 $5.20 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $-- $-- $-- $-- $-- - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c) 1.46%(d) 1.46%(e) 1.57% 1.57%(e) 1.52%(d),(e) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .70%(d) .74% .37% .86% (.80%)(d) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 43% 110% 111% 58% 2% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 25.46%(g) 15.86% 15.63% 22.48% 3.38%(g) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class Y would have been 1.47%, 2.04% and 5.34% for the periods ended Oct. 31, 2005, 2003 and 2002, respectively. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 29 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 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. - -------------------------------------------------------------------------------- 30 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2005 APRIL 30, 2006 THE PERIOD(a) EXPENSE RATIO Class A - --------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,254.50 $9.01 1.63% - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.53 $8.06 1.63% - --------------------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,249.20 $13.29 2.41% - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.70 $11.89 2.41% - --------------------------------------------------------------------------------------------------------- Class C - --------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,248.60 $13.29 2.41% - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.70 $11.89 2.41% - --------------------------------------------------------------------------------------------------------- Class I - --------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,257.70 $6.53 1.18% - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.73 $5.84 1.18% - --------------------------------------------------------------------------------------------------------- Class Y - --------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,254.60 $8.07 1.46% - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.36 $7.22 1.46% - ---------------------------------------------------------------------------------------------------------
(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 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2006: +25.45% for Class A, +24.92% for Class B, +24.86% for Class C, +25.77% for Class I and +25.46% for Class Y. - -------------------------------------------------------------------------------- 31 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL 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/Trustees (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. The Fund operates under an order from the Securities and Exchange Commission that permits the investment manager, subject to the approval of the Board, to appoint unaffiliated subadvisers or change the terms of subadvisory agreements without first obtaining shareholder approval. As a basis for making its determination, the Board monitors the investment performance of the Fund throughout the year using a number of benchmarks and comparison periods of one, three and five years, as well as, the entire period during which the subadviser has managed its portion of the investment portfolio. On an annual basis the Board assesses the operating capabilities of the subadviser, such as adherence to the investment strategies of the Fund, compliance with its code of ethics and all applicable legal requirements, and its working relationship with the investment manager, through reports prepared by the investment manager. During the year, if there is a change in the composition of the subadviser's management team or if other circumstances so require, the Board will re-assess the operating capabilities. The Board also considers the fees paid by the investment manager to the subadviser and any business relationships that exist between the investment manager and its affiliates and the subadviser. Based on its review and evaluation, the Board determined to approve the continuation of the subadvisory agreements. 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 www.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 most recent 12-month period ended June 30 is available without charge by visiting www.riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 32 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RESULTS OF MEETING OF SHAREHOLDERS RIVERSOURCE INTERNATIONAL EQUITY FUND REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006 (UNAUDITED) A brief description of each proposal voted upon at the meeting and the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each proposal is set forth below. A vote is based on total dollar interest in a fund. ELECTION OF BOARD MEMBERS
AFFIRMATIVE WITHHOLD - ------------------------------------------------------------------------------- Kathleen Blatz 148,385,841.94 3,225,364.25 - ------------------------------------------------------------------------------- Arne H. Carlson 148,412,238.84 3,198,967.35 - ------------------------------------------------------------------------------- Patricia M. Flynn 148,715,899.99 2,895,306.20 - ------------------------------------------------------------------------------- Anne P. Jones 148,435,514.78 3,175,691.41 - ------------------------------------------------------------------------------- Jeffrey Laikind 148,596,460.56 3,014,745.63 - ------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 148,456,440.01 3,154,766.18 - ------------------------------------------------------------------------------- Catherine James Paglia 148,617,392.45 2,993,813.74 - ------------------------------------------------------------------------------- Vikki L. Pryor 148,630,145.23 2,981,060.96 - ------------------------------------------------------------------------------- Alan K. Simpson 148,047,269.26 3,563,936.93 - ------------------------------------------------------------------------------- Alison Taunton-Rigby 148,715,899.99 2,895,306.20 - ------------------------------------------------------------------------------- William F. Truscott 148,501,065.55 3,110,140.64 - -------------------------------------------------------------------------------
AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------------- 146,370,142.58 3,086,758.40 2,154,305.21 0.00 - --------------------------------------------------------------------------------------
APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE INVESTMENTS, LLC
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------------- 146,954,576.37 2,545,305.05 2,111,324.77 0.00 - --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 33 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
DIVERSIFICATION AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------------- 146,939,125.97 2,545,783.83 2,126,296.39 0.00 - -------------------------------------------------------------------------------------- LENDING AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------------- 145,672,729.82 3,686,653.02 2,251,823.35 0.00 - -------------------------------------------------------------------------------------- BORROWING AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------------- 145,589,385.82 3,752,505.48 2,269,314.89 0.00 - --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 34 - RIVERSOURCE INTERNATIONAL EQUITY FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RIVERSOURCE(SM) INTERNATIONAL EQUITY FUND 734 Ameriprise Financial Center Minneapolis, MN 55474 riversource.com/funds [RiverSource Investments logo] This report must be accompanied or preceded by the Fund's current prospectus. RiverSource Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. Both companies are part of Ameriprise Financial, Inc. S-6270 E (6/06) Semiannual Report RIVERSOURCE [LOGO](SM) INVESTMENTS RIVERSOURCE(SM) INTERNATIONAL SELECT VALUE FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2006 > RIVERSOURCE INTERNATIONAL SELECT VALUE FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH. - -------------------------------------------------------------------------------- TABLE OF CONTENTS Fund Snapshot .............................................................. 2 Performance Summary ........................................................ 3 Questions & Answers with Portfolio Management .............................. 5 Investments in Securities .................................................. 8 Financial Statements ....................................................... 13 Notes to Financial Statements .............................................. 16 Fund Expenses Example ...................................................... 30 Approval of Investment Management Services Agreement ....................... 32 Proxy Voting ............................................................... 33 Results of Meeting of Shareholders ......................................... 34
DALBAR [LOGO] RATED 2006 FOR COMMUNICATION RiverSource Funds' 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. - -------------------------------------------------------------------------------- 1 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND SNAPSHOT AT APRIL 30, 2006 - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS < - -------------------------------------------------------------------------------- ALLIANCE CAPITAL MANAGEMENT L.P.
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY Kevin F. Simms 1/04 16 Henry S. D'Auria 1/04 17
- -------------------------------------------------------------------------------- FUND OBJECTIVE < - -------------------------------------------------------------------------------- The Fund seeks to provide shareholders with long-term capital growth. Inception dates by class A: 9/28/01 B: 9/28/01 C: 9/28/01 I: 3/4/04 Y: 9/28/01 Ticker symbols by class A: APIAX B: AXIBX C: APICX I: APRIX Y: -- Total net assets $1.896 billion Number of holdings 132 - -------------------------------------------------------------------------------- STYLE MATRIX < - --------------------------------------------------------------------------------
- --------------------------------- STYLE VALUE BLEND GROWTH - --------------------------------- LARGE - --------------------------------- MEDIUM SIZE - --------------------------------- SMALL - ---------------------------------
Shading within the style matrix indicates areas in which the Fund generally invests. - -------------------------------------------------------------------------------- TOP TEN HOLDINGS < - -------------------------------------------------------------------------------- Percentage of portfolio assets ING Groep (Netherlands) 2.5% - -------------------------------------------------------------------------------- Eni (Italy) 2.4 - -------------------------------------------------------------------------------- ORIX (Japan) 2.3 - -------------------------------------------------------------------------------- Total (France) 2.3 - -------------------------------------------------------------------------------- Toyota Motor (Japan) 2.2 - -------------------------------------------------------------------------------- Renault (France) 2.1 - -------------------------------------------------------------------------------- Continental (Germany) 2.1 - -------------------------------------------------------------------------------- Sumitomo Mitsui Financial Group (Japan) 2.1 - -------------------------------------------------------------------------------- E.On (Germany) 2.1 - -------------------------------------------------------------------------------- Canon (Japan) 2.0 - --------------------------------------------------------------------------------
For further detail about these holdings, please refer to the section entitled "Investments in Securities." Investment products involve risks including possible loss of principal and fluctuation in value. Stocks of small- and mid-capitalization companies involve substantial risk. Historically, these stocks have experienced greater price volatility than stocks of larger companies, and they can be expected to do so in the future. International investing involves increased risk and volatility, not typically associated with domestic investing, due to potential political and economic instability, limited liquidity, volatile prices, lack of accounting, auditing, and financial reporting standards, changes in currency exchange rates, and differences in how trades are cleared and settled. Risks are particularly significant in emerging markets due to the dramatic pace of economic, social, and political change. 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. - -------------------------------------------------------------------------------- 2 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON For the six-month period ended April 30, 2006 [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.] RiverSource International Select Value Fund Class A (excluding sales charge) +25.56% Morgan Stanley Capital International (MSCI) EAFE GDP Weighted, Half-Hedged Index(1) (unmanaged) +22.70% Morgan Stanley Capital International (MSCI) EAFE Index(2) (unmanaged) +23.10% Lipper International Multi-Cap Value Funds Index(3) +24.92%
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 www.riversource.com/funds. (1) The Morgan Stanley Capital International (MSCI) EAFE GDP Weighted, Half-Hedged Index, an unmanaged index, is compiled from a composite of securities of major stock markets in Europe, Australia and the Far East, with countries weighted according to gross domestic product and currency positions half-hedged. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (3) The Lipper International Multi-Cap Value Funds Index includes the 10 largest international multi-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 3 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS < - --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y (INCEPTION DATES) (9/28/01) (9/28/01) (9/28/01) (3/4/04) (9/28/01) AFTER AFTER NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5) AT APRIL 30, 2006 - --------------------------------------------------------------------------------------------------------- 6 months* +25.56% +18.34% +25.05% +20.05% +25.16% +24.16% +25.87% +25.59% - --------------------------------------------------------------------------------------------------------- 1 year +41.79% +33.64% +40.70% +35.70% +40.66% +39.66% +42.49% +42.06% - --------------------------------------------------------------------------------------------------------- 3 years +31.70% +29.13% +30.69% +29.91% +30.77% +30.77% N/A +31.91% - --------------------------------------------------------------------------------------------------------- Since inception +19.69% +18.15% +18.78% +18.54% +18.78% +18.78% +26.39% +19.86% - --------------------------------------------------------------------------------------------------------- AT MARCH 31, 2006 - --------------------------------------------------------------------------------------------------------- 6 months* +17.41% +10.65% +17.03% +12.03% +16.88% +15.88% +17.65% +17.47% - --------------------------------------------------------------------------------------------------------- 1 year +31.73% +24.16% +30.82% +25.82% +30.82% +29.82% +32.46% +32.16% - --------------------------------------------------------------------------------------------------------- 3 years +34.88% +32.24% +33.89% +33.14% +33.93% +33.93% N/A +35.13% - --------------------------------------------------------------------------------------------------------- Since inception +19.14% +17.58% +18.27% +18.02% +18.24% +18.24% +25.43% +19.35% - ---------------------------------------------------------------------------------------------------------
(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. * Not annualized. - -------------------------------------------------------------------------------- 4 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT RiverSource International Select Value Fund rose 25.56% for the six months ended April 30, 2006 (Class A shares, excluding sales charges). This outperformed the Fund's benchmark, the MSCI EAFE GDP Weighted, Half-Hedged Index, which advanced 22.70% for the period, and the broader MSCI EAFE Index, which rose 23.10%. The Fund also outperformed its peer group, as represented by the Lipper International Multi-Cap Value Funds Index, which was up 24.92% for the period. Alliance Capital Management L.P. (AllianceBernstein), a New York-based investment firm, manages the portfolio of RiverSource International Select Value Fund. Below, AllianceBernstein discusses the Fund's positioning and results during the first half of the fiscal year 2006. - -------------------------------------------------------------------------------- COUNTRY COMPOSITION < - -------------------------------------------------------------------------------- Percentage of portfolio assets at April 30. 2006 [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Japan 27.4% United Kingdom 14.6% Germany 12.1% France 11.7% Netherlands 4.6% Italy 4.1% Canada 3.1% Spain 2.9% Cash & Short-Term Securities 2.7% Switzerland 2.4% Singapore 1.8% South Korea 1.8% Belgium 1.5% Brazil 1.5% South Africa 1.2% Taiwan 1.1% Austria 1.0% Other* 4.5%
* Includes Australia, China, Denmark, Finland, Hong Kong, Hungary, India, Luxembourg, Philippine Islands, Sweden and Thailand. Q. What factors affected performance for this period? A. International equity markets posted healthy gains amid robust and more balanced global economic growth during the period. The Fund performed well during the period due to strong stock selection, particularly in the financials sector. Economic activity in Japan surged in the fourth quarter of 2005, helping Japanese stocks, particularly the Fund's holdings in financial companies such as ORIX and ITOCHU. Stock selection in the industrials sector was also strong, including positions in Arcelor, Xstrata and JFE Holdings. Steelmaker Arcelor soared after receiving a hostile $22 billion offer from larger rival Mittal. Speculation of further consolidation and improved sentiment in the steel industry also boosted the shares of JFE in Japan. Xstrata, the diversified mining group, rose after posting stronger than expected earnings largely due to booming global demand for commodities. Detractors to performance included Spanish-Argentinean energy firm Repsol YPF, which declined after writing off a quarter of its proven reserves following geological problems with gas wells in Argentina. While we continue to monitor the situation, our research indicates the stock remains - -------------------------------------------------------------------------------- 5 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS > THE FUND PERFORMED WELL DURING THE PERIOD DUE TO STRONG STOCK SELECTION, PARTICULARLY IN THE FINANCIALS SECTOR. attractive, as it trades at a discount to its peers and its share price reflects known write-downs and political risks. Mitsui OSK Lines, the Japanese shipping company, was another negative contributor. A relatively recent addition to the portfolio, Mitsui suffered from news of a decline in freight rates for European/Asia-Pacific routes. The fall was driven by increased supply, which will exceed demand in the short term. But with global trade expected to remain robust over the next few years and shipbuilding capacity limited by the diversion of shipyard resources to building oil rigs, the balance between supply and demand should soon be restored. Q. What changes did you make to the portfolio during the period? A. As a result of the recent outperformance of emerging markets, the discount between developing and developed markets has narrowed. We have, therefore, trimmed the Fund's exposure. But with emerging markets benefiting from a combination of faster economic growth, healthy current account balances and much lower inflation than in the past, a more modest discount seems appropriate. Perhaps the most notable recent shift in the portfolio's positioning during the period has been the increased weighting in utilities stocks. During the past few years, soaring gas and oil prices have had a knock-on effect on the price of electricity. This has boosted utilities' profits, empowering some of Europe's largest to set out on the acquisition trail. The cycle is likely to continue, as rivals of recent deal participants attempt to bulk up in turn and achieve the economies of scale that help them stay competitive. This backdrop has been favorable for the Fund's holdings in E.ON and Endesa. - -------------------------------------------------------------------------------- 6 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS Q. How are you positioning the Fund going forward? A. The value opportunity remains muted, limiting the scope for active sector positions. However, we continue to favor the energy, industrials and financials sectors as well as opportunities in emerging markets. Our increased weighting of utilities stocks reflects the increased opportunity that our bottom-up research has detected in that sector. - -------------------------------------------------------------------------------- 7 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES RiverSource International Select Value Fund APRIL 30, 2006 (UNAUDITED) (Percentages represent value of investments compared to net assets)
- -------------------------------------------------------------------------------- COMMON STOCKS (96.4%)(c) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) AUSTRALIA (0.4%) TRANSPORTATION INFRASTRUCTURE Macquarie Airports 3,400,200 $ 8,472,673 - -------------------------------------------------------------------------------- AUSTRIA (1.0%) OIL, GAS & CONSUMABLE FUELS OMV 269,300 18,720,591 - -------------------------------------------------------------------------------- BELGIUM (1.5%) COMMERCIAL BANKS (0.8%) KBC Groep 140,100 16,249,600 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.7%) Delhaize Group 175,200 12,618,944 - -------------------------------------------------------------------------------- BRAZIL (1.5%) COMMERCIAL BANKS (0.2%) UNIBANCO - Uniao de Bancos Brasileiros ADR 52,900 4,197,615 - -------------------------------------------------------------------------------- METALS & MINING (0.7%) Gerdau ADR 340,950 5,898,435 Usinas Siderurgicas de Minas Gerais Series A 158,200 6,006,443 --------------- Total 11,904,878 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.6%) Petroleo Brasileiro 524,700 11,653,572 - -------------------------------------------------------------------------------- CANADA (3.0%) COMMERCIAL BANKS (0.4%) Bank of Nova Scotia 186,178 7,746,882 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%) TELUS 270,400 11,173,953 - -------------------------------------------------------------------------------- INSURANCE (0.4%) Manulife Financial 129,300 8,442,665 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.6%) Canadian Natural Resources 503,200 30,246,010 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) CHINA (0.3%) OIL, GAS & CONSUMABLE FUELS PetroChina Series H 5,958,000 $ 6,570,561 - -------------------------------------------------------------------------------- DENMARK (0.7%) COMMERCIAL BANKS Danske Bank 324,200 12,897,714 - -------------------------------------------------------------------------------- FINLAND (0.7%) INSURANCE Sampo Series A 669,800 13,822,329 - -------------------------------------------------------------------------------- FRANCE (11.6%) AUTOMOBILES (2.1%) Renault 345,700 40,118,067 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (2.8%) BNP Paribas 73,300 6,925,300 BNP Paribas-New 7,330(b) 668,953 Credit Agricole 556,536 22,422,341 Societe Generale 167,000 25,510,172 --------------- Total 55,526,766 - -------------------------------------------------------------------------------- INSURANCE (1.9%) Assurances Generales de France 285,300 36,059,715 - -------------------------------------------------------------------------------- METALS & MINING (0.8%) Arcelor 345,980 14,227,264 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.3%) Total 154,500 42,719,073 - -------------------------------------------------------------------------------- PHARMACEUTICALS (1.7%) Sanofi-Aventis 340,426 32,098,646 - -------------------------------------------------------------------------------- GERMANY (12.0%) AUTO COMPONENTS (2.1%) Continental 334,900(d) 39,865,930 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (2.1%) E.ON 320,300(d) 39,000,667 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 8 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) GERMANY (CONT.) ELECTRONIC EQUIPMENT & INSTRUMENTS (0.2%) EPCOS 297,300(b) $ 3,997,651 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.2%) Fresenius Medical Care & Co 35,000 4,199,011 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.3%) TUI 301,600 6,421,797 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.3%) Siemens 257,000 24,313,483 - -------------------------------------------------------------------------------- INSURANCE (2.2%) Allianz 72,700(d) 12,169,091 Munich Re Group 198,000(d) 28,017,760 --------------- Total 40,186,851 - -------------------------------------------------------------------------------- MACHINERY (1.2%) MAN 311,200 23,588,188 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (1.5%) RWE 334,370 28,984,329 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.9%) Schering 152,100(d) 16,331,032 - -------------------------------------------------------------------------------- HONG KONG (0.3%) REAL ESTATE Kerry Properties 1,330,000 4,709,012 Sino Land 461,700 768,220 --------------- Total 5,477,232 - -------------------------------------------------------------------------------- HUNGARY (0.4%) OIL, GAS & CONSUMABLE FUELS MOL Magyar Olaj-es Gazipari 62,100 7,396,755 - -------------------------------------------------------------------------------- INDIA (0.3%) COMMERCIAL BANKS State Bank of India GDR 96,500 4,916,675 - -------------------------------------------------------------------------------- ITALY (4.1%) COMMERCIAL BANKS (1.0%) Banca Intesa 3,105,875(d) 18,413,427 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.8%) Buzzi Unicem 570,781 14,601,257 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.3%) Eni 1,465,000 44,720,410 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) JAPAN (27.3%) AUTOMOBILES (4.4%) Honda Motor 299,400 $ 21,274,888 Nissan Motor 1,384,300 18,201,995 Toyota Motor 713,500 41,738,340 --------------- Total 81,215,223 - -------------------------------------------------------------------------------- CHEMICALS (0.6%) Mitsui Chemicals 1,685,000 12,195,345 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (3.6%) Mitsubishi UFJ Financial Group 1,817 28,567,677 Sumitomo Mitsui Financial Group 3,581 39,317,083 --------------- Total 67,884,760 - -------------------------------------------------------------------------------- CONSUMER FINANCE (2.9%) Aiful 101,025 6,033,992 ORIX 147,000 44,158,103 Promise 91,150 5,620,316 --------------- Total 55,812,411 - -------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.8%) Tokyo Electric Power 570,100 14,646,838 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (1.5%) Hitachi 1,390,000 10,341,063 Kyocera 186,700 17,431,893 --------------- Total 27,772,956 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.3%) UNY 296,000 5,290,821 - -------------------------------------------------------------------------------- GAS UTILITIES (0.5%) Tokyo Gas 2,122,000 10,269,846 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (1.1%) Sankyo 80,200 5,691,840 Sega Sammy Holdings 361,400 14,411,559 --------------- Total 20,103,399 - -------------------------------------------------------------------------------- MACHINERY (0.4%) Sumitomo Heavy Inds 765,000 8,063,241 - -------------------------------------------------------------------------------- MARINE (0.7%) Mitsui OSK Lines 1,968,000 14,088,011 - -------------------------------------------------------------------------------- METALS & MINING (3.8%) JFE Holdings 856,200 33,240,265 Kobe Steel 5,157,000 17,529,723 Sumitomo Metal Inds 4,790,000 20,194,993 --------------- Total 70,964,981 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 9 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) JAPAN (CONT.) OFFICE ELECTRONICS (1.9%) Canon 480,600 $ 36,767,905 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.4%) Nippon Mining Holdings 764,500 7,070,870 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.4%) Takeda Pharmaceutical 125,400 7,666,087 - -------------------------------------------------------------------------------- ROAD & RAIL (0.8%) East Japan Railway 2,019 15,765,402 - -------------------------------------------------------------------------------- TOBACCO (1.5%) Japan Tobacco 7,230 29,085,112 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.7%) ITOCHU 2,071,000 18,809,082 Mitsubishi 183,000 4,428,327 Mitsui & Co 582,000 8,797,734 --------------- Total 32,035,143 - -------------------------------------------------------------------------------- LUXEMBOURG (0.3%) MEDIA SES Global FDR 317,200 5,197,507 - -------------------------------------------------------------------------------- NETHERLANDS (4.6%) AEROSPACE & DEFENSE (0.9%) European Aeronautic Defence and Space 423,370 16,704,736 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) ABN AMRO Holding 280,600 8,385,047 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (2.4%) ING Groep 1,136,124(d) 46,232,022 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.6%) Koninklijke Philips Electronics 305,500 10,539,532 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.3%) Royal Dutch Shell Series A 161,027 5,520,786 - -------------------------------------------------------------------------------- PHILIPPINE ISLANDS (0.2%) DIVERSIFIED TELECOMMUNICATION SERVICES Philippine Long Distance Telephone 98,000 3,341,280 - -------------------------------------------------------------------------------- SINGAPORE (1.7%) DIVERSIFIED TELECOMMUNICATION SERVICES (1.2%) SingTel 13,875,786 24,053,939 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) SINGAPORE (CONT.) ELECTRONIC EQUIPMENT & INSTRUMENTS (0.5%) Flextronics Intl 788,300(b) $ 8,955,088 - -------------------------------------------------------------------------------- SOUTH AFRICA (1.2%) COMMERCIAL BANKS (0.2%) Standard Bank Group 243,000 3,478,669 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.1%) Telkom 81,570 1,948,915 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.2%) Tiger Brands 126,000 3,521,315 - -------------------------------------------------------------------------------- INSURANCE (0.3%) Sanlam 2,371,000 6,143,594 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.4%) Sasol 163,400 6,897,506 - -------------------------------------------------------------------------------- SOUTH KOREA (1.5%) AUTO COMPONENTS (0.2%) Hyundai Mobis 52,200 4,611,581 - -------------------------------------------------------------------------------- CHEMICALS (0.2%) Honam Peterochemical 66,000 4,199,809 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.5%) Industrial Bank of Korea 194,500 3,919,292 Kookmin Bank 53,900 4,830,363 --------------- Total 8,749,655 - -------------------------------------------------------------------------------- METALS & MINING (0.4%) POSCO 25,500 7,112,631 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.2%) Samsung Electronics 6,700 4,576,095 - -------------------------------------------------------------------------------- SPAIN (2.9%) ELECTRIC UTILITIES (1.4%) Endesa 811,225 26,932,707 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.1%) Repsol YPF 721,900 21,563,117 - -------------------------------------------------------------------------------- TOBACCO (0.4%) Altadis 140,400 6,662,523 - -------------------------------------------------------------------------------- SWEDEN (0.7%) COMMERCIAL BANKS Nordea Bank 975,400 12,583,622 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) SWITZERLAND (2.4%) CAPITAL MARKETS (1.2%) Credit Suisse Group 353,000(d) $ 22,172,795 - -------------------------------------------------------------------------------- METALS & MINING (1.2%) Xstrata 644,590 23,320,129 - -------------------------------------------------------------------------------- TAIWAN (1.1%) COMPUTERS & PERIPHERALS (0.3%) Compal Electronics 4,886,000 5,376,132 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.4%) AU Optronics 1,464,000 2,400,226 Hon Hai Precision Industry 747,000 5,069,765 --------------- Total 7,469,991 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.4%) Taiwan Semiconductor Mfg 3,742,000 7,988,408 - -------------------------------------------------------------------------------- THAILAND (0.2%) OIL, GAS & CONSUMABLE FUELS PTT 540,800 3,718,721 - -------------------------------------------------------------------------------- UNITED KINGDOM (14.5%) AEROSPACE & DEFENSE (0.8%) BAE Systems 2,082,100 15,851,260 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (3.4%) Barclays 1,753,500 21,902,922 HBOS 1,091,400 19,155,364 Royal Bank of Scotland Group 701,500 22,910,205 --------------- Total 63,968,491 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.9%) J Sainsbury 2,670,062 16,274,156 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.5%) Tate & Lyle 966,900 9,785,438 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.0%) Punch Taverns 692,000 11,053,910 Whitbread 416,400 8,504,220 --------------- Total 19,558,130 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.1%) George Wimpey 813,000 7,760,916 Persimmon 300,000 7,166,354 Taylor Woodrow 867,500 6,058,624 --------------- Total 20,985,894 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) INSURANCE (2.0%) Aviva 1,356,292 $ 19,810,317 Friends Provident 3,780,080 13,561,929 Royal & SunAlliance Insurance Group 1,468,500 3,695,377 --------------- Total 37,067,623 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.0%) BP 1,460,500 18,016,693 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.7%) AstraZeneca 255,000 14,089,271 - -------------------------------------------------------------------------------- TOBACCO (1.7%) British American Tobacco 1,256,900 32,133,235 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.4%) Vodafone Group 11,580,400 27,346,330 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,211,401,163) $1,827,614,937 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PREFERRED STOCKS (0.3%) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) SOUTH KOREA Samsung Electronics 8,800(c) $ 4,769,117 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost: $4,923,573) $ 4,769,117 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SHORT-TERM SECURITIES (2.7%)(e) - -------------------------------------------------------------------------------- ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY COMMERCIAL PAPER Chesham Finance LLC 05-01-06 4.84% $ 7,544,000 $ 7,540,957 Dakota Notes 05-11-06 4.79 2,000,000(f) 1,996,548 Emerald Certificates MBNA MCCT 06-13-06 4.83 2,000,000(f) 1,987,733 Gemini Securitization 05-01-06 4.82 2,256,000(f) 2,255,094 05-12-06 4.80 14,200,000(f) 14,173,549 General Electric Capital 05-01-06 4.83 4,500,000 4,498,189
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- SHORT-TERM SECURITIES (CONTINUED) - -------------------------------------------------------------------------------- ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY COMMERCIAL PAPER (CONT.) Jupiter Securitization 05-05-06 4.77% $ 1,151,000(f) $ 1,149,932 05-08-06 4.78 8,000,000(f) 7,989,400 Morgan Stanley & Co 05-02-06 4.80 3,000,000 2,998,400 Nieuw Amsterdam 05-16-06 4.83 4,000,000(f) 3,990,360
- -------------------------------------------------------------------------------- SHORT-TERM SECURITIES (CONTINUED) - -------------------------------------------------------------------------------- ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY COMMERCIAL PAPER (CONT.) Park Granada LLC 07-05-06 4.93% $ 3,000,000(f) $ 2,972,307 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITIES (Cost: $51,558,988) $ 51,552,469 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,267,883,724)(g) $1,883,936,523 ================================================================================
- -------------------------------------------------------------------------------- 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. (d) At April 30, 2006, security was partially or fully on loan. See Note 5 to the financial statements. (e) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 7 to the financial statements):
TYPE OF SECURITY CONTRACTS -------------------------------------------------------------------------- PURCHASE CONTRACTS Tokyo Price Index Future, June 2006 250
(f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors.These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2006, the value of these securities amounted to $36,514,923 or 1.9% of net assets. (g) At April 30, 2006, the cost of securities for federal income tax purposes was approximately $1,267,884,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $622,861,000 Unrealized depreciation (6,808,000) -------------------------------------------------------------------------- Net unrealized appreciation $616,053,000 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (I) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (II) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (III) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (IV) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 12 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RiverSource International Select Value Fund APRIL 30, 2006 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------------- ASSETS - ---------------------------------------------------------------------------------------------------------------------- Investments in securities, at value (Note 1)* (identified cost $1,267,883,724) $ 1,883,936,523 Cash in bank on demand deposit 20,352 Foreign currency holdings (identified cost $20,490,752) (Note 1) 21,136,968 Capital shares receivable 1,263,014 Dividends and accrued interest receivable 9,126,208 Receivable for investment securities sold 1,695,477 Margin deposits on futures contracts (Note 7) 1,043,039 U.S. government securities held as collateral (Note 5) 152,232,649 - ---------------------------------------------------------------------------------------------------------------------- Total assets 2,070,454,230 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- LIABILITIES - ---------------------------------------------------------------------------------------------------------------------- Capital shares payable 224,404 Payable for investment securities purchased 4,747,458 Unrealized depreciation on foreign currency contracts held, at value (Note 6) 16,916,832 Payable upon return of securities loaned (Note 5) 152,232,649 Accrued investment management services fee 43,368 Accrued distribution fee 21,302 Accrued service fee 5 Accrued transfer agency fee 4,883 Accrued administrative services fee 3,850 Other accrued expenses 157,950 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities 174,352,701 - ---------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 1,896,101,529 ====================================================================================================================== - ---------------------------------------------------------------------------------------------------------------------- REPRESENTED BY - ---------------------------------------------------------------------------------------------------------------------- Capital stock -- $.01 par value (Note 1) $ 1,796,043 Additional paid-in capital 1,219,449,075 Excess of distributions over net investment income (2,455,088) Accumulated net realized gain (loss) 74,691,786 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 6 and 7) 602,619,713 - ---------------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 1,896,101,529 ====================================================================================================================== Net assets applicable to outstanding shares: Class A $ 1,392,800,450 Class B $ 403,870,827 Class C $ 23,622,486 Class I $ 74,171,836 Class Y $ 1,635,930 Net asset value per share of outstanding capital stock: Class A shares 131,075,310 $ 10.63 Class B shares 39,167,635 $ 10.31 Class C shares 2,293,947 $ 10.30 Class I shares 6,914,414 $ 10.73 Class Y shares 152,978 $ 10.69 - ---------------------------------------------------------------------------------------------------------------------- *Including securities on loan, at value (Note 5) $ 156,264,870 - ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS RiverSource International Select Value Fund SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED) - ---------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME - ---------------------------------------------------------------------------------------------------------------------- Income: Dividends $ 16,935,712 Interest 527,385 Fee income from securities lending (Note 5) 552,036 Less foreign taxes withheld (1,763,797) - ---------------------------------------------------------------------------------------------------------------------- Total income 16,251,336 - ---------------------------------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 7,461,783 Distribution fee Class A 1,458,220 Class B 1,752,025 Class C 99,482 Transfer agency fee 1,283,436 Incremental transfer agency fee Class A 99,584 Class B 59,015 Class C 2,977 Service fee -- Class Y 624 Administrative services fees and expenses 617,423 Compensation of board members 5,625 Custodian fees 165,195 Printing and postage 180,465 Registration fees 54,566 Audit fees 11,500 Other 18,593 - ---------------------------------------------------------------------------------------------------------------------- Total expenses 13,270,513 Earnings credits on cash balances (Note 2) (23,842) - ---------------------------------------------------------------------------------------------------------------------- Total net expenses 13,246,671 - ---------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 3,004,665 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET - ---------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on: Security transactions (Note 3) 57,533,285 Foreign currency transactions 13,787,795 Futures contracts 3,371,325 - ---------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 74,692,405 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 292,454,996 - ---------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 367,147,401 - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 370,152,066 ======================================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS RiverSource International Select Value Fund
APRIL 30, 2006 SIX MONTHS ENDED OCT. 31, 2005 (UNAUDITED) YEAR ENDED - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS AND DISTRIBUTIONS - ---------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net $ 3,004,665 $ 11,845,266 Net realized gain (loss) on investments 74,692,405 71,686,370 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 292,454,996 131,005,718 - ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 370,152,066 214,537,354 - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (25,641,225) -- Class B (5,774,933) -- Class C (334,098) -- Class I (1,879,380) -- Class Y (25,903) -- Net realized gain Class A (40,958,926) (25,324,943) Class B (12,925,508) (9,029,520) Class C (721,629) (471,404) Class I (2,591,521) (960,567) Class Y (38,556) (19,103) - ---------------------------------------------------------------------------------------------------------------------- Total distributions (90,891,679) (35,805,537) - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) - ---------------------------------------------------------------------------------------------------------------------- Proceeds from sales Class A shares (Note 2) 230,230,328 375,279,287 Class B shares 58,140,050 111,687,513 Class C shares 3,862,023 5,569,305 Class I shares 15,243,605 41,163,007 Class Y shares 508,791 347,440 Reinvestment of distributions at net asset value Class A shares 65,368,254 24,993,555 Class B shares 18,411,993 8,899,018 Class C shares 1,015,005 453,066 Class I shares 4,470,046 960,160 Class Y shares 63,264 18,515 Payments for redemptions Class A shares (103,959,875) (156,469,077) Class B shares (Note 2) (41,030,399) (73,574,789) Class C shares (Note 2) (1,738,427) (2,961,896) Class I shares (19,199,990) (9,589,149) Class Y shares (70,991) (42,248) - ---------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 231,313,677 326,733,707 - ---------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 510,574,064 505,465,524 Net assets at beginning of period 1,385,527,465 880,061,941 - ---------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 1,896,101,529 $ 1,385,527,465 ====================================================================================================================== Undistributed (excess of distributions over) net investment income $ (2,455,088) $ 28,195,786 - ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS RiverSource International Select Value Fund (Unaudited as to April 30, 2006) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of RiverSource International Managers Series, Inc. (formerly AXP Partners International Series, Inc.) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource International Managers 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 issuers in countries that are part of the Morgan Stanley Capital International (MSCI) EAFE (Europe, Australia and the Far East) Index and Canada. 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 April 30, 2006, Ameriprise Financial, Inc. (Ameriprise Financial) and the affiliated funds-of-funds owned 100% of Class I shares, which represented 3.91% 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. - -------------------------------------------------------------------------------- 16 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. 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. - -------------------------------------------------------------------------------- 17 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL 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 April 30, 2006, foreign currency holdings consisted of multiple denominations, primarily 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. - -------------------------------------------------------------------------------- 18 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income to shareholders. No provision for income or excise taxes is thus required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- 19 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL 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. The management fee is a percentage of the Fund's average daily net assets that declines from 0.90% to 0.775% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper International Multi-Cap Value Funds Index. In certain circumstances, the Board may approve a change in the index. The maximum adjustment is 0.12% per year. If the performance difference is less than 0.50%, the adjustment will be zero. The adjustment increased the fee by $713,144 for the six months ended April 30, 2006. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. 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. The Investment Manager has a Subadvisory Agreement with Alliance Capital Management L.P. 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. - -------------------------------------------------------------------------------- 20 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- The Transfer Agent charges an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $1,954,752 for Class A, $208,445 for Class B and $955 for Class C for the six months ended April 30, 2006. During the six months ended April 30, 2006, the Fund's custodian and transfer agency fees were reduced by $23,842 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $312,055,557 and $209,652,941, respectively, for the six months ended April 30, 2006. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2006 CLASS A CLASS B CLASS C CLASS I CLASS Y - -------------------------------------------------------------------------------------------------------------- Sold 23,619,897 6,155,602 409,060 1,557,463 52,233 Issued for reinvested distributions 7,089,857 2,050,333 113,282 480,650 6,817 Redeemed (10,680,577) (4,325,056) (183,293) (1,850,862) (7,175) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) 20,029,177 3,880,879 339,049 187,251 51,875 - --------------------------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - -------------------------------------------------------------------------------------------------------------- Sold 45,019,345 13,842,020 689,080 4,903,088 40,740 Issued for reinvested distribution 3,151,772 1,149,745 58,611 120,321 2,323 Redeemed (18,660,838) (8,912,365) (364,913) (1,150,316) (5,097) - -------------------------------------------------------------------------------------------------------------- Net increase (decrease) 29,510,279 6,079,400 382,778 3,873,093 37,966 - --------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 21 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 5. LENDING OF PORTFOLIO SECURITIES At April 30, 2006, securities valued at $156,264,870 were on loan to brokers. For collateral, the Fund received U.S. government securities valued at $152,232,649. At April 30, 2006, due to fluctuating market conditions, the Fund was undercollaterized. However on May 1, 2006, the Fund returned to an adequately collaterized position. Income from securities lending amounted to $552,036 for the six months ended April 30, 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. FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2006, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - -------------------------------------------------------------------------------------------- June 15, 2006 159,140,000 277,791,602 $-- $12,636,827 British Pound U.S. Dollar June 15, 2006 12,791,000,000 110,186,501 -- 2,872,968 Japanese Yen U.S. Dollar June 15, 2006 74,750,000 9,587,328 -- 627,985 Swedish Krona U.S. Dollar June 15, 2006 23,800,000 18,507,430 -- 779,052 Swiss Franc U.S. Dollar - -------------------------------------------------------------------------------------------- Total $-- $16,916,832 - --------------------------------------------------------------------------------------------
7. STOCK INDEX FUTURES CONTRACTS At April 30, 2006, $1,043,039 was held in a margin deposit account as collateral to cover initial margin deposits on 250 open purchase contracts denominated in Japanese yen. The notional market value of the open purchase contracts at April 30, 2006 was $37,856,829 with a net unrealized gain of $2,567,441. See "Summary of significant accounting policies" and "Notes to investments in securities." - -------------------------------------------------------------------------------- 22 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 8. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The 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. The Fund had no borrowings outstanding during the six months ended April 30, 2006. 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. 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. - -------------------------------------------------------------------------------- 23 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL 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 or arbitration proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal or arbitration proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. - -------------------------------------------------------------------------------- 24 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL 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 Oct. 31, 2006(g) 2005 2004 2003 2002 Net asset value, beginning of period $ 9.00 $ 7.68 $ 6.28 $ 4.75 $ 5.23 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .08 .01 .04 .02 Net gains (losses) (both realized and unrealized) 2.19 1.53 1.39 1.49 (.50) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.21 1.61 1.40 1.53 (.48) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.22) -- -- -- -- Distributions from realized gains (.36) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.58) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.63 $ 9.00 $ 7.68 $ 6.28 $ 4.75 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 1,393 $ 999 $ 626 $ 363 $ 163 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 1.49%(c) 1.48% 1.52% 1.65%(d) 1.64%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .54%(c) 1.18% .65% .87% .77% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 13% 22% 23% 18% 13% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 25.56%(f) 21.53% 22.29% 32.21% (9.18%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 1.68% and 1.82% for the years ended Oct. 31, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 25 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS B - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(a) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(g) 2005 2004 2003 2002 Net asset value, beginning of period $ 8.72 $ 7.51 $ 6.18 $ 4.71 $ 5.22 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- .04 -- -- -- Net gains (losses) (both realized and unrealized) 2.11 1.46 1.33 1.47 (.51) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.11 1.50 1.33 1.47 (.51) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.16) -- -- -- -- Distributions from realized gains (.36) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.52) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.31 $ 8.72 $ 7.51 $ 6.18 $ 4.71 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 404 $ 308 $ 219 $ 153 $ 77 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 2.26%(c) 2.25% 2.28% 2.42%(d) 2.41%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.26%)(c) .42% (.10%) .12% .01% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 13% 22% 23% 18% 13% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 25.05%(f) 20.52% 21.52% 31.21% (9.77%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 2.46% and 2.59% for the years ended Oct. 31, 2003 and 2002 respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 26 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS C - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(a) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(g) 2005 2004 2003 2002 Net asset value, beginning of period $ 8.71 $ 7.50 $ 6.18 $ 4.71 $ 5.22 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) -- .05 -- -- -- Net gains (losses) (both realized and unrealized) 2.11 1.45 1.32 1.47 (.51) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.11 1.50 1.32 1.47 (.51) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.16) -- -- -- -- Distributions from realized gains (.36) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.52) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.30 $ 8.71 $ 7.50 $ 6.18 $ 4.71 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 24 $ 17 $ 12 $ 8 $ 3 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 2.26%(c) 2.25% 2.28% 2.42%(d) 2.42%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.23%)(c) .40% (.11%) .13% .02% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 13% 22% 23% 18% 13% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 25.16%(f) 20.55% 21.36% 31.21% (9.77%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class C would have been 2.47% and 2.59% for the years ended Oct. 31, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 27 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS I - ----------------------------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) - ----------------------------------------------------------------------------------------------------------- Fiscal period ended Oct. 31, 2006(g) 2005 2004(b) Net asset value, beginning of period $ 9.09 $ 7.73 $ 7.16 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .09 .10 Net gains (losses) (both realized and unrealized) 2.23 1.56 .47 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 2.26 1.65 .57 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.26) -- -- Distributions from realized gains (.36) (.29) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (.62) (.29) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.73 $ 9.09 $ 7.73 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ 74 $ 61 $ 22 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c) 1.05%(d) 1.03% 1.08%(d) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .94%(d) 1.79% .90%(d) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 13% 22% 23% - ----------------------------------------------------------------------------------------------------------- Total return(e) 25.87%(f) 21.93% 7.96%(f) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 28 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS Y - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE INCOME AND CAPITAL CHANGES(a) - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended Oct. 31, 2006(g) 2005 2004 2003 2002 Net asset value, beginning of period $ 9.06 $ 7.72 $ 6.30 $ 4.76 $ 5.23 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .09 .02 .05 .03 Net gains (losses) (both realized and unrealized) 2.20 1.54 1.40 1.49 (.50) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.23 1.63 1.42 1.54 (.47) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.24) -- -- -- -- Distributions from realized gains (.36) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.60) (.29) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.69 $ 9.06 $ 7.72 $ 6.30 $ 4.76 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in millions) $ 2 $ 1 $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(b) 1.32%(c) 1.31% 1.35% 1.47%(d) 1.45%(d) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .81%(c) 1.29% .85% .88% 1.01% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 13% 22% 23% 18% 13% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 25.59%(f) 21.69% 22.54% 32.35% (8.99%) - ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Adjusted to an annual basis. (d) 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 1.50% and 1.65% for the years ended Oct. 31, 2003 and 2002, respectively. (e) Total return does not reflect payment of a sales charge. (f) Not annualized. (g) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 29 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 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. - -------------------------------------------------------------------------------- 30 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE NOV. 1, 2005 APRIL 30, 2006 THE PERIOD(a) RATIO - -------------------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,255.60 $ 8.24 1.49% - -------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.21 $ 7.37 1.49% - -------------------------------------------------------------------------------------------------------------- Class B - -------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,250.50 $12.47 2.26% - -------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.44 $11.16 2.26% - -------------------------------------------------------------------------------------------------------------- Class C - -------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,251.60 $12.48 2.26% - -------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,013.44 $11.16 2.26% - -------------------------------------------------------------------------------------------------------------- Class I - -------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,258.70 $ 5.82 1.05% - -------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.37 $ 5.20 1.05% - -------------------------------------------------------------------------------------------------------------- Class Y - -------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,255.90 $ 7.30 1.32% - -------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.05 $ 6.53 1.32% - --------------------------------------------------------------------------------------------------------------
(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 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2006: +25.56% for Class A, +25.05% for Class B, +25.16% for Class C, +25.87% for Class I and +25.59% for Class Y. - -------------------------------------------------------------------------------- 31 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL 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/Trustees (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. The Fund operates under an order from the Securities and Exchange Commission that permits the investment manager, subject to the approval of the Board, to appoint unaffiliated subadvisers or change the terms of subadvisory agreements without first obtaining shareholder approval. As a basis for making its determination, the Board monitors the investment performance of the Fund throughout the year using a number of benchmarks and comparison periods of one, three and five years, as well as, the entire period during which the subadviser has managed its portion of the investment portfolio. On an annual basis the Board assesses the operating capabilities of the subadviser, such as adherence to the investment strategies of the Fund, compliance with its code of ethics and all applicable legal requirements, and its working relationship with the investment manager, through reports prepared by the investment manager. During the year, if there is a change in the composition of the subadviser's management team or if other circumstances so require, the Board will re-assess the operating capabilities. The Board also considers the fees paid by the investment manager to the subadviser and any business relationships that exist between the investment manager and its affiliates and the subadviser. Based on its review and evaluation, the Board determined to approve the continuation of the subadvisory agreements. - -------------------------------------------------------------------------------- 32 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting www.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 most recent 12-month period ended June 30 is available without charge by visiting www.riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 33 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RESULTS OF MEETING OF SHAREHOLDERS RIVERSOURCE INTERNATIONAL SELECT VALUE FUND REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006 (UNAUDITED) A brief description of each proposal voted upon at the meeting and the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each proposal is set forth below. A vote is based on total dollar interest in a fund. ELECTION OF BOARD MEMBERS
AFFIRMATIVE WITHHOLD - -------------------------------------------------------------------------------- Kathleen Blatz 1,157,215,347.96 31,058,759.59 - -------------------------------------------------------------------------------- Arne H. Carlson 1,155,540,845.24 32,733,262.31 - -------------------------------------------------------------------------------- Patricia M. Flynn 1,158,337,798.99 29,936,308.56 - -------------------------------------------------------------------------------- Anne P. Jones 1,155,946,950.97 32,327,156.58 - -------------------------------------------------------------------------------- Jeffrey Laikind 1,157,560,623.59 30,713,483.96 - -------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 1,158,902,661.57 29,371,445.98 - -------------------------------------------------------------------------------- Catherine James Paglia 1,158,051,202.82 30,222,904.73 - -------------------------------------------------------------------------------- Vikki L. Pryor 1,158,201,436.14 30,072,671.41 - -------------------------------------------------------------------------------- Alan K. Simpson 1,154,118,472.77 34,155,634.78 - -------------------------------------------------------------------------------- Alison Taunton-Rigby 1,157,856,252.17 30,417,855.38 - -------------------------------------------------------------------------------- William F. Truscott 1,158,643,092.51 29,631,015.04 - --------------------------------------------------------------------------------
AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 1,138,014,008.49 29,218,246.86 21,006,884.59 34,967.61 - --------------------------------------------------------------------------------
APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE INVESTMENTS, LLC
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 1,143,776,516.38 23,683,020.30 20,779,603.26 34,967.61 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 34 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES DIVERSIFICATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 1,142,008,567.70 26,053,553.89 20,177,018.35 34,967.61 - --------------------------------------------------------------------------------
LENDING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 1,134,693,809.02 31,664,232.66 21,881,098.26 34,967.61 - --------------------------------------------------------------------------------
BORROWING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - -------------------------------------------------------------------------------- 1,139,914,562.29 28,202,321.37 20,122,256.28 34,967.61 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 35 - RIVERSOURCE INTERNATIONAL SELECT VALUE FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RIVERSOURCE(SM) INTERNATIONAL SELECT 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 Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. RIVERSOURCE [LOGO](SM) Both companies are part of Ameriprise Financial, Inc. INVESTMENTS S-6253 F (6/06) Semiannual Report RIVERSOURCE [LOGO](SM) INVESTMENTS RIVERSOURCE(SM) INTERNATIONAL SMALL CAP FUND - -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED APRIL 30, 2006 > RIVERSOURCE INTERNATIONAL SMALL CAP FUND SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM GROWTH OF CAPITAL. - -------------------------------------------------------------------------------- TABLE OF CONTENTS Fund Snapshot .................................................................2 Performance Summary ...........................................................3 Questions & Answers with Portfolio Management ...................................................5 Investments in Securities ....................................................10 Financial Statements .........................................................20 Notes to Financial Statements ................................................23 Fund Expenses Example ........................................................37 Approval of Investment Management Services Agreement .........................................................39 Proxy Voting .................................................................41 Results of Meeting of Shareholders ...........................................42
DALBAR [LOGO] RATED 2006 FOR COMMUNICATION RiverSource Funds' shareholder reports have been awarded the Communications Seal from Dalbar Inc.,an independent financial services research firm.The Seal recognizes communications demonstratinga level of excellence in the industry. - -------------------------------------------------------------------------------- 1 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND SNAPSHOT AT APRIL 30, 2006 - -------------------------------------------------------------------------------- PORTFOLIO MANAGERS < - -------------------------------------------------------------------------------- AIG GLOBAL INVESTMENT CORP.
PORTFOLIO MANAGER SINCE YEARS IN INDUSTRY Hans Danielsson 4/06 29
BATTERYMARCH FINANCIAL MANAGEMENT, INC.
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY Charles F. Lovejoy, CFA 4/06 26 Christopher W. Floyd, CFA 4/06 7
- -------------------------------------------------------------------------------- FUND OBJECTIVE < - -------------------------------------------------------------------------------- The Fund seeks to provide shareholders with long-term growth of capital. Inception dates by class A: 10/3/02 B: 10/3/02 C: 10/3/02 I: 3/4/04 Y: 10/3/02 Ticker symbols by class A: AISCX B: APNBX C: -- I: -- Y: -- Total net assets $117.5 million Number of holdings 331 - -------------------------------------------------------------------------------- COUNTRY COMPOSITION < - -------------------------------------------------------------------------------- Percentage of portfolio assets at April 30, 2006 [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Cash & Short-Term Securities 23.8% Japan 17.2% United Kingdom 9.8% Germany 6.7% France 5.2% Canada 4.0% Sweden 3.9% Netherlands 3.8% Norway 3.2% Switzerland 2.9% Denmark 2.6% Greece 1.9% Italy 1.8% Finland 1.6% Hong Kong 1.6% Ireland 1.5% South Korea 1.5% Singapore 1.1% Spain 1.0% Other* 4.9%
- -------------------------------------------------------------------------------- TOP TEN HOLDINGS < - -------------------------------------------------------------------------------- Percentage of portfolio assets D Carnegie & Co (Sweden) 1.0% - -------------------------------------------------------------------------------- Euler Hermes (France) 0.8 - -------------------------------------------------------------------------------- Pfleiderer (Germany) 0.8 - -------------------------------------------------------------------------------- YIT (Finland) 0.8 - -------------------------------------------------------------------------------- Neopost (France) 0.8 - -------------------------------------------------------------------------------- DSV (Denmark) 0.7 - -------------------------------------------------------------------------------- CAE (Canada) 0.7 - -------------------------------------------------------------------------------- Banque Cantonale Vaudoise (Switzerland) 0.7 - -------------------------------------------------------------------------------- Koninklijke BAM Groep (Netherlands) 0.7 - -------------------------------------------------------------------------------- Banco Pastor (Spain) 0.6 - --------------------------------------------------------------------------------
For further detail about these holdings please refer to the section entitled "Investments in Securities." - -------------------------------------------------------------------------------- STYLE MATRIX < - --------------------------------------------------------------------------------
- --------------------------------- STYLE VALUE BLEND GROWTH - --------------------------------- LARGE - --------------------------------- MEDIUM SIZE - --------------------------------- SMALL - ---------------------------------
Shading within the style matrix indicates areas in which the Fund generally invests. * Includes Australia, Belgium, Bermuda, China, India, Israel, Liechtenstein, Luxembourg, Malaysia, Philippine Islands and Taiwan. Investment products involve risks including possible loss of principal and fluctuation in value. Stocks of small- and mid-capitalization companies involve substantial risk. Historically, these stocks have experienced greater price volatility than stocks of larger companies, and they can be expected to do so in the future. International investing involves increased risk and volatility, not typically associated with domestic investing, due to potential political and economic instability, limited liquidity, volatile prices, lack of accounting, auditing, and financial reporting standards, changes in currency exchange rates, and differences in how trades are cleared and settled. Risks are particularly significant in emerging markets due to the dramatic pace of economic, social, and political change. 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. - -------------------------------------------------------------------------------- 2 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- PERFORMANCE COMPARISON For the six-month period ended April 30, 2006 [THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIAL.] RiverSource International Small Cap Fund Class A (excluding sales charge) +23.42% S&P/Citigroup Global Equity Index ex-U.S. Less Than $2 billon Index(1) (unmanaged) +29.84 Lipper International Small-Cap Funds Index(2) +32.06
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 www.riversource.com/funds. (1) The S&P/Citigroup Global Equity Index ex-U.S. Less Than $2 billion Index, an unmanaged market capitalization weighted benchmark, measures the small stock component of the Salomon Smith Barney Global Equity Index, which includes developed and emerging market countries globally excluding the U.S. Within each country, those stocks falling under a two billion dollar market cap of the available market capital in each country form the universe. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. (2) The Lipper International Small-Cap Funds Index includes the 10 largest international small-cap funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. See "Fund Management and Compensation" for more information. The 5.75% sales charge applicable to Class A shares of the Fund is not reflected in the bar chart. If reflected, returns would be lower than those shown. The performance of other classes may vary from that shown because of differences in expenses. The indices do not reflect the effects of sales charges, expenses (excluding Lipper) and taxes. - -------------------------------------------------------------------------------- 3 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS < - --------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y (INCEPTION DATES) (10/3/02) (10/3/02) (10/3/02) (3/4/04) (10/3/02) AFTER AFTER NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5) AT APRIL 30, 2006 - -------------------------------------------------------------------------------------------------------- 6 months* +23.42% +16.33% +22.96% +17.96% +22.94% +21.94% +23.72% +23.48% - -------------------------------------------------------------------------------------------------------- 1 year +33.41% +25.75% +32.35% +27.35% +32.30% +31.30% +33.97% +33.59% - -------------------------------------------------------------------------------------------------------- 3 years +30.88% +28.32% +29.91% +29.11% +29.91% +29.91% N/A +31.13% - -------------------------------------------------------------------------------------------------------- Since inception +29.33% +27.20% +28.32% +27.88% +28.33% +28.33% +19.81% +29.53% - -------------------------------------------------------------------------------------------------------- AT MARCH 31, 2006 - -------------------------------------------------------------------------------------------------------- 6 months* +15.52% +8.87% +15.04% +10.04% +15.15% +14.15% +15.87% +15.61% - -------------------------------------------------------------------------------------------------------- 1 year +24.69% +17.52% +23.65% +18.65% +23.75% +22.75% +25.27% +24.74% - -------------------------------------------------------------------------------------------------------- 3 years +34.00% +31.38% +32.95% +32.19% +33.01% +33.01% N/A +34.26% - -------------------------------------------------------------------------------------------------------- Since inception +28.90% +26.73% +27.89% +27.42% +27.93% +27.93% +18.80% +29.11% - --------------------------------------------------------------------------------------------------------
(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. * Not annualized. - -------------------------------------------------------------------------------- 4 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT PERFORMANCE SUMMARY RiverSource International Small Cap Fund advanced 23.42% (Class A shares, excluding sales charge) for the six months ended April 30, 2006. The Fund underperformed its benchmark, the S&P/Citigroup Global Equity Index ex-U.S. Less Than $2 billion Index (Citigroup Index), which rose 29.84% for the semiannual period. The Fund also underperformed its peer group, as represented by the Lipper International Small-Cap Funds Index, which rose 32.06% during the same time frame. RiverSource International Small Cap Fund is managed by two independent money management firms that each invest a portion of Fund assets in a blend of growth and value stocks of small-capitalization international companies. On April 24, 2006, AIG Global Investment Corp. (AIGGIC) and Batterymarch Financial Management, Inc. (Batterymarch) replaced Templeton Investment Counsel, LLC (Franklin Templeton) and Wellington Management Company, LLP together with its affiliate, Wellington Management International Ltd (Wellington Management International) as subadvisers to the Fund. AIGGIC and Batterymarch each managed approximately 50% of the Fund's assets as of April 30, 2006. Below, each subadviser discusses results and positioning for their portion of the Fund for the first half of the fiscal year. Q: What factors affected performance the most for your portion of the Fund for the semiannual period ended April 30, 2006?* FRANKLIN TEMPLETON: Detracting from Fund performance during the period was Hong Kong-based Techtronic Industries, the world leader in the design, engineering, manufacturing and marketing of power tools. The stock declined in value due to rising inventory levels in the U.S. Canadian company Quebecor World also negatively impacted Fund performance during the period. Quebecor World * Franklin Templeton and Wellington Management provided Fund commentary through their management tenure ended April 21, 2006. - -------------------------------------------------------------------------------- 5 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS provides print, pre-media, logistics and distribution services to book and magazine publishers, retailers, telephone companies, and direct mail and catalog customers. Recently, overall industry conditions were difficult with too much capacity and pricing pressure. In addition, the company suffered from some underperforming European operations. The Fund did benefit from the strong performance of several stocks during the period including D. Carnegie and Company, a well-respected investment bank that operates in the Nordic capital markets. Carnegie is generally considered the leading investment banking advisor in the Nordic region. Daegu Bank, a South Korean regional bank with a strong client base in Daegu and Kyungbuk provinces, also performed well during the period. The bank provides various services to its clients from commercial banking to foreign exchange. Over the period, Daegu Bank improved most of its operating results as the export environment improved, credit costs declined and delinquency ratios fell across segments. WELLINGTON MANAGEMENT INTERNATIONAL: All 10 sectors within the Citigroup Index advanced during the period, led by energy, materials and industrials. The health care, utilities and consumer staples sectors posted more modest gains. Emerging markets was the best performing region. Our portion of the Fund's performance lagged the Citigroup Index during the period. The portfolio's unfavorable return * Franklin Templeton and Wellington Management provided Fund commentary through their management tenure ended April 21, 2006. - -------------------------------------------------------------------------------- 6 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS relative to the Citigroup Index was partially driven by less favorable stock selection in the consumer staples and financials sectors. In addition, overweight positions in the weak performing health care and consumer staples sectors negatively contributed to performance. These negative results were partially offset by strong stock selection in the industrials and materials sectors. From a regional perspective, stock selection in Europe, particularly in the United Kingdom, detracted. However, our stock selection was strong in Japan, where our holdings outperformed as investors focused more on higher quality companies and sold out of speculative micro-cap stocks that had reached extreme valuations. Q: What changes did you make to your portion of the Fund and how is it currently positioned?* FRANKLIN TEMPLETON: During the six-month period, we added Bio-Treat Technology, Dorel Industries and TravelSky Technologies. We believe we purchased these stocks at attractive prices relative to our assessment of their intrinsic value. Bio-Treat is a pioneer in waste and wastewater management in China. The company successfully developed a proprietary application of biological processes, called the BMS Biological Process Technology, for waste and wastewater treatment for residential, commercial and municipal projects. In view of widespread pollution in many cities across China, and the need to clean up its environment before the 2008 Olympics, China increased its pollution control efforts. We expect these efforts to continue to benefit companies engaged in pollution control. * Franklin Templeton and Wellington Management provided Fund commentary through their management tenure ended April 21, 2006. - -------------------------------------------------------------------------------- 7 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS Based in Canada, Dorel Industries is a leading global consumer products manufacturer, importer and marketer specializing in three major segments: juvenile products, home furnishings, and leisure and recreational products. The company's low valuation at the time of purchase offered us an attractive buying opportunity. TravelSky Technologies develops electronic travel distribution systems and airport passenger processing and air cargo systems in China. TravelSky also owns and operates a real-time data network for China's civil aviation industry. We believed that TravelSky offered well-positioned exposure to the growing Chinese aviation sector. Sales during the period included shares of Hansol Paper Company, a Korean paper manufacturer; Oce, a Dutch documentation and print production equipment company; and Imtech, a Dutch manufacturer and installer of information and communication technology. Our analysis indicated that these companies' share prices were at or above our estimate of their intrinsic values. WELLINGTON MANAGEMENT INTERNATIONAL: While our sector allocations are a result of bottom-up stock selection, we increased our exposure to the retailing and real estate sectors. We trimmed some of our exposure to the insurance and software and services industries. We continued to maintain our neutral geographic positioning. * Franklin Templeton and Wellington Management provided Fund commentary through their management tenure ended April 21, 2006. - -------------------------------------------------------------------------------- 8 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- QUESTIONS & ANSWERS Q: How do you intend to manage your portion of the Fund in the coming months?** BATTERYMARCH: We are one of the first major firms to create and implement a quantitative investment process. Our long history and tenured personnel have an in-depth knowledge of data analysis that is crucial to the fundamental success of any quantitative investment manager. We use a disciplined investment process that incorporates rigorous stock selection, effective risk control and cost-efficient trading. Our quantitative investment process ranks companies based on valuation, growth and momentum characteristics. AIGGIC: We have more than 55 investment professionals located throughout Europe and Asia. Our broad-based team is largely composed of sector specialists located within each region from which the portfolio management team draws industry- and company-specific research. We have several investment professionals dedicated to international small-cap investing, and the team is divided into three regions, each geographically located in their specific region -- European, Asia and Japan. The role of each regional team is to find the best international small-cap ideas to combine them into an overall diversified international small-cap portfolio. ** As a result of portfolio management changes, the Fund's portfolio turnover rate of 112% for the semiannual period was temporarily higher than usual. - -------------------------------------------------------------------------------- 9 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES RiverSource International Small Cap Fund APRIL 30, 2006 (UNAUDITED) (Percentages represent value of investments compared to net assets)
- -------------------------------------------------------------------------------- COMMON STOCKS (88.7%)(c) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) AUSTRALIA (1.1%) AUTO COMPONENTS (0.2%) Pacifica Group 88,600 $ 183,082 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.2%) Ansell 21,600 187,069 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) West Australian Newspapers Holdings 32,888 207,376 - -------------------------------------------------------------------------------- METALS & MINING (0.1%) Zinifex 22,050 173,377 - -------------------------------------------------------------------------------- MULTILINE RETAIL (0.2%) David Jones 89,600 182,425 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.2%) JB Hi-Fi 42,400 161,056 Just Group 78,100 186,898 ------------- Total 347,954 - -------------------------------------------------------------------------------- BELGIUM (0.7%) CHEMICALS (0.3%) Tessenderlo Chemie 7,875 313,377 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.4%) Option 18,620(b) 533,161 - -------------------------------------------------------------------------------- BERMUDA (0.3%) INSURANCE Catlin Group 46,500 403,444 - -------------------------------------------------------------------------------- CANADA (4.7%) AEROSPACE & DEFENSE (0.7%) CAE 110,790 911,689 - -------------------------------------------------------------------------------- AUTO COMPONENTS (0.4%) Linamar 34,810 499,421 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.2%) Canaccord Capital 9,800 198,980 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) CANADA (CONT.) COMMERCIAL BANKS (0.2%) Laurentian Bank of Canada 7,300 $ 212,732 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.1%) Aastra Technologies 5,400(b) 165,478 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.6%) Ensign Energy Services 4,200 176,152 Savanna Energy Services 6,600(b) 181,824 Trican Well Service 3,600(b) 174,494 Western Lakota Energy Services 10,800(b) 171,467 ------------- Total 703,937 - -------------------------------------------------------------------------------- INSURANCE (0.4%) Kingsway Financial Services 20,600 444,982 - -------------------------------------------------------------------------------- MEDIA (0.2%) Alliance Atlantis Communications Series B 5,700(b) 181,758 - -------------------------------------------------------------------------------- METALS & MINING (0.5%) EuroZinc Mining 82,900(b) 187,600 HudBay Minerals 16,000(b) 187,478 Major Drilling Group Intl 7,500(b) 171,064 ------------- Total 546,142 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (0.3%) ATCO Cl I 12,000 364,079 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.4%) Find Energy 17,100(b) 178,953 Petrobank Energy & Resources 18,900(b) 236,753 ------------- Total 415,706 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.1%) Sino-Forest Cl A 30,800(b) 164,469 - -------------------------------------------------------------------------------- ROAD & RAIL (0.3%) Mullen Group Income Fund Unit 5,900 180,747 TransForce Income Fund Unit 11,200 185,531 ------------- Total 366,278 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 10 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) CANADA (CONT.) SPECIALTY RETAIL (0.3%) Forzani Group Cl A 11,700(b) $ 164,826 Reitmans (Canada) Cl A 9,300 185,916 ------------- Total 350,742 - -------------------------------------------------------------------------------- CHINA (0.3%) COMMERCIAL SERVICES & SUPPLIES Bio-Treat Technology 391,000 326,534 - -------------------------------------------------------------------------------- DENMARK (3.0%) BEVERAGES (0.6%) Royal Unibrew 6,770 731,576 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.6%) GN Store Nord 49,380 703,543 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.6%) Bang & Olufsen Series B 5,560 698,608 - -------------------------------------------------------------------------------- INSURANCE (0.3%) Alm.Brand 5,220(b) 316,468 - -------------------------------------------------------------------------------- MACHINERY (0.2%) NKT Holding 2,850 183,146 - -------------------------------------------------------------------------------- ROAD & RAIL (0.7%) DSV 5,790 947,816 - -------------------------------------------------------------------------------- FINLAND (1.8%) CONSTRUCTION & ENGINEERING (0.9%) YIT 38,360 1,081,940 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.2%) HK Ruokatalo Group Series A 16,650 207,923 - -------------------------------------------------------------------------------- MARINE (0.7%) Cargotec Series B 17,940 871,915 - -------------------------------------------------------------------------------- FRANCE (6.1%) COMMERCIAL BANKS (0.3%) Natexis Banques Populaires 1,150 311,591 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Bacou-Dalloz 1,600 206,668 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) FRANCE (CONT.) HOUSEHOLD DURABLES (1.2%) Kaufman & Broad 11,490 $ 681,193 Maisons France Confort 4,620 347,329 Nexity 5,500 384,348 ------------- Total 1,412,870 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.2%) Wendel Investissement 1,600 200,916 - -------------------------------------------------------------------------------- INSURANCE (1.0%) Euler Hermes 9,400 1,169,116 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.3%) Gameloft 48,500(b) 366,455 - -------------------------------------------------------------------------------- IT SERVICES (1.5%) Alten 18,520(b) 700,834 ALTRAN Technologies 18,200(b) 263,781 Atos Origin 4,600(b) 344,955 Groupe Steria 8,610 527,068 ------------- Total 1,836,638 - -------------------------------------------------------------------------------- MEDIA (0.2%) Eutelsat Communications 15,800(b) 261,483 - -------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.9%) Neopost 9,190 1,039,247 - -------------------------------------------------------------------------------- REAL ESTATE (0.3%) Icade 8,080(b) 347,449 - -------------------------------------------------------------------------------- GERMANY (7.1%) AEROSPACE & DEFENSE (0.3%) MTU Aero Engines Holding 10,499(b) 380,881 - -------------------------------------------------------------------------------- AIRLINES (0.2%) Deutsche Lufthansa 10,850 200,092 - -------------------------------------------------------------------------------- AUTO COMPONENTS (0.9%) ElringKlinger 13,419 731,065 LEONI 7,600 315,305 ------------- Total 1,046,370 - -------------------------------------------------------------------------------- BUILDING PRODUCTS (1.0%) Pfleiderer 38,739(b) 1,168,371 - -------------------------------------------------------------------------------- CHEMICALS (0.4%) Lanxess 11,600(b) 474,377 - -------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Sixt 5,160 254,430 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 11 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) GERMANY (CONT.) DIVERSIFIED FINANCIAL SERVICES (0.6%) Grenkeleasing 9,760 $ 744,832 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.5%) Celesio 4,300 404,631 Fresenius Medical Care & Co 1,750 209,951 ------------- Total 614,582 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) Rational 2,770 542,456 - -------------------------------------------------------------------------------- INSURANCE (0.4%) AMB Generali Holding 3,150 389,633 cash.life 1,770 72,115 ------------- Total 461,748 - -------------------------------------------------------------------------------- MACHINERY (0.5%) Heidelberger Druckmaschinen 3,800 191,733 WashTec 18,020(b) 358,004 ------------- Total 549,737 - -------------------------------------------------------------------------------- MEDIA (0.3%) CTS Eventim 10,280 356,598 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) STADA Arzneimittel 4,400 212,960 - -------------------------------------------------------------------------------- REAL ESTATE (0.5%) Vivacon 10,010(b) 540,419 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.6%) Fielmann 7,400 708,478 - -------------------------------------------------------------------------------- GREECE (2.3%) CAPITAL MARKETS (0.5%) Marfin Financial Group 15,680 534,026 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.4%) Piraeus Bank 16,380 516,130 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.4%) Hellenic Technodomiki 46,240 487,615 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.2%) Hellenic Exchanges 14,407 264,962 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.3%) Nirefs Aquaculture 64,460 313,856 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) GREECE (CONT.) METALS & MINING (0.5%) Aluminium of Greece 10,277 $ 242,156 Mytilineos Holdings 10,540 307,916 ------------- Total 550,072 - -------------------------------------------------------------------------------- HONG KONG (1.9%) AIR FREIGHT & LOGISTICS (0.2%) Integrated Distribution Services Group 207,000 307,046 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.3%) Vtech Holdings 62,000 294,690 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.3%) Singamas Container Holdings 392,000 295,786 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.3%) Xiwang Sugar Holdings 484,000(b) 333,991 - -------------------------------------------------------------------------------- PHARMACEUTICALS (--%) Far East Pharmaceutical Technology 1,181,200(b,d,e) -- - -------------------------------------------------------------------------------- REAL ESTATE (0.8%) Far East Consortium Intl 475,000 211,373 Great Eagle Holdings 109,000 394,362 Hang Lung Group 175,000 416,458 ------------- Total 1,022,193 - -------------------------------------------------------------------------------- INDIA (0.4%) MACHINERY Tata Motors ADR 20,490 424,758 - -------------------------------------------------------------------------------- IRELAND (1.8%) FOOD PRODUCTS (0.4%) IAWS Group 29,420 523,628 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.1%) United Drug 37,100 175,024 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.7%) Paddy Power 40,770 725,125 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.6%) Grafton Group Unit 50,910(b) 711,534 - -------------------------------------------------------------------------------- ISRAEL (0.4%) ELECTRONIC EQUIPMENT & INSTRUMENTS Orbotech 20,510(b) 521,159 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 12 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) ITALY (2.1%) AUTO COMPONENTS (0.4%) Brembo 31,100 $ 319,328 Sogefi 31,100 237,339 ------------- Total 556,667 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.3%) Banco Popolare di Verona e Novara 11,800 332,074 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.4%) Digital Multimedia Technologies 8,950(b) 521,576 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.2%) Saipem 8,900 222,508 - -------------------------------------------------------------------------------- MACHINERY (0.2%) Biesse 13,700 205,992 - -------------------------------------------------------------------------------- MARINE (0.2%) Trevi Finanziaria 19,200 176,798 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Recordati 27,200 211,350 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.2%) Gruppo Coin 39,000(b) 211,045 - -------------------------------------------------------------------------------- JAPAN (20.3%) AIR FREIGHT & LOGISTICS (0.2%) Kintetsu World Express 3,900 96,087 SBS Holdings 42 178,920 ------------- Total 275,007 - -------------------------------------------------------------------------------- AUTO COMPONENTS (1.2%) Daido Metal 39,000 337,075 Exedy 15,500 487,395 NHK Spring 10,000 115,942 TBK 38,000 265,349 Teikoku Piston Ring 16,000 258,024 ------------- Total 1,463,785 - -------------------------------------------------------------------------------- BEVERAGES (0.5%) Asahi Soft Drinks 14,500 229,249 Oenon Holdings 93,000 393,729 ------------ Total 622,978 - -------------------------------------------------------------------------------- BUILDING PRODUCTS (0.2%) Nichias 24,000 180,659 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.2%) Okasan Holdings 18,000 203,162 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) JAPAN (CONT.) CHEMICALS (1.6%) Adeka 13,000 $ 199,139 Chugoku Marine Paints 28,000 180,272 Lintec 8,500 215,393 Nifco 14,400 298,499 Nissan Chemical Inds 10,000 169,521 Shin-Etsu Polymer 39,100 674,506 ------------- Total 1,737,330 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.2%) Kagoshima Bank 13,000 105,165 Yamaguchi Bank 5,000 74,967 ------------- Total 180,132 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.9%) Career Design Center 103 383,593 en-japan 23 138,990 Fullcast 55 222,706 Moshi Moshi Hotline 3,350 133,294 Park24 5,700 206,271 ------------- Total 1,084,854 - -------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.2%) Melco Holdings 6,600 206,377 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.2%) Kyowa Exeo 15,000 187,352 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.3%) Sumitomo Osaka Cement 100,500 368,986 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.4%) Rengo 61,000 481,142 - -------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%) JSAT 60 177,075 Telepark 51 153,202 ------------- Total 330,277 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.6%) Hitachi Cable 60,000 327,273 Nippon Signal 36,000 337,707 ------------- Total 664,980 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 13 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) JAPAN (CONT.) ELECTRONIC EQUIPMENT & INSTRUMENTS (1.0%) IRISO Electronics 1,200 $ 46,061 Japan Aviation Electronics Industry 18,000 295,177 Kaga Electronics 7,000 182,916 Meiko Electronics 900 68,775 Star Micronics 8,000 172,859 Taiyo Yuden 12,000 197,207 Toyo Tanso 2,400(b) 181,713 ------------- Total 1,144,708 - -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.4%) Modec 6,000 166,008 Shinko Plantech 47,000 324,892 ------------- Total 490,900 - -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.4%) Can Do 183 245,928 RyoShoku 6,500 196,970 ------------- Total 442,898 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.4%) Kakiyasu Honten 7,000 141,414 Morinaga & Co 110,600 305,037 ------------- Total 446,451 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) NIPRO 11,000 187,053 Sysmex 5,200 233,395 TOPCON 10,800 217,233 ------------- Total 637,681 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.5%) BML 14,500 284,651 Toho Pharmaceutical 18,400 326,465 ------------- Total 611,116 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.6%) H.I.S. 5,400 170,751 Kyoritsu Maintenance 4,400 173,913 Renaissance 2,800 55,459 Resorttrust 6,400 220,922 St. Marc Holdings 1,900 131,006 ------------- Total 752,051 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Haseko 82,000(b) 311,147 Joint 8,300 272,657 Kenwood 118,000 292,279 ------------- Total 876,083 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) JAPAN (CONT.) HOUSEHOLD PRODUCTS (--%) Pigeon 3,700 $ 56,386 - -------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.1%) DeNA 35(b) 98,990 - -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.1%) Kakaku.com 26 103,909 - -------------------------------------------------------------------------------- IT SERVICES (0.4%) Hisamitsu Pharmaceutical 5,900 181,897 Hitachi Systems & Services 3,000 77,470 Obic 870 178,356 ------------- Total 437,723 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.2%) Daikoku Denki 4,900 191,954 - -------------------------------------------------------------------------------- MACHINERY (1.9%) Amano 6,400 111,585 Daifuku 21,000 341,238 Harmonic Drive Systems 14 55,951 Japan Steel Works 32,000 224,295 Nabtesco 43,000 545,007 Okuma Holdings 17,000 230,698 OSG 8,800 186,667 Tocalo 1,400 52,016 Tsubakimoto Chain 47,000 339,754 ------------- Total 2,087,211 - -------------------------------------------------------------------------------- MEDIA (0.3%) Daiichikosho 8,000 217,127 Nippon Chemiphar 14,000(b) 111,902 ------------- Total 329,029 - -------------------------------------------------------------------------------- METALS & MINING (1.2%) Daido Steel 49,000 449,758 Dowa Mining 39,000 445,323 Tokyo Steel Mfg 22,000 466,668 ------------- Total 1,361,749 - -------------------------------------------------------------------------------- MULTILINE RETAIL (0.2%) Don Quijote 3,300 281,450 - -------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.2%) Milbon 6,360 283,784 - -------------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Tsumura & Co 10,000 266,140 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 14 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) JAPAN (CONT.) REAL ESTATE (0.5%) Kenedix 37 $ 190,769 Leopalace21 5,100 198,892 Tosei 172 197,910 Urban 3,900 57,892 ------------- Total 645,463 - -------------------------------------------------------------------------------- ROAD & RAIL (0.2%) Sankyu 38,000 211,278 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%) Disco 10,700 685,138 Japan Electronic Materials 8,400 223,557 Micronics Japan 4,000 181,291 Mimasu Semiconductor Industry 9,800 220,360 ------------- Total 1,310,346 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (1.2%) Culture Convenience Club 14,700 185,025 Edion 9,600 232,306 Kyoto Kimono Yuzen 28 56,566 Otsuka 2,100 252,516 Otsuka Kagu 5,500 253,623 Right On 5,000 215,195 USS 3,560 266,414 ------------- Total 1,461,645 - -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.3%) Gunze 46,000 316,364 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.6%) Hitachi High-Technologies 11,000 339,130 IBJ Leasing 7,300 198,129 UFJ Central Leasing 3,400 211,436 ------------- Total 748,695 - -------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.1%) Okinawa Cellular Telephone 68 165,446 - -------------------------------------------------------------------------------- LIECHTENSTEIN (0.5%) CAPITAL MARKETS Verwaltungs & Privat Bank 2,710 624,948 - -------------------------------------------------------------------------------- LUXEMBOURG (0.1%) COMMERCIAL SERVICES & SUPPLIES Transcom WorldWide Series B SDR 13,979(b) 175,584 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) MALAYSIA (0.8%) HOTELS, RESTAURANTS & LEISURE (0.5%) Resorts World 144,300 $ 533,486 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (0.3%) YTL 260,700 366,828 - -------------------------------------------------------------------------------- NETHERLANDS (3.8%) COMMERCIAL SERVICES & SUPPLIES (0.6%) Buhrmann 11,300 219,081 Samas Groep 15,400(b) 196,198 USG People 2,400 206,769 ------------- Total 622,048 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (1.7%) Arcadis 12,480 592,224 Imtech 11,441 629,798 Koninklijke BAM Groep 8,380 900,081 ------------- Total 2,122,103 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.5%) Draka Holding 27,523(b) 531,178 - -------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.4%) Aalberts Inds 6,563 534,795 - -------------------------------------------------------------------------------- MEDIA (0.3%) Wolters Kluwer 12,000 312,575 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.4%) Beter Bed Holding 4,500 281,771 Macintosh Retail Group 2,400 251,271 ------------- Total 533,042 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.3%) Hagemeyer 36,700(b) 199,525 Univar 3,500 194,785 ------------- Total 394,310 - -------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.2%) Smit Intl 2,200 195,366 - -------------------------------------------------------------------------------- NORWAY (3.8%) AIRLINES (0.2%) Norwegian Air Shuttle 12,100(b) 217,410 - -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.6%) Tandberg Television 33,430(b) 674,047 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 15 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) NORWAY (CONT.) ENERGY EQUIPMENT & SERVICES (2.1%) Aker Kvaerner ASA 8,710 $ 849,769 Petrolia Drilling 400,000(b) 230,248 Prosafe 11,290 671,904 Sevan Marine 72,330(b) 529,253 TGS NOPEC Geophysical 3,450(b) 232,248 ------------- Total 2,513,422 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.7%) Cermaq 24,800(b) 364,949 Pan Fish 430,000(b) 437,697 ------------- Total 802,646 - -------------------------------------------------------------------------------- MACHINERY (0.2%) Aker Yards 2,620 210,455 - -------------------------------------------------------------------------------- PHILIPPINE ISLANDS (0.2%) REAL ESTATE Megaworld 10,650,000 255,685 - -------------------------------------------------------------------------------- RUSSIA (0.1%) FOOD & STAPLES RETAILING Pyaterochka Holding GDR 6,210(b) 118,301 - -------------------------------------------------------------------------------- SINGAPORE (1.3%) FOOD & STAPLES RETAILING (0.2%) Olam Intl 275,000 281,855 - -------------------------------------------------------------------------------- FOOD PRODUCTS (--%) Want Want Holdings 930 1,358 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.5%) Parkway Holdings 335,000 553,176 - -------------------------------------------------------------------------------- MACHINERY (0.6%) Inter-Roller Engineering 310,000 407,946 SembCorp Marine 132,000 255,549 ------------- Total 663,495 - -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (--%) United Test and Assembly Center 73,000(b) 47,571 - -------------------------------------------------------------------------------- SOUTH KOREA (1.7%) AIRLINES (0.1%) Korean Air Lines 4,740 172,679 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.1%) Daishin Securities 7,530 176,091 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) SOUTH KOREA (CONT.) CHEMICALS (0.2%) SSCP 14,100(b) $ 275,151 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.2%) Daegu Bank 9,620 180,585 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.1%) Woongjin Coway 5,850 173,719 - -------------------------------------------------------------------------------- METALS & MINING (0.3%) Korea Zinc 3,300 297,136 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.4%) GS Holdings 14,360 449,273 - -------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.3%) Hansol Paper 21,090 324,324 - -------------------------------------------------------------------------------- SPAIN (1.2%) COMMERCIAL BANKS (0.7%) Banco Pastor 15,100 889,311 - -------------------------------------------------------------------------------- MACHINERY (0.5%) Mecalux 15,490(b) 553,542 - -------------------------------------------------------------------------------- SWEDEN (4.5%) BIOTECHNOLOGY (0.2%) Q-Med 6,100 260,797 - -------------------------------------------------------------------------------- CAPITAL MARKETS (1.1%) D Carnegie & Co 62,220 1,385,133 - -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.3%) Elekta Series B 21,670 358,492 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.1%) RaySearch Laboratories 2,708(b) 64,894 - -------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.4%) JM 7,730 497,834 - -------------------------------------------------------------------------------- IT SERVICES (0.3%) HiQ Intl 56,140 340,154 - -------------------------------------------------------------------------------- MACHINERY (0.1%) Munters 2,500 95,311 - -------------------------------------------------------------------------------- MEDIA (0.6%) Modern Times Group Series B 13,040(b) 717,303 - -------------------------------------------------------------------------------- METALS & MINING (0.4%) Boliden 24,000(b) 488,535 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 16 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) SWEDEN (CONT.) SOFTWARE (0.3%) Protect Data 19,860 $ 338,013 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.7%) Bilia Series A 17,300 306,220 Nobia 10,600 335,561 RNB Retail and Brands 15,790 145,121 ------------- Total 786,902 - -------------------------------------------------------------------------------- SWITZERLAND (3.5%) AUTO COMPONENTS (0.2%) Georg Fischer 425(b) 206,640 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.3%) Charles Voegele Holding Series A 3,600(b) 305,080 - -------------------------------------------------------------------------------- CHEMICALS (0.4%) Syngenta 3,400(b) 474,278 - -------------------------------------------------------------------------------- COMMERCIAL BANKS (0.8%) Banque Cantonale Vaudoise 2,500 907,615 - -------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.5%) Holcim 6,600 553,459 - -------------------------------------------------------------------------------- CONSUMER FINANCE (0.3%) Bank Sarasin & Co Series B 110 329,947 - -------------------------------------------------------------------------------- INSURANCE (0.8%) Baloise Holding 3,995 305,053 Helvetia Patria Holding 1,450 391,670 Swiss Life Holding 1,650(b) 380,171 ------------- Total 1,076,894 - -------------------------------------------------------------------------------- MACHINERY (0.2%) Swisslog Holding 165,000(b) 216,860 - -------------------------------------------------------------------------------- TAIWAN (0.7%) COMMUNICATIONS EQUIPMENT D-Link 713,200 807,100 - -------------------------------------------------------------------------------- UNITED KINGDOM (11.6%) AEROSPACE & DEFENSE (0.1%) Radstone Technology 33,130 169,155 - -------------------------------------------------------------------------------- AIRLINES (0.2%) British Airways 41,900(b) 256,911 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) AUTO COMPONENTS (0.2%) GKN 43,300 $ 247,532 - -------------------------------------------------------------------------------- CAPITAL MARKETS (0.1%) New Star Asset Management Group 16,740(b) 131,870 - -------------------------------------------------------------------------------- CHEMICALS (0.4%) Elementis 143,850 226,243 Foseco 71,300 237,928 ------------- Total 464,171 - -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.2%) Regus Group 99,520(b) 210,964 - -------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.4%) Galliford Try 112,400 266,450 Kier Group 8,300 260,323 ------------- Total 526,773 - -------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.3%) Rexam 40,200 399,511 - -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.2%) NETeller 13,650(b) 192,903 - -------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.2%) Chloride Group 120,000 221,555 - -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%) Abacus Group 48,200 152,054 Spectris 20,300 249,310 ------------- Total 401,364 - -------------------------------------------------------------------------------- FOOD PRODUCTS (0.4%) Northern Foods 110,866 180,431 Premier Foods 62,780 340,004 ------------- Total 520,435 - -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.2%) Alliance UniChem 11,000 178,220 - -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.4%) First Choice Holidays 63,800 258,855 Gondola Holdings 86,830 560,900 Punch Taverns 44,330 708,121 ------------- Total 1,527,876 - --------------------------------------------------------------------------------
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 17 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) HOUSEHOLD DURABLES (0.9%) Barratt Developments 13,200 $ 238,776 Bovis Homes Group 15,100 246,300 Persimmon 10,000 238,878 Wilson Bowden 8,600 245,738 ------------- Total 969,692 - -------------------------------------------------------------------------------- INSURANCE (1.1%) Benfield Group 27,517 194,939 Brit Insurance Holdings 265,900 465,474 Hiscox 130,630 548,463 ------------- Total 1,208,876 - -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.1%) Vitec Group 17,800 162,941 - -------------------------------------------------------------------------------- MACHINERY (1.2%) Bodycote Intl 148,945 759,804 IMI 24,000 246,172 Invensys 594,800(b) 257,597 ------------- Total 1,263,573 - -------------------------------------------------------------------------------- MEDIA (0.2%) Yell Group 26,500 248,379 - -------------------------------------------------------------------------------- METALS & MINING (0.2%) Vedanta Resources 9,800 281,993 - -------------------------------------------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER (0.2%) Intl Power 32,800 178,087 - -------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.2%) Venture Production 16,800(b) 237,518 - -------------------------------------------------------------------------------- REAL ESTATE (0.4%) Countrywide 18,300 178,029 Mapeley 4,809 281,667 ------------- Total 459,696 - -------------------------------------------------------------------------------- ROAD & RAIL (0.4%) Helphire Group 63,600 459,839 - -------------------------------------------------------------------------------- SOFTWARE (0.7%) NDS Group ADR 17,330(b) 873,880 - -------------------------------------------------------------------------------- SPECIALTY RETAIL (0.6%) Jessops 114,800 259,579 Lookers 22,600 300,429 Pendragon 17,850 196,924 ------------- Total 756,932 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COMMON STOCKS (CONTINUED) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) THRIFTS & MORTGAGE FINANCE (0.3%) Northern Rock 20,050 $ 387,548 - -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (0.2%) SIG 15,300 252,491 - -------------------------------------------------------------------------------- WATER UTILITIES (0.3%) Northumbrian Water Group 65,000 297,042 - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $98,498,006) $104,198,430 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PREFERRED STOCKS (0.8%)(c) - -------------------------------------------------------------------------------- ISSUER SHARES VALUE(a) GERMANY Fresenius 1,100 $ 190,301 Fuchs Petrolub 4,350 232,653 Hugo Boss 10,810 511,340 - -------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost: $631,614) $ 934,294 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHORT-TERM SECURITIES (28.0%) - -------------------------------------------------------------------------------- ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY U.S. GOVERNMENT AGENCIES (17.0%) Federal Home Loan Bank Disc Nts 05-02-06 4.55% $20,000,000 $19,989,889 - -------------------------------------------------------------------------------- COMMERCIAL PAPER (11.0%) Chesham Finance LLC 05-01-06 4.83 4,000,000 3,998,390 Gemini Securitization 05-01-06 4.82 4,900,000(f) 4,898,032 General Electric Capital 05-01-06 4.83 4,000,000 3,998,390 ------------- Total 12,894,812 - -------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITIES (Cost: $32,888,958) $ 32,884,701 - -------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $132,018,578) (g) $138,017,425 ================================================================================
See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 18 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO INVESTMENTS IN SECURITIES - -------------------------------------------------------------------------------- (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) Negligible market value. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at April 30, 2006, is as follows:
ACQUISITION SECURITY DATES COST -------------------------------------------------------------------------- Far East Pharmaceutical Technology 03-10-04 thru 06-08-04 $163,792
(f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2006, the value of these securities amounted to $4,898,032 or 4.2% of net assets. (g) At April 30, 2006, the cost of securities for federal income tax purposes was approximately $132,019,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 7,056,000 Unrealized depreciation (1,058,000) -------------------------------------------------------------------------- Net unrealized appreciation $ 5,998,000 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/funds. - -------------------------------------------------------------------------------- 19 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES RiverSource International Small Cap Fund APRIL 30, 2006 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------ ASSETS - ------------------------------------------------------------------------------------------------------------------------ Investments in securities, at value (Note 1) (identified cost $132,018,578) $ 138,017,425 Cash in bank on demand deposit 1,500,991 Foreign currency holdings (identified cost $33,677,168) (Note 1) 33,729,802 Capital shares receivable 85,379 Dividends and accrued interest receivable 290,688 Receivable for investment securities sold 5,968,358 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 215,333 - ------------------------------------------------------------------------------------------------------------------------ Total assets 179,807,976 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ LIABILITIES - ------------------------------------------------------------------------------------------------------------------------ Capital shares payable 33,215 Payable for investment securities purchased 62,089,572 Unrealized depreciation on foreign currency contracts held, at value (Note 5) 8,312 Accrued investment management services fee 3,604 Accrued distribution fee 1,157 Accrued transfer agency fee 325 Accrued administrative services fee 258 Other accrued expenses 196,229 - ------------------------------------------------------------------------------------------------------------------------ Total liabilities 62,332,672 - ------------------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 117,475,304 ======================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------ REPRESENTED BY - ------------------------------------------------------------------------------------------------------------------------ Capital stock -- $.01 par value (Note 1) $ 122,315 Additional paid-in capital 87,187,440 Excess of distributions over net investment income (40,208) Accumulated net realized gain (loss) 24,404,638 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 5) 5,801,119 - ------------------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 117,475,304 ======================================================================================================================== Net assets applicable to outstanding shares: Class A $ 80,406,860 Class B $ 21,095,468 Class C $ 1,014,899 Class I $ 14,808,677 Class Y $ 149,400 Net asset value per share of outstanding capital stock: Class A shares 8,344,104 $ 9.64 Class B shares 2,240,195 $ 9.42 Class C shares 107,628 $ 9.43 Class I shares 1,524,144 $ 9.72 Class Y shares 15,433 $ 9.68 - ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS RiverSource International Small Cap Fund
SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME - ------------------------------------------------------------------------------------------------------------------------ Income: Dividends $ 1,077,037 Interest 112,646 Less foreign taxes withheld (102,161) - ------------------------------------------------------------------------------------------------------------------------ Total income 1,087,522 - ------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 519,389 Distribution fee Class A 88,230 Class B 93,085 Class C 4,529 Transfer agency fee 90,956 Incremental transfer agency fee Class A 7,041 Class B 4,019 Class C 218 Service fee -- Class Y 55 Administrative services fees and expenses 38,111 Compensation of board members 4,692 Custodian fees 91,000 Printing and postage 30,900 Registration fees 43,146 Audit fees 10,000 Other 11,542 - ------------------------------------------------------------------------------------------------------------------------ Total expenses 1,036,913 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (53,891) - ------------------------------------------------------------------------------------------------------------------------ 983,022 Earnings credits on cash balances (Note 2) (1,365) - ------------------------------------------------------------------------------------------------------------------------ Total net expenses 981,657 - ------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 105,865 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET - ------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on: Security transactions (Note 3) 24,068,235 Foreign currency transactions 460,367 - ------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 24,528,602 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,634,821) - ------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 21,893,781 - ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 21,999,646 ========================================================================================================================
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS RiverSource International Small Cap Fund
APRIL 30, 2006 OCT. 31, 2005 SIX MONTHS ENDED YEAR ENDED (UNAUDITED) - ----------------------------------------------------------------------------------------------------------- OPERATIONS AND DISTRIBUTIONS - ----------------------------------------------------------------------------------------------------------- Investment income (loss) -- net $ 105,865 $ 299,970 Net realized gain (loss) on investments 24,528,602 10,887,673 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,634,821) 2,526,429 - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 21,999,646 13,714,072 - ----------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income Class A (675,821) -- Class B (51,826) -- Class C (3,702) -- Class I (163,689) -- Class Y (1,003) -- Net realized gain Class A (7,214,155) (3,074,414) Class B (1,936,989) (770,526) Class C (97,432) (31,000) Class I (1,232,741) (725,619) Class Y (9,458) (4,875) - ----------------------------------------------------------------------------------------------------------- Total distributions (11,386,816) (4,606,434) - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) - ----------------------------------------------------------------------------------------------------------- Proceeds from sales Class A shares (Note 2) 8,668,839 20,198,794 Class B shares 2,738,460 6,921,085 Class C shares 191,035 338,320 Class I shares 2,808,844 9,240,532 Class Y shares 42,500 29,679 Reinvestment of distributions at net asset value Class A shares 6,594,653 2,224,110 Class B shares 1,950,637 762,289 Class C shares 97,301 29,978 Class I shares 1,395,036 725,058 Class Y shares 8,310 3,989 Payments for redemptions Class A shares (7,611,655) (16,751,618) Class B shares (Note 2) (2,482,690) (4,989,552) Class C shares (Note 2) (204,150) (160,749) Class I shares (1,024,719) (11,334,345) Class Y shares (783) (30,748) - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 13,171,618 7,206,822 - ----------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 23,784,448 16,314,460 Net assets at beginning of period 93,690,856 77,376,396 - ----------------------------------------------------------------------------------------------------------- Net assets at end of period $ 117,475,304 $ 93,690,856 =========================================================================================================== Undistributed (excess of distributions over) net investment income $ (40,208) $ 749,968 - -----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS RiverSource International Small Cap Fund (Unaudited as to April 30, 2006) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Fund is a series of RiverSource International Managers Series, Inc. (formerly AXP Partners International Series, Inc.) and is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. RiverSource International Managers 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 non-U.S. companies. 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 April 30, 2006, Ameriprise Financial, Inc. (Ameriprise Financial) and affiliated funds-of-funds owned 100% of Class I shares, which represents 12.61% 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. VALUATION OF SECURITIES All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. Pursuant to procedures adopted by the Board of Directors of the funds, Ameriprise Financial utilizes Fair Value Pricing (FVP). - -------------------------------------------------------------------------------- 23 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities as of the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. OPTION TRANSACTIONS To produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments, the Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Fund also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS To gain exposure to or protect itself from market changes the Fund may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Fund also may buy and write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. 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. - -------------------------------------------------------------------------------- 24 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At April 30, 2006, foreign currency holdings consisted of multiple denominations, primarily British pounds, European monetary units and Hong Kong dollars. 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. ILLIQUID SECURITIES At April 30, 2006, investments in securities included issues that are illiquid, which the Fund currently limits to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities at April 30, 2006 was $0. These securities are valued at fair value according to methods selected in good faith by the Board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. 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 all sections of the Internal Revenue Code that apply 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 - -------------------------------------------------------------------------------- 25 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. DIVIDENDS TO SHAREHOLDERS An annual dividend from net investment income, declared and paid at the end of the calendar year, when available, is reinvested in additional shares of the Fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the income dividend. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. 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. The management fee is a percentage of the Fund's average daily net assets that declines from 1.12% to 0.995% annually as the Fund's assets increase. The fee may be adjusted upward or downward by a performance incentive adjustment based on a comparison of the performance of Class A shares of the Fund to the Lipper International Small-Cap 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 $56,315 for the six months ended April 30, 2006. Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. 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. The Investment Manager has Subadvisory Agreements with AIG Global Investment Corp. (AIGGIC) and Batterymarch Financial Management, Inc. (Batterymarch). Effective April 24, 2006, AIGGIC and Batterymarch replaced Templeton Investment Counsel, LLC and Wellington Management Company, LLP together with its affiliate Wellington Management International Ltd as subadvisers to the Fund. New investments in the Fund, net of any redemptions, are allocated in accordance with the Investment Manager's determination of the allocation that is in the best interests of the Fund's shareholders. Each subadviser's proportionate share of investments in the Fund will vary due to market fluctuations. - -------------------------------------------------------------------------------- 26 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- Under a separate Transfer Agency Agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. The Fund pays the Transfer Agent an annual fee per shareholder account for this service as follows: o Class A $19.50 o Class B $20.50 o Class C $20.00 o Class Y $17.50 The incremental transfer agency fee is the amount charged to the specific classes for the additional expense above the fee for Class Y. Class I pays a transfer agency fee at an annual rate per shareholder account of $1. This amount is included in the transfer agency fee on the statement of operations. The Transfer Agent charges an annual closed account fee of $5 per inactive account, charged on a pro rata basis for 12 months from the date the account becomes inactive. These fees are included in the transfer agency fees on the statement of operations. The Fund has agreements with Ameriprise Financial Services, Inc. (the Distributor) for distribution and shareholder services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to 0.25% of the Fund's average daily net assets attributable to Class A shares and up to 1.00% for Class B and Class C shares. Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net assets attributable to Class Y shares. Sales charges received by the Distributor for distributing Fund shares were $97,872 for Class A, $13,015 for Class B and $144 for Class C for the six months ended April 30, 2006. For the six months ended April 30, 2006, the Investment Manager and its affiliates waived certain fees and expenses to 1.81% for Class A, 2.58% for Class B, 2.59% for Class C, and 1.64% 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 $41,857, $11,441, $543 and $45, respectively, and the management fees waived at the Fund level were $5. In addition, the Investment Manager and its affiliates have agreed to waive certain fees and expenses until Oct. 31, 2006. Under this agreement, net expenses, before giving effect to any performance incentive adjustments, will not exceed 1.92% for Class A, 2.69% for Class B, 2.70% for Class C, 1.57% for Class I and 1.75% for Class Y of the Fund's average daily net assets. During the six months ended April 30, 2006, the Fund's custodian and transfer agency fees were reduced by $1,365 as a result of earnings credits from overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. - -------------------------------------------------------------------------------- 27 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 3. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $110,026,525 and $115,157,083, respectively, for the six months ended April 30, 2006. Realized gains and losses are determined on an identified cost basis. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED APRIL 30, 2006 CLASS A CLASS B CLASS C CLASS I CLASS Y - -------------------------------------------------------------------------------------------------------------------- Sold 960,955 310,522 21,531 309,176 4,707 Issued for reinvested distributions 793,580 239,636 11,939 166,671 997 Redeemed (849,382) (282,123) (23,229) (109,843) (88) - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) 905,153 268,035 10,241 366,004 5,616 - -------------------------------------------------------------------------------------------------------------------- YEAR ENDED OCT. 31, 2005 CLASS A CLASS B CLASS C CLASS I CLASS Y - -------------------------------------------------------------------------------------------------------------------- Sold 2,383,480 833,479 40,839 1,082,875 3,501 Issued for reinvested distributions 278,015 96,983 3,804 90,182 497 Redeemed (1,967,154) (595,379) (19,548) (1,360,248) (3,552) - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) 694,341 335,083 25,095 (187,191) 446 - --------------------------------------------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS At April 30, 2006, the Fund has forward foreign currency exchange contracts that obligate it to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - -------------------------------------------------------------------------------------------------------- May 1, 2006 341,227 256,487 $ -- $2,743 Australian Dollar U.S. Dollar May 1, 2006 950,579 1,071,663 7,975 -- U.S. Dollar Canadian Dollar May 1, 2006 162,158 971,264 2,092 -- U.S. Dollar Danish Krone May 1, 2006 154,335 17,709,156 1,213 -- U.S. Dollar Japanese Yen May 1, 2006 2,381,287 273,836,140 23,949 -- U.S. Dollar Japanese Yen May 2, 2006 188,778 249,287 606 -- U.S. Dollar Australian Dollar May 2, 2006 2,911,438 1,630,263 61,347 -- U.S. Dollar British Pound May 2, 2006 358,865 402,898 1,509 -- U.S. Dollar Canadian Dollar May 2, 2006 152,693 910,053 936 -- U.S. Dollar Danish Krone May 2, 2006 2,519,184 2,022,937 32,549 -- U.S. Dollar European Monetary Unit
- -------------------------------------------------------------------------------- 28 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - -------------------------------------------------------------------------------------------------------- May 2, 2006 542,424 432,520 $ 3,157 $ -- U.S. Dollar European Monetary Unit May 2, 2006 519,113 59,612,352 4,491 -- U.S. Dollar Japanese Yen May 2, 2006 156,534 17,861,278 351 -- U.S. Dollar Japanese Yen May 2, 2006 700,641 4,385,800 12,509 -- U.S. Dollar Norwegian Krone May 2, 2006 516,101 819,697 2,498 -- U.S. Dollar Singapore Dollar May 2, 2006 839,739 6,285,107 16,030 -- U.S. Dollar Swedish Krona May 2, 2006 975,148 1,237,619 22,771 -- U.S. Dollar Swiss Franc May 3, 2006 1,311,532 727,497 15,087 -- U.S. Dollar British Pound May 3, 2006 718,015 572,534 4,240 -- U.S. Dollar European Monetary Unit May 3, 2006 51,226 40,866 327 -- U.S. Dollar European Monetary Unit May 3, 2006 118,409 878,002 1,149 -- U.S. Dollar Swedish Krona May 4, 2006 1,532,524 841,630 365 -- U.S. Dollar British Pound May 4, 2006 641,821 508,304 -- 646 U.S. Dollar European Monetary Unit May 4, 2006 85,439 526,558 182 -- U.S. Dollar Norwegian Krone May 4, 2006 2,060,686 338,800 -- 4,923 South African Rand U.S. Dollar - -------------------------------------------------------------------------------------------------------- Total $215,333 $8,312 - ---------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 29 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 6. BANK BORROWINGS The Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The 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. The Fund had no borrowings outstanding during the six months ended April 30, 2006. 7. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. - -------------------------------------------------------------------------------- 30 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal or arbitration proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal or arbitration proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory 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. - -------------------------------------------------------------------------------- 31 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- 8. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating the Fund's results.
CLASS A - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) - -------------------------------------------------------------------------------------------------------------------------------- Fiscal period ended Oct. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $ 8.81 $ 7.90 $ 7.45 $ 5.09 $ 4.92 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .03 .02 .02 -- Net gains (losses) (both realized and unrealized) 1.88 1.32 .96 2.34 .17 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.89 1.35 .98 2.36 .17 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) -- (.03) -- -- Distributions from realized gains (.97) (.44) (.50) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.06) (.44) (.53) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.64 $ 8.81 $ 7.90 $ 7.45 $ 5.09 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ 80 $ 66 $ 53 $ 26 $ 11 - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.81%(e) 1.94% 1.94% 1.95% 1.86%(e) - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .30%(e) .40% .34% .52% (1.08%)(e) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 112% 80% 66% 87% 7% - -------------------------------------------------------------------------------------------------------------------------------- Total return(f) 23.42%(g) 17.70% 13.94% 46.37% 3.46%(g) - --------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 1.93% for the six months ended April 30, 2006 and 1.99%, 2.26%, 3.09% and 10.34% for the periods ended Oct. 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. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 32 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS B - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) - -------------------------------------------------------------------------------------------------------------------------------- Fiscal period ended Oct. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $ 8.60 $ 7.78 $ 7.39 $ 5.08 $ 4.92 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) (.01) (.02) (.01) Net gains (losses) (both realized and unrealized) 1.84 1.29 .92 2.33 .17 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.82 1.26 .91 2.31 .16 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) -- (.02) -- -- Distributions from realized gains (.97) (.44) (.50) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.00) (.44) (.52) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.42 $ 8.60 $ 7.78 $ 7.39 $ 5.08 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ 21 $ 17 $ 13 $ 4 $ -- - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 2.58%(e) 2.71% 2.71% 2.72% 2.72%(e) - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.47%)(e) (.33%) (.38%) (.45%) (2.17%)(e) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 112% 80% 66% 87% 7% - -------------------------------------------------------------------------------------------------------------------------------- Total return(f) 22.96%(g) 16.77% 13.01% 45.47% 3.25%(g) - --------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 2.70% for the six months ended April 30, 2006 and 2.75%, 3.04%, 3.86% and 11.11% for the periods ended Oct. 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. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 33 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS C - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) - -------------------------------------------------------------------------------------------------------------------------------- Fiscal period ended Oct. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $ 8.62 $ 7.80 $ 7.39 $ 5.08 $ 4.92 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) (.01) (.02) (.01) Net gains (losses) (both realized and unrealized) 1.84 1.29 .93 2.33 .17 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.82 1.26 .92 2.31 .16 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.04) -- (.01) -- -- Distributions from realized gains (.97) (.44) (.50) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.01) (.44) (.51) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.43 $ 8.62 $ 7.80 $ 7.39 $ 5.08 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ 1 $ 1 $ 1 $ -- $ -- - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 2.59%(e) 2.71% 2.71% 2.72% 2.72%(e) - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets (.49%)(e) (.34%) (.34%) (.01%) (2.02%)(e) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 112% 80% 66% 87% 7% - -------------------------------------------------------------------------------------------------------------------------------- Total return(f) 22.94%(g) 16.73% 13.09% 45.47% 3.25%(g) - --------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 2.71% for the six months ended April 30, 2006 and 2.77%, 3.05%, 3.86% and 11.11% for the periods ended Oct. 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. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 34 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS I - ----------------------------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) - ----------------------------------------------------------------------------------------------------------- Fiscal period ended Oct. 31, 2006(h) 2005 2004(b) Net asset value, beginning of period $ 8.89 $ 7.94 $ 7.86 - ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .07 .02 Net gains (losses) (both realized and unrealized) 1.92 1.32 .06 - ----------------------------------------------------------------------------------------------------------- Total from investment operations 1.93 1.39 .08 - ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) -- -- Distributions from realized gains (.97) (.44) -- - ----------------------------------------------------------------------------------------------------------- Total distributions (1.10) (.44) -- - ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.72 $ 8.89 $ 7.94 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - ----------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ 15 $ 10 $ 11 - ----------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c) 1.45%(d) 1.48%(e) 1.55%(d),(e) - ----------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .71%(d) .89% .77%(d) - ----------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 112% 80% 66% - ----------------------------------------------------------------------------------------------------------- Total return(f) 23.72%(g) 18.14% 1.02%(g) - -----------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Inception date is March 4, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses for Class I would have been 1.51% and 1.83% for the periods ended Oct. 31, 2005 and 2004, respectively. (f) Total return does not reflect payment of a sales charge. (g) Not annualized. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 35 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
CLASS Y - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a) - -------------------------------------------------------------------------------------------------------------------------------- Fiscal period ended Oct. 31, 2006(h) 2005 2004 2003 2002(b) Net asset value, beginning of period $ 8.85 $ 7.93 $ 7.47 $ 5.09 $ 4.92 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .04 .03 .03 -- Net gains (losses) (both realized and unrealized) 1.89 1.32 .97 2.35 .17 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.90 1.36 1.00 2.38 .17 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.10) -- (.04) -- -- Distributions from realized gains (.97) (.44) (.50) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.07) (.44) (.54) -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.68 $ 8.85 $ 7.93 $ 7.47 $ 5.09 - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in millions) $ -- $ -- $ -- $ -- $ -- - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.64%(e) 1.77% 1.78% 1.78% 1.73%(e) - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .60%(e) .58% .45% .70% (.93%)(e) - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 112% 80% 66% 87% 7% - -------------------------------------------------------------------------------------------------------------------------------- Total return(f) 23.48%(g) 17.77% 14.15% 46.76% 3.46%(g) - --------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Oct. 3, 2002 (when shares became publicly available) to Oct. 31, 2002. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings 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 1.72% for the six months ended April 30, 2006 and 1.81%, 2.08%, 2.92% and 10.17% for the periods ended Oct. 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. (h) Six months ended April 30, 2006 (Unaudited). - -------------------------------------------------------------------------------- 36 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- FUND EXPENSES EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended April 30, 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. - -------------------------------------------------------------------------------- 37 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED NOV. 1, 2005 APRIL 30, 2006 THE PERIOD(a) EXPENSE RATIO - --------------------------------------------------------------------------------------------------------------------- Class A - --------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,234.20 $ 9.92 1.81% - --------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.64 $ 8.95 1.81% - --------------------------------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,229.60 $14.11 2.58% - --------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.87 $12.73 2.58% - --------------------------------------------------------------------------------------------------------------------- Class C - --------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,229.40 $14.16 2.59% - --------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,011.82 $12.78 2.59% - --------------------------------------------------------------------------------------------------------------------- Class I - --------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,237.20 $ 7.95 1.45% - --------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.41 $ 7.17 1.45% - --------------------------------------------------------------------------------------------------------------------- Class Y - --------------------------------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,234.80 $ 8.99 1.64% - --------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.48 $ 8.11 1.64% - ---------------------------------------------------------------------------------------------------------------------
(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 179/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended April 30, 2006: +23.42% for Class A, +22.96% for Class B, +22.94% for Class C, +23.72% for Class I and +23.48% for Class Y. - -------------------------------------------------------------------------------- 38 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL 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/Trustees (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. The Fund operates under an order from the Securities and Exchange Commission that permits the investment manager, subject to the approval of the Board, to appoint unaffiliated subadvisers or change the terms of subadvisory agreements without first obtaining shareholder approval. As a basis for making its determination, the Board monitors the investment performance of the Fund throughout the year using a number of benchmarks and comparison periods of one, three and five years, as well as, the entire period during which the subadviser has managed its portion of the investment portfolio. On an annual basis the Board assesses the operating capabilities of the subadviser, such as adherence to the investment strategies of the Fund, compliance with its code of ethics and all applicable legal requirements, and its working relationship with the investment manager, through reports prepared by the investment manager. During the year, if there is a change in the composition of the subadviser's management team or if other circumstances so require, the Board will re-assess the operating capabilities. The Board also considers the fees paid by the investment manager to the subadviser and any business relationships that exist between the investment manager and its affiliates and the subadviser. Based on its review and evaluation, at a meeting of the Board held on April 12-13, 2006, the Board, including all of its independent members, determined to terminate the subadvisory agreements with Templeton Investment Counsel, LLC ("Franklin Templeton") and Wellington Management Company, LLP together with its affiliate Wellington Management International Ltd ("Wellington Management International") and approve new subadvisory agreements with AIG Global Investment Corp. ("AIGGIC") and Batterymarch Financial Management, Inc. ("Batterymarch"). The recommendation to replace Franklin Templeton and Wellington Management International with AIGGIC and Batterymarch was made by RiverSource Investments in the ordinary course of its ongoing evaluation of the subadvisers. - -------------------------------------------------------------------------------- 39 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- In evaluating the recommendation to hire AIGGIC and Batterymarch as subadvisers for the Fund, the Board considered, among other factors: o The favorable history, reputation, qualification and background of each subadviser, as well as the qualifications of each subadviser's personnel and its financial condition. o The expertise that each subadviser offers in providing portfolio management services to other similar portfolios and the performance history of those portfolios. o Each subadviser's proposed investment strategy for the Fund. o Each subadviser's long- and short-term performance relative to comparable mutual funds and unmanaged indexes. o The compliance program of each subadviser. Based on the foregoing analysis, the Board concluded that the approval of new subadvisory agreements with AIGGIC and Batterymarch is in the best interests of the Fund and its shareholders. - -------------------------------------------------------------------------------- 40 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting www.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 most recent 12-month period ended June 30 is available without charge by visiting www.riversource.com/funds; or searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 41 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RESULTS OF MEETING OF SHAREHOLDERS RIVERSOURCE INTERNATIONAL SMALL CAP FUND REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006 (UNAUDITED) A brief description of each proposal voted upon at the meeting and the votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each proposal is set forth below. A vote is based on total dollar interest in a fund. ELECTION OF BOARD MEMBERS
AFFIRMATIVE WITHHOLD - ------------------------------------------------------------------------------- Kathleen Blatz 80,395,356.90 2,433,426.94 - ------------------------------------------------------------------------------- Arne H. Carlson 80,238,310.56 2,590,473.28 - ------------------------------------------------------------------------------- Patricia M. Flynn 80,352,950.47 2,475,833.37 - ------------------------------------------------------------------------------- Anne P. Jones 80,243,599.07 2,585,184.77 - ------------------------------------------------------------------------------- Jeffrey Laikind 80,167,487.87 2,661,295.97 - ------------------------------------------------------------------------------- Stephen R. Lewis, Jr. 80,433,871.21 2,394,912.63 - ------------------------------------------------------------------------------- Catherine James Paglia 80,354,719.79 2,474,064.05 - ------------------------------------------------------------------------------- Vikki L. Pryor 80,309,056.93 2,519,726.91 - ------------------------------------------------------------------------------- Alan K. Simpson 79,892,295.70 2,936,488.14 - ------------------------------------------------------------------------------- Alison Taunton-Rigby 80,410,463.47 2,418,320.37 - ------------------------------------------------------------------------------- William F. Truscott 80,313,580.95 2,515,202.89 - -------------------------------------------------------------------------------
AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - ------------------------------------------------------------------------------- 78,875,555.05 2,680,998.86 1,272,229.93 0.00 - -------------------------------------------------------------------------------
APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE INVESTMENTS, LLC
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - ------------------------------------------------------------------------------- 79,229,728.05 2,136,562.93 1,462,492.86 0.00 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 42 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES DIVERSIFICATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - ------------------------------------------------------------------------------- 79,490,663.79 1,702,481.40 1,635,638.65 0.00 - -------------------------------------------------------------------------------
LENDING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - ------------------------------------------------------------------------------- 78,494,320.94 2,782,099.09 1,552,363.81 0.00 - -------------------------------------------------------------------------------
BORROWING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES - ------------------------------------------------------------------------------- 78,988,703.90 2,474,980.31 1,365,099.63 0.00 - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 43 - RIVERSOURCE INTERNATIONAL SMALL CAP FUND - 2006 SEMIANNUAL REPORT - -------------------------------------------------------------------------------- RIVERSOURCE(SM) INTERNATIONAL SMALL CAP 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 Funds are managed by RiverSource Investments, LLC and distributed by Ameriprise Financial Services, Inc., Member NASD. RIVERSOURCE [LOGO](SM) Both companies are part of Ameriprise Financial, Inc. INVESTMENTS S-6269 E (6/06) Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date June 28, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date June 28, 2006 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date June 28, 2006 EX-99.CERT 2 ex99-cert.txt CERTIFICATION PURSUANT TO 270.30A-2 OF THE INVESTMENT COMPANY ACT OF 1940 Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Paula Meyer, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource International Managers Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 22, 2006 /s/ Paula R. Meyer -------------------- Name: Paula R. Meyer Title: President and Chief Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey Fox, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource International Managers Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 22, 2006 /s/ Jeffrey P. Fox --------------------- Name: Jeffrey P. Fox Title: Treasurer and Chief Financial Officer EX-99.906 CERT 3 ex99-906cert.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: June 22, 2006 /s/ Paula R. Meyer ------------- ------------------ Paula R. Meyer President and Chief Executive Officer Date: June 22, 2006 /s/ Jeffrey P. Fox ------------- ------------------ Jeffrey P. Fox Treasurer and Chief Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----