0000820027-05-000983.txt : 20110310 0000820027-05-000983.hdr.sgml : 20110310 20051027120435 ACCESSION NUMBER: 0000820027-05-000983 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20051027 DATE AS OF CHANGE: 20051027 EFFECTIVENESS DATE: 20051028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP VARIABLE PORTFOLIO INVESTMENT SERIES INC CENTRAL INDEX KEY: 0000353968 IRS NUMBER: 411409539 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-73115 FILM NUMBER: 051159216 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 VARIABLE PORTFOLIO INVESTMENT SERIES INC DATE OF NAME CHANGE: 19991126 FORMER COMPANY: FORMER CONFORMED NAME: IDS LIFE INVESTMENT SERIES INC DATE OF NAME CHANGE: 19981102 FORMER COMPANY: FORMER CONFORMED NAME: IDS LIFE CAPITAL RESOURCE FUND INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP VARIABLE PORTFOLIO INVESTMENT SERIES INC CENTRAL INDEX KEY: 0000353968 IRS NUMBER: 411409539 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03218 FILM NUMBER: 051159217 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 VARIABLE PORTFOLIO INVESTMENT SERIES INC DATE OF NAME CHANGE: 19991126 FORMER COMPANY: FORMER CONFORMED NAME: IDS LIFE INVESTMENT SERIES INC DATE OF NAME CHANGE: 19981102 FORMER COMPANY: FORMER CONFORMED NAME: IDS LIFE CAPITAL RESOURCE FUND INC DATE OF NAME CHANGE: 19920703 485BPOS 1 vpinvestment-partc.txt AXP VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 57 (File No. 2-73115) [X] --- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 59 (File No. 811-3218) [X] --- AXP Variable Portfolio - Investment Series, Inc. 50606 Ameriprise Financial Center Minneapolis, Minnesota 55474 Leslie L. Ogg - 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268 (612) 330-9283 Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on Oct. 28, 2005 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of Rule 485 If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. PROSPECTUS [RIVERSOURCE(SM) INVESTMENTS LOGO] RIVERSOURCE(SM) VARIABLE PORTFOLIO FUNDS PROSPECTUS OCT. 28, 2005 RiverSource(SM) Variable Portfolio - Balanced Fund RiverSource(SM) Variable Portfolio - Cash Management Fund RiverSource(SM) Variable Portfolio - Core Bond Fund RiverSource(SM) Variable Portfolio - Diversified Bond Fund RiverSource(SM) Variable Portfolio - Diversified Equity Income Fund RiverSource(SM) Variable Portfolio - Emerging Markets Fund RiverSource(SM) Variable Portfolio - Global Bond Fund RiverSource(SM) Variable Portfolio - Global Inflation Protected Securities Fund RiverSource(SM) Variable Portfolio - Growth Fund RiverSource(SM) Variable Portfolio - High Yield Bond Fund RiverSource(SM) Variable Portfolio - Income Opportunities Fund RiverSource(SM) Variable Portfolio - International Opportunity Fund RiverSource(SM) Variable Portfolio - Large Cap Equity Fund RiverSource(SM) Variable Portfolio - Large Cap Value Fund RiverSource(SM) Variable Portfolio - Mid Cap Growth Fund RiverSource(SM) Variable Portfolio - Mid Cap Value Fund RiverSource(SM) Variable Portfolio - New Dimensions Fund(R) RiverSource(SM) Variable Portfolio - S&P 500 Index Fund RiverSource(SM) Variable Portfolio - Select Value Fund RiverSource(SM) Variable Portfolio - Short Duration U.S. Government Fund RiverSource(SM) Variable Portfolio - Small Cap Advantage Fund RiverSource(SM) Variable Portfolio - Small Cap Value Fund RiverSource(SM) Variable Portfolio - Strategy Aggressive Fund As of Oct. 1, 2005, the RiverSource brand replaced "American Express" and "AXP" in the name of the American Express(R) Variable Portfolio Funds. In addition to the brand name change, the following funds changed their names: AXP Variable Portfolio - Equity Select Fund changed its name to RiverSource Variable Portfolio - Mid Cap Growth Fund, AXP Variable Portfolio - Managed Fund changed its name to RiverSource Variable Portfolio - Balanced Fund, AXP Variable Portfolio - Partners Select Value Fund changed its name to RiverSource Variable Portfolio - Select Value Fund, AXP Variable Portfolio - Partners Small Cap Value Fund changed its name to RiverSource Variable Portfolio - Small Cap Value Fund, AXP Variable Portfolio - Threadneedle Emerging Markets Fund changed its name to RiverSource Variable Portfolio - Emerging Markets Fund and AXP Variable Portfolio - Threadneedle International Fund changed its name to RiverSource Variable Portfolio - International Opportunity Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. This prospectus may contain information on Funds not available under your variable annuity contract or life insurance policy. Please refer to your variable annuity contract or life insurance policy prospectus for information regarding the investment options available to you. THESE SECURITIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR AN AFFILIATE OF ANY BANK, NOR ARE THEY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), OR ANY OTHER AGENCY OF THE UNITED STATES, OR ANY BANK OR AN AFFILIATE OF ANY BANK; AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF VALUE. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS THE RIVERSOURCE VARIABLE PORTFOLIO FUNDS 4P RIVERSOURCE VARIABLE PORTFOLIO - BALANCED FUND 4P Objective 4p Principal Investment Strategies 4p Principal Risks 5p Past Performance 6p Management 7p RIVERSOURCE VARIABLE PORTFOLIO - CASH MANAGEMENT FUND 8P Objective 8p Principal Investment Strategies 8p Principal Risks 8p Past Performance 9p RIVERSOURCE VARIABLE PORTFOLIO - CORE BOND FUND 10P Objective 10p Principal Investment Strategies 10p Principal Risks 10p Past Performance 11p Management 11p RIVERSOURCE VARIABLE PORTFOLIO - DIVERSIFIED BOND FUND 12P Objective 12p Principal Investment Strategies 12p Principal Risks 12p Past Performance 13p Management 14p RIVERSOURCE VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND 15P Objective 15p Principal Investment Strategies 15p Principal Risks 15p Past Performance 16p Management 17p RIVERSOURCE VARIABLE PORTFOLIO - EMERGING MARKETS FUND 18P Objective 18p Principal Investment Strategies 18p Principal Risks 19p Past Performance 20p Management 21p RIVERSOURCE VARIABLE PORTFOLIO - GLOBAL BOND FUND 22P Objective 22p Principal Investment Strategies 22p Principal Risks 22p Past Performance 24p Management 25p RIVERSOURCE VARIABLE PORTFOLIO - GLOBAL INFLATION PROTECTED SECURITIES FUND 26P Objective 26p Principal Investment Strategies 26p Principal Risks 26p Past Performance 27p Management 28p RIVERSOURCE VARIABLE PORTFOLIO - GROWTH FUND 29P Objective 29p Principal Investment Strategies 29p Principal Risks 29p Past Performance 30p Management 30p RIVERSOURCE VARIABLE PORTFOLIO - HIGH YIELD BOND FUND 31P Objective 31p Principal Investment Strategies 31p Principal Risks 31p Past Performance 32p Management 33p RIVERSOURCE VARIABLE PORTFOLIO - INCOME OPPORTUNITIES FUND 34P Objective 34p Principal Investment Strategies 34p Principal Risks 34p Past Performance 35p Management 35p RIVERSOURCE VARIABLE PORTFOLIO - INTERNATIONAL OPPORTUNITY FUND 36P Objective 36p Principal Investment Strategies 36p Principal Risks 37p Past Performance 38p Management 39p RIVERSOURCE VARIABLE PORTFOLIO - LARGE CAP EQUITY FUND 40P Objective 40p Principal Investment Strategies 40p Principal Risks 40p Past Performance 41p Management 42p RIVERSOURCE VARIABLE PORTFOLIO - LARGE CAP VALUE FUND 43P Objective 43p Principal Investment Strategies 43p Principal Risks 43p Past Performance 44p Management 44p RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 2p RIVERSOURCE VARIABLE PORTFOLIO - MID CAP GROWTH FUND 45P Objective 45p Principal Investment Strategies 45p Principal Risks 45p Past Performance 46p Management 46p RIVERSOURCE VARIABLE PORTFOLIO - MID CAP VALUE FUND 47P Objective 47p Principal Investment Strategies 47p Principal Risks 47p Past Performance 48p Management 48p RIVERSOURCE VARIABLE PORTFOLIO - NEW DIMENSIONS FUND 49P Objective 49p Principal Investment Strategies 49p Principal Risks 49p Past Performance 50p Management 51p RIVERSOURCE VARIABLE PORTFOLIO - S&P 500 INDEX FUND 52P Objective 52p Principal Investment Strategies 52p Principal Risks 53p Past Performance 53p Management 54p RIVERSOURCE VARIABLE PORTFOLIO - SELECT VALUE FUND 55P Objective 55p Principal Investment Strategies 55p Principal Risks 55p Past Performance 56p Management 56p RIVERSOURCE VARIABLE PORTFOLIO - SHORT DURATION U.S. GOVERNMENT FUND 57P Objective 57p Principal Investment Strategies 57p Principal Risks 57p Past Performance 58p Management 59p RIVERSOURCE VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND 60P Objective 60p Principal Investment Strategies 60p Principal Risks 60p Past Performance 61p Management 62p RIVERSOURCE VARIABLE PORTFOLIO - SMALL CAP VALUE FUND 63P Objective 63p Principal Investment Strategies 63p Principal Risks 64p Past Performance 65p Management 66p RIVERSOURCE VARIABLE PORTFOLIO - STRATEGY AGGRESSIVE FUND 69P Objective 69p Principal Investment Strategies 69p Principal Risks 69p Past Performance 70p Management 70p FEES AND EXPENSES 71P OTHER INVESTMENT STRATEGIES AND RISKS 73P INVESTMENT MANAGER AND COMPENSATION 73P BUYING AND SELLING SHARES 75P Valuing Fund Shares 75p Purchasing Shares 75p Transferring/Selling Shares 75p Market Timing 75p DISTRIBUTIONS AND TAXES 76P FINANCIAL HIGHLIGHTS 76P CORPORATE REORGANIZATION On Sept. 30, 2005, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) was spun off to shareholders of its parent corporation, American Express Company (American Express) and is now a separate company trading under the ticker symbol AMP. Ameriprise Financial provides administrative services to the Funds and is the parent company of the Funds' investment manager, RiverSource Investments, LLC and the Funds' distributor, IDS Life Insurance Company. Ameriprise Financial and its subsidiaries are no longer affiliated with American Express. The Board of Directors has approved in principle the merger of RiverSource Variable Portfolio - New Dimensions Fund into RiverSource Variable Portfolio - Large Cap Equity Fund and the merger of RiverSource Variable Portfolio - Strategy Aggressive Fund into RiverSource Variable Portfolio - Mid Cap Growth Fund. The mergers are subject to approval by shareholders of RiverSource Variable Portfolio - New Dimensions Fund and RiverSource Variable Portfolio - Strategy Aggressive Fund. It is currently anticipated that proxy materials regarding the mergers will be distributed to shareholders in December 2005, and that a meeting for shareholders to consider the mergers will be held in February 2006. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 3p THE RIVERSOURCE VARIABLE PORTFOLIO FUNDS References to "Fund" throughout this prospectus refer to RiverSource Variable Portfolio - Balanced Fund, RiverSource Variable Portfolio - Cash Management Fund, RiverSource Variable Portfolio - Core Bond Fund, RiverSource Variable Portfolio - Diversified Bond Fund, RiverSource Variable Portfolio - Diversified Equity Income Fund, RiverSource Variable Portfolio - Emerging Markets Fund, RiverSource Variable Portfolio - Global Bond Fund, RiverSource Variable Portfolio - Global Inflation Protected Securities Fund, RiverSource Variable Portfolio - Growth Fund, RiverSource Variable Portfolio - High Yield Bond Fund, RiverSource Variable Portfolio - Income Opportunities Fund, RiverSource Variable Portfolio - International Opportunity Fund, RiverSource Variable Portfolio - Large Cap Equity Fund, RiverSource Variable Portfolio - Large Cap Value Fund, RiverSource Variable Portfolio - Mid Cap Growth Fund, RiverSource Variable Portfolio - Mid Cap Value Fund, RiverSource Variable Portfolio - New Dimensions Fund, RiverSource Variable Portfolio - S&P 500 Index Fund, RiverSource Variable Portfolio - Select Value Fund, RiverSource Variable Portfolio - Short Duration U.S. Government Fund, RiverSource Variable Portfolio - Small Cap Advantage Fund, RiverSource Variable Portfolio - Small Cap Value Fund and RiverSource Variable Portfolio - Strategy Aggressive Fund, singularly or collectively as the context requires. A Fund may have a name, portfolio manager, objectives, strategies and characteristics that are the same or substantially similar to those of a publicly-traded retail mutual fund. Each Fund will have its own unique portfolio holdings, fees, operating expenses and operating results. The performance results of each Fund may differ significantly from any publicly-traded retail mutual fund. PLEASE REMEMBER THAT YOU MAY NOT BUY (NOR WILL YOU OWN) SHARES OF THE FUND DIRECTLY. YOU INVEST BY BUYING A VARIABLE ANNUITY CONTRACT OR LIFE INSURANCE POLICY AND ALLOCATING YOUR PURCHASE PAYMENTS TO THE VARIABLE SUBACCOUNT OR VARIABLE ACCOUNT (THE SUBACCOUNTS) THAT INVESTS IN THE FUND. RIVERSOURCE VARIABLE PORTFOLIO - BALANCED FUND OBJECTIVE The Fund seeks maximum total investment return through a combination of capital growth and current income. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in a combination of common and preferred stocks, bonds and other debt securities. Under normal market conditions, at least 50% of the Fund's total assets are invested in common stocks and no less than 25% of the Fund's total assets are invested in debt securities. Although the Fund emphasizes high- and medium-quality securities for the debt portion of its portfolio, it may buy lower-quality (junk) bonds. The Fund may invest up to 25% of its total assets in foreign investments. In pursuit of the Fund's objective, RiverSource Investments, LLC (the "investment manager" or "RiverSource Investments") chooses equity investments by: - Identifying a variety of large, well-established companies whose underlying fundamentals (indicating, for example, a company's financial condition and viability) are stable or are anticipated to become stable, or whose fundamentals are improving. - Identifying stocks that are undervalued: - because they have one or more valuation ratios, such as price-to-earnings or price-to-cash flow, that are low relative to the general market, or have a yield that exceeds the market, - because one or more of their valuation ratios are low relative to historical levels for the stock, - because one or more of their valuation ratios or other financial measures make that stock attractive relative to its peers, or - because they are undervalued relative to their intrinsic value, as identified by the investment manager. In evaluating whether to sell an equity security, the investment manager considers factors including, among others, whether: - The security is overvalued relative to other potential investments. - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - Potential losses, due to factors such as a market down-turn, can be minimized. In pursuit of the Fund's goal, the investment manager chooses debt investments by: - Evaluating the debt portion of the portfolio's total exposure to sectors, industries and securities relative to the Lehman Brothers Aggregate Bond Index (the Index). - Analyzing factors such as credit quality, interest rate outlook and price to select the most attractive securities within each sector. - Targeting an average duration for the debt portion of the portfolio within one year of the duration of the Index which, as of Aug. 31, 2005 was 4.26 years. Duration measures the sensitivity of bond prices to changes in interest rates. The longer the duration of a bond, the longer it will take to repay the principal and interest obligations and the more sensitive it will be to changes in interest rates. For example, a five-year duration means a bond is expected to decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 4p In evaluating whether to sell a debt security, the investment manager considers, among other factors: - The debt portion of the portfolio's total exposure to sectors, industries and securities relative to the Index. - Whether a security's rating is changed or is vulnerable to a change. - Whether a sector or industry is experiencing change. - Changes in the interest rate or economic outlook. - Whether the investment manager identifies a more attractive opportunity. PRINCIPAL RISKS Please remember that with any investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. FOREIGN RISK. The following are all components of foreign risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. CURRENCY RISK results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 5p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - BALANCED FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1995 +24.21% 1996 +16.20% 1997 +19.50% 1998 +15.80% 1999 +14.84% 2000 -2.31% 2001 -10.59% 2002 -12.92% 2003 +20.26% 2004 +9.59%
During the period shown in the bar chart, the highest return for a calendar quarter was +15.66% (quarter ended Dec. 31, 1998) and the lowest return for a calendar quarter was -12.37%% (quarter ended Sept. 30, 2001). The Fund's year-to-date return at Sept. 30, 2005 was +9.24%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004) 1 YEAR 5 YEARS 10 YEARS RiverSource VP - Balanced Fund +9.59% +0.05% +8.68% Russell 1000(R) Value Index (reflects no deduction for fees, expenses or taxes) +16.49% +5.27% +13.83% S&P 500 Index (reflects no deduction for fees, expenses or taxes) +10.88% -2.30% +12.07% Lehman Brothers Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) +4.34% +7.71% +7.72% Blended Index +11.55% +6.59% +11.65% Lipper Balanced Funds Index +8.99% +2.95% +9.44%
The Russell 1000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Blended Index consists of 60% Russell 1000(R) Value Index and 40% Lehman Brothers Aggregate Bond Index. The Lipper Balanced Funds Index includes the 30 largest balanced 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. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from S&P 500 Index to the Russell 1000 Value Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000 Value Index will be included. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 6p MANAGEMENT PORTFOLIO MANAGER(S). The Fund is allocated among equity and fixed income asset classes. Robert Ewing determines the allocations among these asset classes. In addition, Mr. Ewing is responsible for the day-to-day management of the equity portion of the Fund: Robert Ewing, CFA, Co-Portfolio Manager - Managed the equity portion of the Portfolio since, 2002. - Joined RiverSource Investments (previously American Express Financial Corporation (AEFC)) in 2002. - Analyst and Portfolio Manager, Fidelity Investments, 1990 to 2002. - Began investment career in 1988. - BS, Boston College Carroll School of Management. The portfolio managers responsible for the day-to-day management of the fixed income portion of the Fund are: Jamie Jackson, CFA, Co-Portfolio Manager - Co-Managed the Portfolio since 2003. - Leader of the liquid assets sector team. - Joined RiverSource Investments (previously AEFC) in 2003. - Co-head of U.S. Investment Grade Fixed Income, UBS Global Asset Management, 1997 to 2003. - Began investment career in 1988. - MBA, Marquette University. Scott Kirby, Co-Portfolio Manager - Co-Managed the Portfolio since 2003. - Leader of the structured assets sector team. - Employed by RiverSource Investments (previously AEFC) from 1979 to 1985 and from 1987 to present. - Began investment career in 1979. - MBA, University of Minnesota. Tom Murphy, CFA, Co-Portfolio Manager - Co-Managed the Portfolio since 2003. - Leader of the investment grade corporate bond sector team. - Joined RiverSource Investments (previously AEFC) in 2002. - Managing Director and Portfolio Manager, BlackRock Financial Management, in 2002, and various positions at Zurich Scudder from 1992 to 2002. - Began investment career in 1986. - MBA, University of Michigan. The fixed income department of RiverSource Investments is divided into six sector teams, each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio managers lead the teams that specialize in the sectors in which the Fund primarily invests, and collectively determine allocation of Fund assets among the sectors. The Statement of Additional Information (SAI) provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 7p RIVERSOURCE VARIABLE PORTFOLIO - CASH MANAGEMENT FUND OBJECTIVE The Fund seeks to provide shareholders with maximum current income consistent with liquidity and stability of principal. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets primarily are invested in money market instruments, such as marketable debt obligations issued by corporations or the U.S. government or its agencies, bank certificates of deposit, bankers' acceptances, letters of credit, and commercial paper, including asset-backed commercial paper. The Fund may invest more than 25% of its total assets in U.S. banks, U.S. branches of foreign banks and U.S. government securities. Additionally, the Fund may invest up to 25% of its total assets in U.S. dollar-denominated foreign investments. Because the Fund seeks to maintain a constant net asset value of $1.00 per share, capital appreciation is not expected to play a role in the Fund's return. The Fund's yield will vary from day-to-day. The Fund restricts its investments to instruments that meet certain maturity and quality standards required by the Securities and Exchange Commission (SEC) for money market funds. For example, the Fund: - Limits its average portfolio maturity to ninety days or less. - Buys obligations with remaining maturities of 397 days or less. - Buys only obligations that are denominated in U.S. dollars and present minimal credit risk. In pursuit of the Fund's objective, the investment manager chooses investments by: - Considering opportunities and risks given current interest rates and anticipated interest rates. - Purchasing securities based on the timing of cash flows in and out of the Fund. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The issuer's credit rating declines or the investment manager expects a decline (the Fund, in certain cases, may continue to own securities that are down-graded until the investment manager believes it is advantageous to sell). - Political, economic, or other events could affect the issuer's performance. - The investment manager identifies a more attractive opportunity. - The issuer or the security continues to meet the other standards described above. For more information on strategies and holdings, see the Fund's SAI and its annual and semiannual reports. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Although the Fund's share price has remained constant in the past, THE FUND CANNOT GUARANTEE THAT IT WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. INFLATION RISK. Also known as purchasing power risk, inflation risk reflects the effects of continually rising prices on investments. If an investment's return is lower than the rate of inflation, your money will have less purchasing power as time goes on. REINVESTMENT RISK. The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. For example, if the Fund concentrates its investments in banks, the value of these investments may be adversely affected by economic or regulatory developments in the banking industry. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 8p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - CASH MANAGEMENT FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1995 +5.45% 1996 +4.23% 1997 +5.16% 1998 +5.14% 1999 +4.73% 2000 +5.83% 2001 +3.74% 2002 +1.14% 2003 +0.51% 2004 +0.74%
During the period shown in the bar chart, the highest return for a calendar quarter was +1.49% (quarter ended Sept. 30, 2000) and the lowest return for a calendar quarter was +0.09% (quarter ended Sept. 30, 2003). The Fund's year-to-date return at Sept. 30, 2005 was +2.09%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS 10 YEARS RiverSource VP - Cash Management Fund +0.74% +2.38% +3.73%
YIELD INFORMATION For current 7-day yield information, call (800) 862-7919 and select option #2. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 9p RIVERSOURCE VARIABLE PORTFOLIO - CORE BOND FUND OBJECTIVE The Fund seeks to provide shareholders with a high total return through current income and capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund invests at least 80% of its net assets in bonds and other debt securities. Although the Fund is not an index fund, it invests primarily in securities like those included in the Lehman Brothers Aggregate Bond Index (the "Index") which are investment grade and denominated in U.S. dollars. The Index includes securities issued by the U.S. government, corporate bonds, and mortgage- and asset-backed securities. The Fund will not invest in securities rated below investment grade, although it may hold securities that have been downgraded. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager chooses investments by: - Evaluating the portfolio's total exposure to the sectors, industries and securities relative to the Index. - Analyzing factors such as credit quality, interest rate outlook and price to select the most attractive securities within each sector (for example, identifying securities that have the opportunity to appreciate in value or provide income based on duration, expectations or changes in interest rates or credit quality). - Targeting an average portfolio duration within one year of the duration of the Index which, as of Aug. 31, 2005, was 4.26 years. Duration measures the sensitivity of bond prices to changes in interest rates. The longer the duration of a bond, the longer it will take to repay the principal and interest obligations and the more sensitive it will be to changes in interest rates. For example, a five year duration means a bond is expected to decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. The Fund's investment process employs significant risk controls that are designed to maintain risk levels to be comparable to the Index. These controls include review of effective duration and limitation on sector allocations, industry concentration and the size of individual positions. In evaluating whether to sell a security, the investment manager considers, among other factors: - The portfolio's total exposure to the sectors, industries and securities relative to the Index. - Whether a security's rating is changed or is vulnerable to a change. - Whether a sector or industry is experiencing change. - Changes in the interest rate or economic outlook. - Identification of a more attractive opportunity. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 10p PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund began operations on Feb. 4, 2004. When available the Fund intends to compare its performance to the Lehman Brothers Aggregate Bond Index, an unmanaged index, made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Fund also intends to compare its performance to the Lipper Intermediate Investment Grade Index, an index that includes the 30 largest investment grade funds tracked by Lipper Inc. The index's returns include net reinvested dividends. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the Fund are: Jamie Jackson, CFA, Co-Portfolio Manager - Co-managed the Fund since 2004. - Leader of the liquid assets sector team. - Joined RiverSource Investments (previously AEFC) in 2004. - Co-head of U.S. Investment Grade Fixed Income, UBS Global Asset Management, 1997 to 2003. - Began investment career in 1988. - MBA, Marquette University. Scott Kirby, Co-Portfolio Manager - Co-managed the Fund since 2004. - Leader of the structured assets sector team. - Employed by RiverSource Investments (previously AEFC) from 1979 to 1985 and from 1987 to the present. - Began investment career in 1979. - MBA, University of Minnesota. Tom Murphy, CFA, Co-Portfolio Manager - Co-managed the Fund since 2004. - Leader of the investment grade corporate bond sector team. - Joined RiverSource Investments (previously AEFC) in 2002. - Managing Director and Portfolio Manager, BlackRock Financial Management, 2002; various positions, Zurich Scudder, 1992 to 2002. - Began investment career in 1986. - MBA, University of Michigan. The fixed income department of RiverSource Investments is divided into six sector teams, each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio managers lead the teams that specialize in the sectors in which the Fund primarily invests, and collectively determine allocation of Fund assets among the sectors. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 11p RIVERSOURCE VARIABLE PORTFOLIO - DIVERSIFIED BOND FUND OBJECTIVE The Fund seeks to provide shareholders with a high level of current income while attempting to conserve the value of the investment for the longest period of time. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund invests at least 80% of its net assets in bonds and other debt securities. At least 50% of the Fund's net assets will be invested in securities like those included in the Lehman Brothers Aggregate Bond Index (the "Index"), which are investment grade and denominated in U.S. dollars. The Index includes securities issued by the U.S. government, corporate bonds, and mortgage- and asset-backed securities. Although the Fund emphasizes high- and medium-quality debt securities, it will assume some credit risk to achieve higher yield and/or capital appreciation by buying lower-quality (junk) bonds. The Fund may invest up to 15% in foreign investments, which may include investments in emerging markets. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. The selection of debt obligations is the primary decision in building the investment portfolio. In pursuit of the Fund's objective, the investment manager chooses investments by: - Evaluating the portfolio's total exposure to sectors, industries and securities relative to the Index. - Analyzing factors such as credit quality, interest rate outlook and price to select the most attractive securities within each sector. - Investing in lower-quality (junk) bonds and foreign investments as attractive opportunities arise. - Targeting an average portfolio duration within one year of the duration of the Index which, as of Aug. 31, 2005, was 4.26 years. Duration measures the sensitivity of bond prices to changes in interest rates. The longer the duration of a bond, the longer it will take to repay the principal and interest obligations and the more sensitive it will be to changes in interest rates. For example, a 5 year duration means a bond is expected to decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. In evaluating whether to sell a security, the investment manager considers, among other factors: - Identification of more attractive investments based on relative value. - The portfolio's total exposure to sectors, industries and securities relative to the Index. - Whether a security's rating has changed or is vulnerable to a change. - Whether a sector or industry is experiencing change. - Changes in the interest rate or economic outlook. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 12p PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - DIVERSIFIED BOND FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1995 +22.30% 1996 +5.70% 1997 +8.83% 1998 +1.51% 1999 +1.70% 2000 +5.41% 2001 +7.67% 2002 +5.53% 2003 +4.48% 2004 +4.48%
During the period shown in the bar chart, the highest return for a calendar quarter was +8.65% (quarter ended June 30, 1995) and the lowest return for a calendar quarter was -2.99% (quarter ended Sept. 30, 1998). The Fund's year-to-date return at Sept. 30, 2005 was +2.84%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS 10 YEARS RiverSource VP - Diversified Bond Fund +4.48% +5.51% +6.62% Lehman Brothers Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) +4.34% +7.71% +7.72% Lipper Intermediate Investment Grade Index +4.28% +7.33% +7.21%
The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Intermediate Investment Grade Index includes the 30 largest investment grade funds tracked by Lipper Inc. The index's returns include net reinvested dividends. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 13p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the Fund are: Jamie Jackson, CFA, Co-Portfolio Manager - Co-managed the Fund since 2003. - Leader of the liquid assets sector team. - Joined RiverSource Investments (previously AEFC) in 2003. - Co-head of U.S. Investment Grade Fixed Income, UBS Global Asset Management, 1997 to 2003. - Began investment career in 1988. - MBA, Marquette University. Scott Kirby, Co-Portfolio Manager - Co-managed the Fund since 2003. - Leader of the structured assets sector team. - Employed by RiverSource Investments (previously AEFC) from 1979 to 1985 and from 1987 to the present. - Began investment career in 1979. - MBA, University of Minnesota. Tom Murphy, CFA, Co-Portfolio Manager - Co-managed the Fund since 2002. - Leader of the investment grade corporate bond sector team. - Joined RiverSource Investments (previously AEFC) in 2002. - Managing Director and Portfolio Manager, BlackRock Financial Management, 2002; various positions, Zurich Scudder, 1992 to 2002. - Began investment career in 1986. - MBA, University of Michigan. Nicholas Pifer, CFA, Co-Portfolio Manager - Co-managed the Fund since 2003. - Leader of the global sector team. - Joined RiverSource Investments (previously AEFC) in 2000. - Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. - Began investment career in 1990. - MA, Johns Hopkins University School of Advanced International Studies. Jennifer Ponce de Leon, Co-Portfolio Manager - Co-managed the Fund since 2003. - Leader of the high yield sector team. - Joined RiverSource Investments (previously AEFC) in 1997. - Began investment career in 1989. - MBA, De Paul University. The fixed income department of RiverSource Investments is divided into six sector teams, each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio managers lead the teams that specialize in the sectors in which the Fund primarily invests, and collectively determine allocation of Fund assets among the sectors. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 14p RIVERSOURCE VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND OBJECTIVE The Fund seeks to provide shareholders with a high level of current income and, as a secondary objective, steady growth of capital. Because any investment involves risk, achieving these objectives cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in equity securities. Under normal market conditions, the Fund will invest at least 80% of its net assets in dividend-paying common and preferred stocks. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager chooses equity investments by: - Identifying stocks that are selling at low prices in relation to: - current and projected earnings; - current and projected dividends; and - historic price levels. - Identifying companies with moderate growth potential based on: - effective management (considering overall performance); and - financial strength. - Identifying companies with dividend-paying stocks. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to alternative investments. - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - The company or the security continues to meet the other standards described above. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 15p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2000 -0.78% 2001 +2.14% 2002 -19.03% 2003 +41.16% 2004 +18.20%
During the period shown in the bar chart, the highest return for a calendar quarter was +22.69% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -21.04% (quarter ended Sept. 30, 2002). The Fund's year-to-date return at Sept. 30, 2005 was +24.23%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004) 1 YEAR 5 YEARS SINCE INCEPTION RiverSource VP - Diversified Equity Income Fund +18.20% +6.49% +7.05%(a) Russell 1000(R) Value Index (reflects no deduction for fees, expenses or taxes) +16.49% +5.27% +6.08%(b) Lipper Equity Income Funds Index +13.02% +3.90% +4.50%(b)
(a) Inception date is Sept. 15, 1999. (b) Measurement period started Oct. 1, 1999. The Russell 1000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000(R) Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Equity Income Funds Index includes the 30 largest equity income 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. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 16p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the Fund are: Warren Spitz, Senior Portfolio Manager - Managed the Portfolio since 2000. - Joined RiverSource Investments (previously AEFC) in 2000 as a Senior Portfolio Manager. - Portfolio Manager, Prudential Global Asset Management, 1987 to 2000. - Began investment career in 1984. - MBA, Wharton School, University of Pennsylvania. Steve Schroll, Portfolio Manager - Managed the Portfolio since 2004. - Joined RiverSource Investments (previously AEFC) in 1998 as a Senior Security Analyst. - Senior Equity Analyst, Piper Jaffray, 1988 to 1998; Equity Analyst, First Asset Management, 1985 to 1988; Equity Analyst, Dain Rauscher, 1981 to 1985. - Began investment career in 1981. - MBA, University of Minnesota. Laton Spahr, Portfolio Manager - Managed the Portfolio since 2004. - Joined RiverSource Investments (previously AEFC) in 2001 as a Security Analyst. - Sector Analyst, Holland Capital Management, 2000 to 2001; Statistical Research Intern, Friess Associates, 1998 to 1999. - Began investment career in 1999. - MS, University of Wisconsin, Applied Security Analysis Program. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 17p RIVERSOURCE VARIABLE PORTFOLIO - EMERGING MARKETS FUND OBJECTIVE The Fund seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in equity securities of emerging markets companies. Emerging markets are countries characterized as developing or emerging by either the World Bank or the United Nations. Under normal market conditions, at least 80% of the Fund's net assets will be invested in securities of companies that are located in emerging market countries, or that earn 50% or more of their total revenues from goods or services produced in emerging markets countries or from sales made in emerging markets countries. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. The investment manager is responsible for oversight of the subadviser, Threadneedle International Limited (Threadneedle), a direct wholly-owned subsidiary of Ameriprise Financial, Inc. Threadneedle provides day-to-day management for the portion of the Fund allocated to equity securities and RiverSource Investments provides day-to day management for the portion of the Fund allocated to debt securities. Threadneedle chooses investments by: - Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. - Conducting detailed research on companies in a consistent strategic and macroeconomic framework. - Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. - Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. Using the global sector strategy, the Fund's portfolio management team constructs the portfolio by selecting geographic regions in which to invest and by investing in most of the stocks on two core lists of holdings, the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the portfolio management team. These discretionary holdings will typically make up a much smaller portion of the Fund. - The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. - The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: - Evaluating the opportunities and risks within regions and sectors; - Assessing valuations; and - Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. - Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 18p PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. Derivatives are financial instruments where value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, options, futures, indexes or currencies. Just as with securities in which the Fund invests directly, derivatives are subject to a number of risks, including market, correlation, liquidity, interest rate and credit risk. In addition, gains or losses involving derivatives may be substantial, because a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the Fund. The Fund will suffer a loss in connection with the investment manager's use of derivative instruments if prices do not move in the direction anticipated by the Fund's manager when entering into the derivative instrument. FOREIGN/EMERGING MARKETS RISKS. The following are all components of foreign/emerging markets risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. CURRENCY RISK results from constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. EMERGING MARKETS RISK includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 19p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - EMERGING MARKETS FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2001 -1.38% 2002 -5.44% 2003 +40.34% 2004 +24.15%
During the period shown in the bar chart, the highest return for a calendar quarter was +22.84% (quarter ended Dec. 31, 2001) and the lowest return for a calendar quarter was -18.18% (quarter ended Sept. 30, 2001). The Fund's year-to-date return at Sept. 30, 2005 was +44.33%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR SINCE INCEPTION RiverSource VP - Emerging Markets Fund +24.15% +3.86%(a) MSCI Emerging Markets Index (reflects no deduction for fees, expenses or taxes) +25.95% +6.68%(b) Lipper Emerging Markets Funds Index +25.69 +7.13%(b)
(a) Inception date is May 1, 2000. (b) Measurement period started May 1, 2000. The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an unmanaged market capitalization-weighted index, is designed to measure equity market performance in the global emerging markets. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets 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. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 20p MANAGEMENT Investment manager contracts with and compensates Threadneedle International Limited (Subadviser or Threadneedle) to manage the investment of the Fund's assets. Investment manager monitors the compliance of Threadneedle with the investment objectives and related policies of the Fund, reviews the performance of Threadneedle, and reports periodically to the Board. THREADNEEDLE Threadneedle, located at 60 St. Mary Axe, London EC3A 8JQ, England, is an affiliate of RiverSource Investments, and a direct wholly-owned subsidiary of Ameriprise Financial, Inc. The portfolio managers who lead the team responsible for the day-to-day management of the Fund are: Julian A.S. Thompson, Portfolio Manager - Managed the Portfolio since 2000. - Joined Threadneedle in 2003. - Began investment career in 1993 as an Investment Manager for Stewart Ivory, a Scottish investment company, 1993 to 1999. - BA and Ph.D., Magdalene College, Cambridge University. Jules Mort, Deputy Portfolio Manager - Managed the Portfolio since 2003. - Joined Threadneedle in 2001 as a fund manager. - Began investment career in 1997 as an Analyst and Portfolio Manager, Baillie Gifford & Co., 1997 to 2001. - BA (Hons) Oxford University 1996. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 21p RIVERSOURCE VARIABLE PORTFOLIO - GLOBAL BOND FUND OBJECTIVE The Fund seeks to provide shareholders with high total return through income and growth of capital. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified mutual fund that invests primarily in debt obligations of U.S. and foreign issuers (which may include issuers located in emerging markets). Under normal market conditions, at least 80% of the Fund's net assets will be invested in investment-grade corporate or government debt obligations, including money market instruments of issuers located in at least three different countries. Although the Fund emphasizes high- and medium-quality debt securities, it may assume some credit risk to achieve higher dividends and/or capital appreciation by buying below investment grade bonds (junk bonds). The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager chooses investments by: - Considering opportunities and risks by credit rating and currency. - Identifying investment-grade U.S. and foreign bonds. - Identifying below investment-grade U.S. and foreign bonds. - Identifying bonds that can take advantage of currency movements and interest rate differences among nations. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued. - The security continues to meet the standards described above. The investment manager closely monitors the Fund's exposure to foreign currency fluctuations. The investment manager may purchase derivative instruments such as futures, options and forward contracts to hedge against currency fluctuations. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. DERIVATIVES RISK. Derivatives are financial instruments where value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, options, futures, indexes or currencies. Just as with securities in which the Fund invests directly, derivatives are subject to a number of risks, including market, correlation, liquidity, interest rate and credit risk. In addition, gains or losses involving derivatives may be substantial, because a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the Fund. The Fund will suffer a loss in connection with the use of derivative instruments, if prices do not move in the direction anticipated by the Fund's portfolio managers when entering into the derivative instrument. DIVERSIFICATION RISK. The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility then a fund that invests more broadly. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 22p FOREIGN/EMERGING MARKETS RISKS. The following are all components of foreign/emerging markets risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. CURRENCY RISK results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. EMERGING MARKETS RISK includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. SECTOR RISK. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 23p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - GLOBAL BOND FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1997 +3.83% 1998 +8.05% 1999 -4.40% 2000 +3.24% 2001 +1.34% 2002 +14.98% 2003 +13.01% 2004 +10.03%
During the period shown in the bar chart, the highest return for a calendar quarter was +7.71% (quarter ended June 30, 2002) and the lowest return for a calendar quarter was -2.94% (quarter ended March 31, 1997). The Fund's year-to-date return at Sept. 30, 2005 was +3.12%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS SINCE INCEPTION RiverSource VP - Global Bond Fund +10.03% +8.39% +6.54%(a) Lehman Brothers Global Aggregate Index (reflects no deduction for fees, expenses or taxes) +9.27% +8.47% +7.01%(b) Lipper Global Income Funds Index +8.51% +7.93% +6.47%(b)
(a) Inception date is May 1, 1996. (b) Measurement period started May 1, 1996. The Lehman Brothers Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. The index reflects the reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Global Income Funds Index includes the 30 largest global income funds tracked by Lipper Inc. The index's returns include net reinvested dividends. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 24p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the day-to-day management of the Fund is: Nicholas Pifer, CFA, Portfolio Manager - Managed the Fund since 2000. - Leader of the global sector team. - Joined RiverSource Investments (previously AEFC) in 2000. - Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. - Began investment career in 1990. - MA, Johns Hopkins University School of Advanced International Studies. The fixed income department of RiverSource Investments is divided into six sector teams, each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio managers lead the teams that specialize in the sectors in which the Fund primarily invests, and collectively determine allocation of Fund assets among the sectors. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 25p RIVERSOURCE VARIABLE PORTFOLIO - GLOBAL INFLATION PROTECTED SECURITIES FUND OBJECTIVE The Fund seeks to provide shareholders with total return that exceeds the rate of inflation over the long-term. Achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund is a non-diversified fund that, under normal market conditions, invests at least 80% of its net assets in inflation-protected debt securities. These securities include inflation-indexed bonds of varying maturities issued by U.S. and foreign governments, their agencies or instrumentalities, and corporations. The Fund invests only in securities rated investment grade, or, if unrated, deemed to be of comparable quality by the investment manager. Inflation-protected securities are designed to protect the future purchasing power of the money invested in them. The value of the bond's principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager makes purchase and sale decisions using proprietary interest rate models and seasoned professional judgment. - Fund assets will be allocated among different countries and different market sectors (including different government or corporate issuers) and different maturities based on views of the relative value for each sector or maturity. The Fund currently intends to focus on inflation-protected debt securities issued by U.S. or foreign governments. - Duration and yield curve decisions will be based on quantitative analysis of forward looking interest rate determinants including inflation, real rates, risk premiums and relative supply/demand. - The Fund will target an average portfolio duration within one year of the duration of a blended index comprised of 50% of the Lehman Brothers U.S. Treasury Inflation Protected Securities (TIPS) Index and 50% of the Lehman Brothers Global Inflation Linked Index (excluding U.S., fully hedged to the U.S. dollar) which, as of June 1, 2005, was 9.6 years on an unadjusted basis, and 6.1 years when adjusted for relative volatility and correlation to traditional government debt securities. Duration measures the sensitivity of bond prices to changes in interest rates. The longer the duration of a bond, the longer it will take to repay the principal and interest obligations and the more sensitive it will be to changes in interest rates. For example, a 5-year duration means a bond is expected to decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. There is no limitation on the maturities of the instruments the Fund will invest in. The investment manager may hedge any portion of the non-U.S. dollar denominated securities in the Fund to the U.S. dollar. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. DIVERSIFICATION RISK. The Fund is non-diversified. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the Fund's performance, the Fund may be more exposed to the risks of loss and volatility then a fund that invests more broadly. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 26p FOREIGN RISK. The following are all components of foreign risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. CURRENCY RISK results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. INFLATION PROTECTED SECURITIES RISK. Inflation-protected debt securities tend to react to change in real interest rates. Real interest rates can be described as nominal interest rates minus the expected impact of inflation. In general, the price of an inflation-protected debt security falls when real interest rates rise, and rises when real interest rates fall. Interest payments on inflation-protected debt securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the Fund may have no income at all. Income earned by a shareholder depends on the amount of principal invested and that principal will not grow with inflation unless the investor reinvests the portion of Fund distributions that comes from inflation adjustments. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund began operations on Sept. 13, 2004. When available, the Fund intends to compare its performance to the Lehman Brothers Global Inflation Linked Index, the Lehman Brothers U.S. Treasury Inflation Notes Index and the Blended Index. The Lehman Brothers Global Inflation Linked Index is an unmanaged index that measures the performance of the inflation protected securities issued in countries around the world, including the United States, the United Kingdom, Canada, Sweden, and France. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lehman Brothers U.S. Treasury Inflation Notes Index is an unmanaged index that measures the performance of the inflation protected obligations of U.S. Treasury. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Blended Index consists of 50% Lehman Brothers Global Inflation Linked Index and 50% Lehman Brothers U.S. Treasury Inflation Notes Index. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from Lehman Brothers U.S. Treasury Inflation Notes Index to the Lehman Brothers Global Inflation Linked Index, and to add the Blended Index as a secondary benchmark. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 27p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the Fund are: Jamie Jackson, CFA, Portfolio Manager - Managed the Fund since 2004. - Leader of the liquid assets sector team. - Joined RiverSource Investments (previously AEFC) in 2003. - Co-head of U.S. Investment Grade Fixed Income, UBS Global Asset Management, 1997 to 2003. - Began investment career in 1988. - MBA, Marquette University. Nicholas Pifer, CFA, Portfolio Manager - Managed the Fund since 2005. - Leader of the global sector team. - Joined RiverSource Investments (previously AEFC) in 2000. - Prior to that, Fixed Income Portfolio Manager, Investment Advisers, Inc., 1997 to 2000. - Began investment career in 1990. - MA, Johns Hopkins University School of Advanced International Studies. The fixed income department of RiverSource Investments is divided into six sector teams, each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio manager leads the sector team in which the Fund primarily invests. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 28p RIVERSOURCE VARIABLE PORTFOLIO - GROWTH FUND OBJECTIVE The Fund seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund invests primarily in common stocks and securities convertible into common stocks that appear to offer growth opportunities. These growth opportunities could result from new management, market developments, or technological superiority. The Fund may invest up to 25% of its total assets in foreign investments. In pursuit of the Fund's objective, the investment manager chooses investments by identifying companies that the investment manager believes have above-average long-term growth potential based, among other factors, on: - Management's track record. - Financial strength. - Competitive market or product position. - Technological advantage (more advanced technology or proven technology advantage) over competitors. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to other potential investments. - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - The investment manager identifies a more attractive opportunity. PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. FOREIGN RISK. The following are all components of foreign risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. CURRENCY RISK results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 29p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - GROWTH FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2000 -19.30% 2001 -30.95% 2002 -26.10% 2003 +21.43% 2004 +8.43%
During the period shown in the bar chart, the highest return for a calendar quarter was +18.16% (quarter ended Dec. 31, 2001) and the lowest return for a calendar quarter was -28.79% (quarter ended Sept. 30, 2001). The Fund's year-to-date return at Sept. 30, 2005 was +17.01%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS SINCE INCEPTION RiverSource VP - Growth Fund +8.43% -11.52% -7.76%(a) Russell 1000(R) Growth Index (reflects no deduction for fees, expenses or taxes) +6.30% -9.29% -4.89%(b) Lipper Large-Cap Growth Funds Index +7.45% -9.72% -5.26%(b)
(a) Inception date is Sept. 15, 1999. (b) Measurement period started Oct. 1, 1999. The Russell 1000(R) Growth Index, an unmanaged index, measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Large-Cap Growth Funds Index includes the 30 largest large cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the Fund's day-to-day management is: Nick Thakore, Portfolio Manager - Managed the Fund since 2002. - Joined RiverSource Investments (previously AEFC) in 2002. - Analyst and Portfolio Manager, Fidelity Investments, 1993 to 2002. - Began investment career in 1993. - MBA, Wharton School, University of Pennsylvania. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 30p RIVERSOURCE VARIABLE PORTFOLIO - HIGH YIELD BOND FUND OBJECTIVE The Fund seeks to provide shareholders with high current income as its primary objective and, as its secondary objective, capital growth. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund will invest at least 80% of its net assets in high-yielding, high risk corporate bonds (junk bonds). These bonds may be issued by U.S. and foreign companies and governments. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager chooses investments by: - Reviewing interest rate and economic forecasts. - Reviewing credit characteristics. - Identifying securities and/or companies that: - have medium and low quality ratings, - have similar qualities to securities or companies with medium or low quality ratings, in the investment manager's opinion, even though they are not rated or have been given a different rating by a rating agency, - have growth potential, - have the potential to increase in value as their credit ratings improve. - Buying securities that are expected to outperform other securities. - Aggressively managing the Fund to earn a high total return. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The interest rate or economic outlook changes. - A sector or industry is experiencing change. - A security's rating is changed. - The security is overvalued relative to alternative investments. - The company does not meet the investment manager's performance expectations. - The investment manager wishes to lock in profits. - The investment manager identifies a more attractive opportunity. - The issuer or the security continues to meet the other standards described above. PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. This Fund has a higher potential for volatility and loss of principal. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 31p PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - HIGH YIELD BOND FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1997 +13.37% 1998 -4.41% 1999 +6.24% 2000 -9.31% 2001 +4.93% 2002 -6.58% 2003 +25.17% 2004 +11.40%
During the period shown in the bar chart, the highest return for a calendar quarter was +8.97% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -9.38% (quarter ended Sept. 30, 1998). The Fund's year-to-date return at Sept. 30, 2005 was +6.79%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS SINCE INCEPTION RiverSource VP - High Yield Bond Fund +11.40% +4.40% +4.87%(a) JP Morgan Global High Yield Index (reflects no deduction for fees, expenses or taxes) +11.55% +7.61% +7.43%(b) Lipper High Current Yield Bond Funds Index +10.34% +3.99% +5.38%(b)
(a) Inception date is May 1, 1996. (b) Measurement period started May 1, 1996. The JP Morgan Global High Yield Index is an unmanaged index used to mirror the investable universe of the U.S. dollar global high yield corporate debt market of both developed and emerging markets. The securities used to create the index may not be representative of the bonds held in the Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper High Current Yield Bond Funds Index includes the 30 largest high yield bond funds tracked by Lipper Inc. The index's returns include net reinvested dividends. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 32p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the day-to-day management of the Fund is: Scott Schroepfer, CFA, Portfolio Manager - Managed the Fund since 1999. - Member of the high yield sector team. - Joined RiverSource Investments (previously AEFC) in 1990. - Began investment career in 1986. - MBA, University of Minnesota. The fixed income department of RiverSource Investments is divided into six sector teams each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio manager leads the sector team in which the Fund primarily invests. The team, led by Jennifer Ponce de Leon, collectively determines portfolio strategy. Ms. Ponce de Leon, who holds an MBA from DePaul University, began her investment career in 1989 and joined RiverSource Investments (previously AEFC) in 1997. She has been leader of the high yield sector team since 2003. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 33p RIVERSOURCE VARIABLE PORTFOLIO - INCOME OPPORTUNITIES FUND OBJECTIVE The Fund seeks to provide shareholders with a high total return through current income and capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund's assets are invested primarily in income-producing debt securities, with an emphasis on the higher rated segment of the high-yield (junk bond) market. The Fund will purchase only securities rated B or above, or unrated securities believed to be of the same quality. If a security falls below a B rating, the Fund may continue to hold the security. In pursuit of the Fund's objective, the investment manager chooses investments by: - Analyzing factors such as credit quality, cash flow and price to select the most attractive securities within each sector (for example, identifying securities that have the opportunity to appreciate in value or provide income based on duration, expectations or changes in interest rates or credit quality). - Seeking broad diversification by allocating investments among various sectors, based on the investment manager's assessment of their economic outlook. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The issuer or the security continues to meet the standards described above. - A sector or industry is experiencing change. - The interest rate or economic outlook changes. - A more attractive opportunity has been identified. Because the Fund emphasizes high-yield investments, analysis of credit risk is more important in selecting investments than either maturity or duration. While maturity and duration are both closely monitored, neither is a primary factor in the decision making process. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 34p PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund began operations on June 1, 2004. When available, the Fund intends to compare its performance to the Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index, an unmanaged index of high yield bonds. The index is subject to a 2% cap on allocation to any one issuer. The 2% cap is intended to provide broad diversification and better reflect the overall character of the high yield market. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Fund also intends to compare its performance to the Lipper High Current Yield Bond Funds Index that includes the 30 largest high yield bond funds tracked by Lipper Inc. The index's returns include net reinvested dividends. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the day-to-day management of the Fund is: Brian Lavin, CFA, Portfolio Manager - Has managed the Fund since 2004. - Member of the high yield sector team. - Joined RiverSource Investments (previously AEFC) in 1994 as a high yield analyst. - Began investment career in 1986. - MBA, University of Wisconsin - Milwaukee. The fixed income department of RiverSource Investments is divided into six sector teams each of which includes a portfolio manager or portfolio managers and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio manager leads the sector team in which the Fund primarily invests. The team, led by Jennifer Ponce de Leon, collectively determines portfolio strategy. Ms. Ponce de Leon, who holds an MBA from DePaul University, began her investment career in 1989 and joined RiverSource Investments (previously AEFC) in 1997. She has been leader of the high yield sector team since 2003. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 35p RIVERSOURCE VARIABLE PORTFOLIO - INTERNATIONAL OPPORTUNITY FUND OBJECTIVE The Fund seeks to provide shareholders with capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets primarily are invested in equity securities of foreign issuers that offer strong growth potential. The Fund may invest in developed and in emerging markets. The investment manager is responsible for oversight of the subadviser, Threadneedle International Limited (Threadneedle), a direct wholly-owned subsidiary of Ameriprise Financial, Inc. Threadneedle provides day-to-day management for the portion of the Fund allocated to equity securities and RiverSource Investments provides day-to-day management to the portion of the Fund allocated to debt securities. Threadneedle chooses investments by: - Deploying an integrated approach to equity research that incorporates regional analyses, a global sector strategy, and stock specific perspectives. - Conducting detailed research on companies in a consistent strategic and macroeconomic framework. - Looking for catalysts of change and identifying the factors driving markets, which will vary over economic and market cycles. - Implementing rigorous risk control processes that ensure that the risk and return characteristics of the Fund's portfolio are consistent with established portfolio management parameters. Threadneedle determines the allocation of the Fund's assets among various regions at a monthly meeting on asset allocation and regional strategy. The allocation is reviewed weekly at a meeting at which all of Threadneedle's regional teams who cover foreign securities are represented. Using the international sector strategy, the Fund's portfolio management team constructs the portfolio using two core lists of recommended holdings, the Largest Companies List and the Preferred List. In addition, the portfolio will hold other securities selected by the various regional experts. These discretionary holdings will typically make up a much smaller portion of the Fund. - The Largest Companies List includes the largest stocks in the Fund's benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index. Threadneedle's research on regions, sectors, and specific companies is used to determine recommended weightings for each stock. - The Preferred List includes the stocks not included in the Largest Companies List that represent the best ideas generated by Threadneedle's research area. Stocks on the Preferred List are selected by: - Evaluating the opportunities and risks within regions and sectors; - Assessing valuations; and - Evaluating one or more of the following: balance sheets and cash flows, the demand for a company's products or services, its competitive position, or its management. The Fund will normally be overweight in the stocks on the Preferred List compared to the benchmark. - Discretionary holdings are selected by the individual portfolio management team based on the same criteria used to generate the Preferred List. These stocks are assigned ratings based on their ability to outperform within their sector. The team typically selects the highest rated stocks outside the core category. A number of factors may prompt the portfolio management team to sell securities. A sale may result from a change in the composition of the Fund's benchmark or a change in sector strategy. A sale may also be prompted by factors specific to a stock, such as valuation or company fundamentals. The Fund will normally have exposure to foreign currencies. The portfolio management team closely monitors the Fund's exposure to foreign currency. From time to time the team may use forward currency transactions or other derivative instruments to hedge against currency fluctuations. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 36p PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. FOREIGN/EMERGING MARKETS RISKS. The following are all components of foreign/emerging markets risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. CURRENCY RISK results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. EMERGING MARKETS RISK includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 37p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RiverSource VP - International Opportunity Fund Performance (based on calendar years) 1995 +11.33% 1996 +9.03% 1997 +2.73% 1998 +15.82% 1999 +45.63% 2000 -24.93% 2001 -28.69% 2002 -18.25% 2003 +28.07% 2004 +17.41%
During the period shown in the bar chart, the highest return for a calendar quarter was +31.82% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -21.14% (quarter ended Sept. 30, 2002). The Fund's year-to-date return at Sept. 30, 2005 was +23.94%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS 10 YEARS RiverSource VP - International Opportunity Fund +17.41% -8.03% +3.30% MSCI EAFE Index (reflects no deduction for fees, expenses or taxes) +20.70% -0.80% +5.94% Lipper International Large-Cap Core Funds Index +17.18% -1.22% +7.73%
The Morgan Stanley Capital International EAFE Index (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. The securities included in the indexes may not be the same as those held by the Fund. The Lipper International Large-Cap Core Funds Index includes the 30 largest international large cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for the purposes of determining the performance incentive adjustment. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 38p MANAGEMENT Riversource Investments contracts with and compensates Threadneedle International Limited (Subadviser or Threadneedle) to manage the investment of the Fund's assets. Riversource Investments monitors the compliance of Threadneedle with the investment objectives and related policies of the Fund, reviews the performance of Threadneedle, and reports periodically to the Board. THREADNEEDLE Threadneedle, located at 60 St. Mary Axe, London EC3A 8JQ, England, is an affiliate of RiverSource Investments, and a direct wholly-owned subsidiary of Ameriprise Financial, Inc. The portfolio managers who lead the team responsible for the day-to-day management of the Fund are: Alex Lyle, Portfolio Manager - Head of managed funds. - Managed the Fund since 2003. - Joined Threadneedle in 1994, where he managed the U.K. equity investments for some large insurance clients and has run a wide range of portfolios. - Began investment career in 1980. - MA, Oxford University. Dominic Rossi, Portfolio Manager - Head of international equities. - Managed the Fund since 2003. - Joined Threadneedle in 1997 as head of international equities. - Began investment career in 1986. - MBA, City University, London. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 39p RIVERSOURCE VARIABLE PORTFOLIO - LARGE CAP EQUITY FUND OBJECTIVE The Fund seeks capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund may invest in income-producing equity securities, such as dividend paying stocks, convertible securities and preferred stocks. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager will hold both growth and value companies and at times may favor one more than the other based on available opportunities. When optimizing for growth, the investment manager invests in companies it believes to have above-average long-term growth potential, or technological superiority, and it selects investments based, among other factors, on: - Effective management. - Financial strength. - Competitive market or product position. - Technological advantage relative to other companies. When optimizing for value, the investment manager invests in companies that appear to be undervalued by various measures or that may be temporarily out of favor, but have good prospects for capital appreciation, and it selects investments based, among other factors, on: - Identifying a variety of large, well-established companies whose underlying fundamentals are stable, or are anticipated to become stable, or whose fundamentals are improving. - Identifying stocks that are undervalued: - because they have one or more ratios, such as price-to-earnings or price-to-cash flow, that are low relative to the general market, or have a yield that exceeds the market, - because one or more of their valuation ratios are low relative to historical levels for the stock, - because one or more of their valuation ratios or other financial measures make that stock attractive relative to its peers, or - because they are undervalued relative to their intrinsic value, as identified by the investment manager. In evaluating whether to sell a security, the investment manager considers factors including, among others whether: - The security is overvalued relative to other potential investments. - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - Potential losses, due to factors such as a market down-turn, can be minimized. - A more attractive opportunity has been identified. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 40p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - LARGE CAP EQUITY FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1995 +27.86% 1996 +7.71% 1997 +24.14% 1998 +24.12% 1999 +23.75% 2000 -17.46% 2001 -18.11% 2002 -22.03% 2003 +29.22% 2004 +5.88%
During the period shown in the bar chart, the highest return for a calendar quarter was +26.20% (quarter ended Dec. 31, 1998) and the lowest return for a calendar quarter was -17.27% (quarter ended Sept. 30, 2001). The Fund's year-to-date return at Sept. 30, 2005 was +14.14%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS 10 YEARS RiverSource VP - Large Cap Equity Fund +5.88% -6.33% +6.62% Russell 1000(R) Index (reflects no deduction for fees, expenses or taxes) +11.40% -1.76% +12.16% S&P 500 Index (reflects no deduction for fees, expenses or taxes) +10.88% -2.30% +12.07% Lipper Large-Cap Core Funds Index +8.29% -2.98% +10.26%
The Russell 1000(R) Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000 Index and represents approximately 92% of the total market capitalization of the Russell 3000(R) Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The securities included in the indexes may not be the same as those held by the Fund. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The securities included in the index may not be the same as those held by the Fund. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for the purposes of determining the performance incentive adjustment. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from S&P 500 Index to the Russell 1000(R) Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000 Index will be included. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 41p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the Fund's day-to-day management are: Robert Ewing, CFA, Portfolio Manager - Managed the Fund since 2004. - Joined RiverSource Investments (previously AEFC) in 2002. - Prior to that, Analyst and Portfolio Manager at Fidelity Investments from 1990 to 2002. - Began investment career in 1988. - BS, Boston College Carroll School of Management. Nick Thakore, Portfolio Manager - Managed the Fund since 2004. - Joined RiverSource Investments (previously AEFC) in 2002. - Prior to that, Analyst and Portfolio Manager at Fidelity Investments from 1993 to 2002. - Began investment career in 1993. - MBA, Wharton School at University of Pennsylvania. Mr. Thakore provides direct day-to-day management for approximately one-third of the portfolio optimizing for growth. Mr. Ewing provides direct day-to-day management for approximately one-third of the portfolio optimizing for value. Messrs. Ewing and Thakore coordinate day-to-day management of the remainder of the portfolio, allocating approximately one-third of the portfolio among a team of research analysts who select investments in their allocations based on the sectors that they cover. These allocations are generally consistent with the sector weightings of the S&P 500 Index, an unmanaged index of common stocks, but allocations may vary. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 42p RIVERSOURCE VARIABLE PORTFOLIO - LARGE CAP VALUE FUND OBJECTIVE The Fund seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies with a market capitalization greater than $5 billion. The Fund may also invest in income-producing equity securities and preferred stocks. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager seeks to identify companies that appear to be undervalued by various measures or that may be temporarily out of favor, but have good prospects for capital appreciation. The investment manager selects investments for the Fund by: - Seeking out a variety of large, well-established companies whose underlying fundamentals are stable, or are anticipated to become stable, or whose fundamentals are improving. - Identifying stocks that are undervalued: - because they have one or more ratios, such as price-to-earnings or price-to-cash flow, that are low relative to the general market, or have a yield that exceeds the market, - because one or more of their current ratios are low relative to historical levels for the stock, - because one or more of their current ratios or other financial measures make that stock attractive relative to its peers, or - because they are undervalued relative to their intrinsic value, as identified by the Fund's manager. In deciding whether to sell a security, the investment manager considers whether: - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - The security is overvalued relative to other potential investments. - A more attractive opportunity has been identified. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 43p PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund began operations on Feb. 4, 2004. When available, the Fund intends to compare its performance to the Russell 1000(R) Value Index, an unmanaged index that measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Fund also intends to compare its performance to the Lipper Large-Cap Value Funds Index that includes the 30 largest large cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for the purposes of determining the performance incentive adjustment. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the Fund's day-to-day management is: Robert Ewing, CFA, Portfolio Manager - Managed the Fund since 2004. - Joined RiverSource Investments (previously AEFC) in 2002. - Analyst and Portfolio Manager, Fidelity Investments, 1990 to 2002. - Began investment career in 1988. - BS, Boston College Carroll School of Management. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 44p RIVERSOURCE VARIABLE PORTFOLIO - MID CAP GROWTH FUND OBJECTIVE The Fund seeks to provide shareholders with growth of capital. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund will invest at least 80% of its net assets at the time of purchase in the common stocks of mid-capitalization companies. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. The investment manager defines mid-cap companies as those whose market capitalization (number of shares outstanding multiplied by the share price) falls within the range of the Russell Midcap(R) Growth Index (the Index). The market capitalization range of the companies included within the Index was $1.2 billion to $15.9 billion as of Aug. 31, 2005. Over time, the capitalizations of the companies in the Index will change. As they do, the size of the companies in which the Fund invests may change. As long as an investment continues to meet the Fund's other investment criteria, the Fund may choose to continue to hold a stock even if the company's market capitalization grows beyond the largest absolute market capitalization weighting held within the Index or falls below the market capitalization of the smallest company held within the Index. In pursuit of the Fund's objective, the investment manager chooses equity investments by: - Identifying companies that it believes exhibit the following traits: - effective management, - financial strength, - growth potential, and - competitive market position. - Identifying sectors with growth potential and weighting purchases in those sectors more heavily. - Considering market trends and identifying opportunities within multiple industries that offer a compelling risk/reward trade-off for shareholders. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to alternative investments. - The company has met the investment manager's earnings and/or growth expectations. - Political, economic, or other events could affect the company's performance. - The company or the security continues to meet the other standards described above. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. MID-SIZED COMPANY RISK. Investments in mid-sized companies often involve greater risks than investments in larger, more established companies because mid-sized companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of mid-sized companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 45p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - MID CAP GROWTH FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2002 -13.76% 2003 +22.57% 2004 +9.10%
During the period shown in the bar chart, the highest return for a calendar quarter was +12.45% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -13.46% (quarter ended Sept. 30, 2002). The Fund's year-to-date return at Sept. 30, 2005 was +20.11%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR SINCE INCEPTION RiverSource VP - Mid Cap Growth Fund +9.10% +3.67%(a) Russell Midcap(R) Growth Index (reflects no deduction for fees, expenses or taxes) +15.48% +2.45%(b) Lipper Mid-Cap Growth Funds Index +14.03% +0.00%(b)
(a) Inception date is May 1, 2001. (b) Measurement period started May 1, 2001. The Russell Midcap(R) Growth Index, an unmanaged index, measures the performance of those Russell MidCap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000(R) Growth Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Mid-Cap Growth Funds Index includes the 30 largest mid-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 the purposes of determining the performance incentive adjustment. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the day-to-day management of the Fund is: Duncan J. Evered, Portfolio Manager - Managed the Fund since 2001. - Joined RiverSource Investments (previously AEFC) in 1994. - Began investment career in 1984. - MBA, Stanford School of Business. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 46p RIVERSOURCE VARIABLE PORTFOLIO - MID CAP VALUE FUND OBJECTIVE The Fund seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal circumstances, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in equity securities of medium-sized companies. Medium-sized companies are those whose market capitalizations at the time of purchase fall within the range of the Russell Midcap(R) Value Index. At Aug. 31, 2005, the range of the Index was between $927.1 million and $15.9 billion. The market capitalization range of the Index is subject to change. The remaining 20% may be invested in stocks of smaller or larger companies, preferreds, convertibles, or other debt securities. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager chooses equity investments by: - Selecting companies that are undervalued based on a variety of measures, such as price/earnings ratio, price/book ratio, current and projected earnings, current and projected dividends, and historic price levels. - Identifying companies with growth potential based on: - effective management, as demonstrated by overall performance, and - financial strength. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to alternative investments. - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - The company or the security continues to meet the other standards described above. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. MID-SIZED COMPANY RISK. Investments in mid-sized companies often involve greater risks than investments in larger, more established companies because mid-sized companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of mid-sized companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. SECTOR RISK. Companies that operate in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a significant portion of its assets invested in a particular sector. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 47p PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund began operations on May 2, 2005. The Fund intends to compare its performance to the Russell Midcap(R) Value Index, an unmanaged index that measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks in the Index are also in the Russell 1000(R) Value Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Fund also intends to compare its performance to the Lipper Mid-Cap Value Funds Index that includes the 30 largest mid-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance will be measured against this index for purposes of determining the performance incentive adjustment. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the Fund are: Warren Spitz, Senior Portfolio Manager - Managed the Fund since 2002. - Joined RiverSource Investments (previously AEFC) in 2000 as a Senior Portfolio Manager. - Portfolio Manager, Prudential Global Asset Management, 1987 to 2000. - Began investment career in 1984. - MBA, Wharton School, University of Pennsylvania. Steve Schroll, Portfolio Manager - Managed the Fund since February 2004. - Joined RiverSource Investments (previously AEFC) in 1998 as a Senior Security Analyst. - Senior Equity Analyst, Piper Jaffray, 1988 to 1998; Equity Analyst, First Asset Management, 1985 to 1988; Equity Analyst, Dain Rauscher, 1981 to 1985. - Began investment career in 1981. - MBA, University of Minnesota. Laton Spahr, Portfolio Manager - Managed the Fund since February 2004. - Joined RiverSource Investments (previously AEFC) in 2001 as a Security Analyst. - Sector Analyst, Holland Capital Management, 2000 to 2001; Statistical Research Intern, Friess Associates, 1998 to 1999. - Began investment career in 1998. - MS, University of Wisconsin, Applied Security Analysis Program. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 48p RIVERSOURCE VARIABLE PORTFOLIO - NEW DIMENSIONS FUND OBJECTIVE The Fund seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. The Fund may invest in income-producing equity securities, such as dividend paying stocks, convertible securities and preferred stocks. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. In pursuit of the Fund's objective, the investment manager will hold both growth and value companies and at times may favor one more than the other based on available opportunities. When optimizing for growth, the investment manager invests in companies it believes to have above-average long-term growth potential, or technological superiority, and it selects investments based, among other factors, on: - Effective management. - Financial strength. - Competitive market or product position. - Technological advantage relative to other companies. When optimizing for value, the investment manager invests in companies that appear to be undervalued by various measures or that may be temporarily out of favor, but have good prospects for capital appreciation, and it selects investments based, among other factors, on: - Identifying a variety of large, well-established companies whose underlying fundamentals are stable, or are anticipated to become stable, or whose fundamentals are improving. - Identifying stocks that are undervalued: - because they have one or more ratios, such as price-to-earnings or price-to-cash flow, that are low relative to the general market, or have a yield that exceeds the market, - because one or more of their valuation ratios are low relative to historical levels for the stock, - because one or more of their valuation ratios or other financial measures make that stock attractive relative to its peers, or - because they are undervalued relative to their intrinsic value, as identified by the investment manager. In evaluating whether to sell a security, the investment manager considers factors including, among others whether: - The security is overvalued relative to other potential investments. - The security has reached the investment manager's price objective. - The company has met the investment manager's earnings and/or growth expectations. - Potential losses, due to factors such as a market down-turn, can be minimized. - A more attractive opportunity has been identified. PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 49p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - NEW DIMENSIONS FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1997 +24.37% 1998 +28.64% 1999 +32.00% 2000 -9.08% 2001 -16.71% 2002 -21.89% 2003 +24.50% 2004 +3.27%
During the period shown in the bar chart, the highest return for a calendar quarter was +24.72% (quarter ended Dec. 31, 1998) and the lowest return for a calendar quarter was -16.64% (quarter ended March 31, 2001). The Fund's year-to-date return at Sept. 30, 2005 was +7.25%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
SINCE 1 YEAR 5 YEARS INCEPTION RiverSource VP - New Dimensions Fund +3.27% -5.33% +6.97% Russell 1000(R) Index (reflects no deduction for fees, expenses or taxes) +11.40% -1.76% +9.14% S&P 500 Index (reflects no deduction for fees, expenses or taxes) +10.88% -2.30% +9.09% Lipper Large-Cap Core Funds Index +8.29% -2.98% +7.62% Lipper Large-Cap Growth Funds Index +7.45% -9.72% +5.38%
(a) Measurement period started April 1, 1995. (b) Measurement period started July 1, 2000. The Russell 1000 Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, and represents approximately 92% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured (since Nov. 1, 2005) against this index for purposes of determining the performance incentive adjustment. The Lipper Large-Cap Growth Funds Index includes the 30 largest large-cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance was measured against this index (through Oct. 31, 2005) for purposes of determining the performance incentive adjustment. The Fund's investment manager recommended to the Fund that the Fund change its comparative index from the S&P 500 Index to the Russell 1000 Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000 Index will be included. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 50p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the Portfolio's day-to-day management are: Robert Ewing, CFA, Portfolio Manager - Managed the Fund since 2005. - Joined RiverSource Investments (previously American Express Financial Corporation (AEFC)) in 2002. - Prior to that, Analyst and Portfolio Manager at Fidelity Investments from 1990 to 2002. - Began investment career in 1988. - BS, Boston College Carroll School of Management. Nick Thakore, Portfolio Manager - Managed the Fund since 2005. - Joined RiverSource Investments (previously AEFC) in 2002. - Prior to that, Analyst and Portfolio Manager at Fidelity Investments from 1993 to 2002. - Began investment career in 1993. - MBA, Wharton School at University of Pennsylvania. Mr. Thakore provides direct day-to-day management for approximately one-third of the portfolio optimizing for growth. Mr. Ewing provides direct day-to-day management for approximately one-third of the portfolio optimizing for value. Messrs. Ewing and Thakore coordinate day-to-day management of the remainder of the portfolio, allocating approximately one-third of the portfolio among a team of research analysts who select investments in their allocations based on the sectors that they cover. These allocations are generally consistent with the sector weightings of the S&P 500 Index, an unmanaged index of common stocks, but allocations may vary. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 51p RIVERSOURCE VARIABLE PORTFOLIO - S&P 500 INDEX FUND OBJECTIVE The Fund seeks to provide shareholders with long-term capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund seeks to provide investment results that correspond to the total return (the combination of appreciation and income) of large-capitalization stocks of U.S. companies. The Fund invests in common stocks included in the Standard & Poor's 500 Composite Stock Price Index (S&P 500). The S&P 500 is made up primarily of large-capitalization companies that represent a broad spectrum of the U.S. economy. The Fund normally will invest at least 80% of its total assets in securities that are contained in the applicable index. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. The Fund is not managed according to a traditional method of "active" investment management. Instead, the Fund follows a passive or indexing investment approach in an attempt to mirror the performance of an index. Keep in mind that an index fund has operating expenses and transaction costs, while an index does not. This means that, while an index fund may track its index closely, it is typically unable to match the performance of the index exactly. While there is no guarantee, the investment manager expects the correlation between the Fund and its respective index to be at least .95. A correlation of 1.00 means the return of the Fund can be completely explained by the return of the index. The Fund normally will invest in all stocks in the S&P 500 in roughly the same proportions as their weightings in the index. For example, if 5% of the S&P 500 is made up of a stock of a particular company, the Fund normally will invest approximately 5% of its assets in that company. This strategy is known as "full replication." Although the Fund attempts to replicate the S&P 500, there may be times when the Fund and the index do not match exactly. The investment manager may purchase stocks not included in the S&P 500 when it believes it would be a cost efficient way of approximating the S&P 500 performance to do so, for example, in anticipation of a stock being added to the index. The investment manager may use various techniques, such as buying and selling options and futures contracts, to increase or decrease the Fund's exposure to changing security prices or other factors that affect security values. The Fund normally will invest at least 80% of its total assets in securities that are contained in the applicable index. The investment manager will monitor the performance of the Fund against the index and will adjust the Fund's holdings, as necessary, to minimize tracking error. In the event a correlation of .95 or better is not achieved, the Fund's Board of Directors (Board) will consider alternative arrangements. The Fund may change its target index for a different index if the current index is discontinued or if the Fund's board believes a different index would better enable the Fund to match the performance of the market segment represented by the current index. The substitute index will measure the same general segment of the market as the current index. The Fund may hold cash or its equivalent or invest in investment grade short-term fixed income securities. Although index funds, by their nature, tend to be tax-efficient investments, the Fund generally is managed without regard to tax efficiency. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security continues to be included in the index. - Corporate actions have affected the company's security (such as corporate reorganizations, mergers or acquisitions). - A company's market weighting otherwise changes with respect to the index. - Timing of cash flows in and out of the Fund require the investment manager to sell a security. For more information on investment strategies and the index, please refer to the SAI. "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," and "Standard & Poor's 500(R) " are trademarks of The McGraw-Hill Companies, Inc. These trademarks have been licensed for use by American Express Financial Advisors Inc. The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's or any of its subsidiaries or affiliates (the "Licensors") and the Licensors make no representation regarding the advisability of investing in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 52p PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: INDEXING RISK. The Fund is managed to an index and the Fund's performance therefore will rise and fall as the performance of the index rises and falls. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. TRACKING ERROR RISK. The Fund may not track the index perfectly because differences between the index and the Fund's portfolio can cause differences in performance. The investment manager purchases securities and other instruments in an attempt to replicate the performance of the index. However, the tools that the investment manager uses to replicate the index are not perfect and the Fund's performance is affected by factors such as the size of the Fund's portfolio, transaction costs, management fees and expenses, brokerage commissions and fees, the extent ant timing of cash flows in and out of the Fund and changes in the index. PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - S&P 500 INDEX FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2001 -12.46% 2002 -22.42% 2003 +27.99% 2004 +10.27%
During the period shown in the bar chart, the highest return for a calendar quarter was +15.23% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -17.26% (quarter ended Sept. 30, 2002). The Fund's year-to-date return at Sept. 30, 2005 was +11.67%. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 53p AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR SINCE INCEPTION RiverSource VP - S&P 500 Index Fund +10.27% -3.08%(a) S&P 500 Index (reflects no deduction for fees, expenses or taxes) +10.88% -2.30%(b) Lipper S&P 500 Objective Funds Index +10.56% -2.58%(b)
(a) Inception date is May 1, 2000. (b) Measurement period started May 1, 2000. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper S&P 500 Objective Funds Index includes the 30 largest S&P 500 funds tracked by Lipper Inc. The index's returns include net reinvested dividends. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the day-to-day management of the Fund is: David Factor, CFA, Portfolio Manager - Managed the Fund since 2001. - Joined RiverSource Investments (previously AEFC) in 1990. - Began investment career in 1996, becoming a quantitative analyst in 1999. - BSB, University of Minnesota. The SAI provides additional information about the portfolio manager's compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 54p RIVERSOURCE VARIABLE PORTFOLIO - SELECT VALUE FUND OBJECTIVE The Fund seeks to provide shareholders with long-term growth of capital. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets are primarily invested in common stocks, preferred stocks and securities convertible into common stocks that are listed on a nationally recognized securities exchange or traded on the NASDAQ National Market System of the National Association of Securities Dealers. The Fund invests in mid cap companies as well as companies with larger and smaller market capitalizations. The Fund considers mid-cap companies to be either those with a market capitalization of up to $10 billion or those whose market capitalization falls within the range of the Russell 3000(R) Value Index. At Aug. 31, 2005, the range of the Index was between $65.3 million and $377.7 billion. The market capitalization range and the composition of the Russell 3000 Value Index are subject to change. The investment manager is responsible for the oversight of the Fund's subadviser, GAMCO Asset Management, Inc. (GAMCO), doing business as Gabelli Asset Management Company (the Subadviser), which provides day-to-day management for the Fund. In selecting investments for the Fund, the Subadviser looks for companies which appear underpriced relative to their private market value (PMV). PMV is the value the Subadviser believes informed investors would be willing to pay for a company in an arm's-length transaction, such as an acquisition, based on the company's cash flow, assets, and business prospects. The Subadviser will invest in companies that it believes are selling at a significant discount to their PMV in the public market. In choosing investments, the Subadviser considers factors such as: - Price and earnings expectations. - The Subadviser's assessment of the company's price-to-earnings ratio relative to the price-to-earnings ratios of other companies. - Balance sheet characteristics. - The Subadviser's assessment of the skills and experience of the company's management relative to other well-managed companies. - Changes in economic and political outlooks as well as individual corporate developments. The Subadviser will generally sell investments when they lose their perceived value relative to other investments. PRINCIPAL RISKS This Fund is designed for long-term investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 55p PAST PERFORMANCE The bar chart and past performance table are not presented because the Fund has not had a full calendar year of operations. The Fund began operations on Feb. 4, 2004. When available, the Fund intends to compare its performance to the Russell 3000(R) Value Index, an unmanaged index, that measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The securities included in the indexes may not be the same as those held by the Fund. The Fund also intends to compare its performance to the Lipper Multi-Cap Value Funds Index that includes the 30 largest multi cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance will be measured against this index for purposes of determining the performance incentive adjustment. MANAGEMENT Riversource Investments selects, contracts with and compensates the Subadviser to manage the investment of the Fund's assets. Riversource Investments monitors the compliance of Subadvisers with the investment objectives and related policies of the Fund, reviews the performance of Subadvisers, and reports periodically to the Board. The Subadviser manages the Fund's assets based upon its experience in managing funds with investment goals and strategies substantially similar to those of the Fund. GAMCO GAMCO, which does business under the name Gabelli Asset Management Company is located at One Corporate Center, Rye, New York. GAMCO, subject to the supervision and approval of RiverSource Investments, provides day-to-day management of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with RiverSource Investments. The portfolio manager responsible for the day-to-day management of the Fund is: - Mr. Mario Gabelli, CFA, Investment Officer - Value Products of Gabelli Asset Management Company and predecessors since inception in 1977. Mr. Gabelli also serves as Chairman and Chief Executive Officer of GAMCO Investors, Inc., a New York Stock Exchange-listed company whose stock trades under the symbol GBL. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 56p RIVERSOURCE VARIABLE PORTFOLIO - SHORT DURATION U.S. GOVERNMENT FUND OBJECTIVE The Fund seeks to provide shareholders with a high level of current income and safety of principal consistent with an investment in U.S. government and government agency securities. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in debt securities issued or guaranteed as to principal and interest by the U.S. government, or its agencies or instrumentalities. Shareholders will be given at least 60 days' notice of any change in the 80% policy. The Fund invests in direct obligations of the U.S. government, such as Treasury bonds, bills, and notes, and of its agencies and instrumentalities. The Fund may also invest to a substantial degree in securities issued by various entities sponsored by the U.S. government, such as the Federal National Mortgage Association (FNMA or Fannie Mae) and the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac). These issuers are chartered or sponsored by acts of Congress; however, their securities are neither issued nor guaranteed by the United States Treasury. When market conditions are favorable, the Fund may also invest in debt securities that are not issued by the U.S. government, its agencies or instrumentalities, or that are denominated in currencies other than the U.S. dollar. In pursuit of the Fund's objective, the investment manager chooses investments by: - Reviewing credit characteristics and the interest rate outlook. - Identifying and buying securities that are high quality or have similar qualities, in the investment manager's opinion, even though they are not rated or have been given a lower rating by a rating agency. - Under normal market conditions, the Fund will maintain an average portfolio duration of one to three years. Duration measures the sensitivity of bond prices to changes in interest rates. The longer the duration of a bond, the longer it will take to repay the principal and interest obligations and the more sensitive it will be to changes in interest rates. For example, a three year duration means a bond is expected to decrease in value by 3% if interest rates rise 1% and increase in value by 3% if interest rates fall 1%. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to alternative investments. - The investment manager wishes to lock-in profits. - Changes in the interest rate or economic outlook. - The investment manager identifies a more attractive opportunity. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 57p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - SHORT DURATION U.S. GOVERNMENT FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2000 +8.47% 2001 +6.29% 2002 +5.83% 2003 +1.52% 2004 +0.85%
During the period shown in the bar chart, the highest return for a calendar quarter was +3.25% (quarter ended Dec. 31, 2000) and the lowest return for a calendar quarter was -1.14% (quarter ended June 30, 2004). The Fund's year-to-date return at Sept. 30, 2005 was +1.23%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS SINCE INCEPTION RiverSource VP - Short Duration U.S. Government Fund +0.85% +4.56% +4.40%(a) Lehman Brothers 1-3 Year Government Index (reflects no deduction for fees, expenses or taxes) +1.07% +5.11% +4.97%(b) Lipper Short U.S. Government Funds Index +1.01% +4.51% +4.41%(b)
(a) Inception date is Sept. 15, 1999. (b) Measurement period started Oct. 1, 1999. The Lehman Brothers 1-3 Year Government Index, an unmanaged index, is made up of all publicly issued, non-convertible domestic debt of the U.S. government, or agency thereof, or any quasi-federal corporation. The index also includes corporate debt guaranteed by the U.S. government. Only notes and bonds with a minimum maturity of one year up to a maximum maturity of 2.9 years are included. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Short U.S. Government Funds Index includes the 30 largest short U.S. government funds tracked by Lipper Inc. The index's returns include net reinvested dividends. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 58p MANAGEMENT PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the Fund are: Scott Kirby, Co-Portfolio Manager - Began managing the Fund in 2001. - Leader of the structured assets sector team. - Employed by RiverSource Investments (previously AEFC) from 1979 to 1985 and from 1987 to present. - Began investment career in 1979. - MBA, University of Minnesota. Jamie Jackson, CFA, Co-Portfolio Manager - Began managing the Fund in 2003. - Leader of the liquid assets sector team. - Joined RiverSource Investments (previously AEFC) in 2003. - Co-head of U.S. Investment Grade Fixed Income, UBS Global Asset Management, 1997 to 2003. - Began investment career in 1988. - MBA, Marquette University. The fixed income department of RiverSource Investments is divided into six sector teams each of which includes a portfolio manager and several analysts, and each of which specializes in a specific sector of the fixed income market. The Fund's portfolio managers lead the sector teams in which the Fund primarily invests. The portfolio managers collectively determine allocation of Fund assets among the sectors, and each provides day-to-day management of the Fund's assets allocated to the sector for which s/he is responsible. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 59p RIVERSOURCE VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND OBJECTIVE The Fund seeks to provide shareholders with long-term capital growth. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES The Fund's assets primarily are invested in equity securities. Under normal market conditions, at least 80% of the Fund's net assets are invested in equity securities of companies with market capitalizations of up to $2 billion or that fall within the range of the Russell 2000(R) Index at the time of investment. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. RiverSource Investments as the investment manager is responsible for the oversight of the subadviser, Kenwood Capital Management LLC (Kenwood) or (the Subadviser), an indirect subsidiary of Ameriprise Financial, Inc. RiverSource Investments and Kenwood each provide day-to-day management for a portion of the Fund in order to provide diversified exposure to the small-cap segment of the U.S. market. Under normal market conditions, it is expected that the Fund will be fully invested in common stocks across a wide range of industries. KENWOOD Kenwood buys stocks based on a largely quantitative analysis of valuation and earnings. This selection discipline favors companies that exhibit: - Attractive valuations, based on measures such as the ratio of stock price to company earnings or free cash flow per share. - Improving earnings, based on trends in analysts' estimates or earnings that were better than expected. Kenwood will normally sell a stock holding if: - The stock becomes expensive relative to other stocks in the sector. - The company's financial performance fails to meet expectations. RIVERSOURCE INVESTMENTS, LLC RiverSource Investments buys stocks based on quantitative analysis of valuation, momentum, and quality adjusted valuation. In selecting securities for the Fund, the investment manager chooses companies with: - Attractive valuations and the potential for earnings growth. - Improving outlook, based on analysis of return patterns over time. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to other potential investments. - The company does not meet the investment manager's performance expectations. PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. The quantitative methodology employed by the investment manager has been extensively tested using historical securities market data, but has only recently begun to be used to manage open-end mutual funds. There can be no assurance that the methodology will enable the Fund to achieve its objective. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 60p SMALL COMPANY RISK. Investments in small capitalization companies often involve greater risks than investments in larger, more established companies because small capitalization companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. In addition, in many instances the securities of small capitalization companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2000 +4.16% 2001 -6.53% 2002 -17.06% 2003 +47.85% 2004 +18.54%
During the period shown in the bar chart, the highest return for a calendar quarter was +22.00% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -19.29% (quarter ended Sept. 30, 2002). The Fund's year-to-date return at Sept. 30, 2005 was +18.15%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS SINCE INCEPTION RiverSource VP - Small Cap Advantage Fund +18.54% +7.19% +9.34%(a) Russell 2000(R) Index (reflects no deduction for fees, expenses or taxes) +18.33% +6.61% +9.77%(b) Lipper Small-Cap Core Funds Index +18.37% +9.06% +12.26%(b)
(a) Inception date is Sept. 15, 1999. (b) Measurement period started Oct. 1, 1999. The Russell 2000(R) Index, an unmanaged index, measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index, which represents approximately 8% of the Russell 3000 total market capitalization. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Small-Cap Core Funds Index includes the 30 largest small cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining incentive adjustment. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 61p MANAGEMENT Riversource Investments manages a portion of the Fund's assets directly and contracts with and compensates Kenwood to manage a portion of the Fund's assets. Riversource Investments monitors the compliance of Kenwood with the investment objectives and related policies of the Fund, reviews the performance of Kenwood, and reports periodically to the Board. Riversource Investments, subject to Board approval, decides the proportion of Fund's assets to be managed by Kenwood and may change these proportions at any time. PORTFOLIO MANAGER(S). The portfolio managers responsible for the day-to-day management of the portion of the Fund managed by RiverSource Investments are: Dimitris J. Bertsimas, Senior Portfolio Manager - Managed the Fund since July 2004. - Joined RiverSource Investments (previously AEFC) as a portfolio manager in 2002. - Co-founded Dynamic Ideas, LLC, a consulting firm specializing in the development of quantitative tools for the asset management industry, where he served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of Operations Research, Sloan School of Management and the Operations Research Center, MIT. - Began investment career as a consultant to asset managers in 1993; became portfolio manager in 2002. - MS and Ph.D., MIT. Jonathan Calvert, CFA, Portfolio Manager - Managed the Fund since July 2004. - Joined RiverSource Investments (previously AEFC) in 2003. - Partner and Director of Quantitative Trading Research, Grantham, Mayo, van Otterloo LLC (GMO), 1992 to 2003. - Began investment career in 1992. - Bachelor of Mathematics, University of Waterloo, Canada. KENWOOD Kenwood, Accenture Tower at Metropolitan Centre, Suite 2330, 333 South 7th Street, Minneapolis, Minnesota 55402, is an indirect subsidiary of Ameriprise Financial, Inc. The portfolio managers responsible for the day-to-day management of the portion of the Fund allocated to Kenwood are: Jake Hurwitz, CFA, Co-Portfolio Manager - Managed the Fund since 1999. - Principal of Kenwood Capital Management LLC, since 1998. - Senior Vice President and Senior Portfolio Manager, Travelers Investment Management Company (TIMCO), 1991 to 1998. - Began investment career in 1979. - MA, University of California; MBA, New York University. Kent Kelley, CFA, Co-Portfolio Manager - Managed the Fund since 1999. - Principal of Kenwood Capital Management LLC, since 1998. - Chief Executive Officer, TIMCO, 1995 to 1998. - Began investment career in 1978. - MA, Yale University. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 62p RIVERSOURCE VARIABLE PORTFOLIO - SMALL CAP VALUE FUND OBJECTIVE The Fund seeks to provide shareholders with long-term capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, at least 80% of the Fund's net assets are invested in small cap companies. Small cap companies are those that have a market capitalization, at the time of investment, of up to $2.5 billion or that fall within the range of the Russell 2000(R) Value Index. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. The investment manager is responsible for oversight of the subadvisers, Royce & Associates, LLC (Royce), Goldman Sachs Asset Management, L.P. (GSAM), Donald Smith & Co., Inc. (Donald Smith), Franklin Portfolio Associates LLC (Franklin Portfolio Associates) and Barrow, Hanley, Mewhinney & Strauss, Inc. (Barrow, Hanley) (the Subadvisers), which provide day-to-day management for the Fund. Each of the Subadvisers acts independently of the others and uses its own methodology for selecting investments. Each of the Subadvisers employs an active investment strategy that focuses on small companies in an attempt to take advantage of what are believed to be undervalued securities. In selecting investments for the Fund, each of the Subadvisers looks for well-capitalized small companies that it believes are undervalued. Although this strategy seeks to identify companies with market capitalizations in the range of the Russell 2000 Value Index, the Fund may hold or buy stock in a company that is not included in the Russell 2000 Value Index if the stock remains attractive. ROYCE Royce uses a value methodology in managing its portion of the Fund. In selecting securities, Royce evaluates the quality of a company's balance sheet, the level of its cash flows and various measures of a company's profitability. Royce then uses these factors to assess the company's current worth, basing this assessment on either what it believes a knowledgeable buyer might pay to acquire the entire company or what it thinks the value of the company should be in the stock market. This analysis takes a number of factors into consideration, including the company's future growth prospects and current financial condition. Royce's investments focus on small- and micro-cap securities that it believes are trading significantly below its estimate of their current worth. In selecting securities for the Fund, Royce looks for companies in the upper end of the small-cap market that have: - Excellent business strengths. - High internal rates of return and low leverage. In the micro-cap sector, Royce selects from a universe of more than 5,900 micro-cap companies. Royce selects companies it believes are trading significantly below its estimate of their current worth. GSAM Business quality, attractive valuation and thoughtful portfolio construction are the key elements of GSAM's Value Equity approach. Through intensive, hands-on research the Value Equity team at GSAM seeks to identify well-positioned small-cap companies that have attractive returns on capital, strong or improving cash flow characteristics and are run by shareholder-oriented managements. The team employs a disciplined valuation approach to invest in these companies when the market does not fully recognize their real economic value. GSAM will sell a position if (1) the risk/reward profile becomes less attractive due to price appreciation; (2) its investment thesis for a particular holding is invalidated based on subsequent information; and (3) its confidence in management's ability to execute is compromised. Furthermore, GSAM mitigates the liquidity and company-specific risks associated with small-cap value investing by limiting amounts in particular sectors and investing in a large number of holdings. DONALD SMITH Donald Smith employs a strict bottom-up approach, investing in stocks of out-of-favor companies selling below tangible book value. Donald Smith looks for companies in the bottom decile of price-to-tangible book value ratios and with a positive outlook for earnings potential over the next 2-4 years. Donald Smith screens about 10,000 companies from various databases. Those companies that meet the criteria are added to the proprietary Watch List, which contains a list of 300 names of low price/tangible book value stocks. From this Watch List, Donald Smith chooses the most attractive 30-50 names after completing its in-depth research, generally investing in companies with market capitalization over $100 million but less than $1.5 billion. Donald Smith will sell a stock when it appreciates rapidly, if a better idea is found, or if fundamentals deteriorate. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 63p FRANKLIN PORTFOLIO ASSOCIATES Franklin Portfolio Associates' investment process is predicated on the belief that it can consistently differentiate between undervalued and overvalued securities. As a result, Franklin Portfolio Associates emphasizes stock selection in the process and limits the over or under exposure to sectors and other factors. Franklin Portfolio Associates uses over 40 measures, including relative value, future value, fundamental momentum, long-term growth, price action and management signals, to determine a stock's attractiveness. As with any investment process, there is no assurance of success. In order to make legitimate comparisons between stocks that have different characteristics such as industry, style and capitalization, Franklin Portfolio Associates applies a process called Peer Group Relativization to remove certain industry and style effects that can distort a fair comparison across a wide universe of securities. The individual measures are then blended together using a proprietary approach to determine a single score of attractiveness. Using this single score, Franklin Portfolio Associates will rank a universe of over 3,500 stocks from most attractive down to least attractive and group them into deciles. Decile #1 are stocks Franklin Portfolio Associates believes are the most undervalued in the marketplace and most likely to appreciate at a higher rate. Stocks that fall below the median ranking are automatic sell candidates and the proceeds are reinvested in stocks from the top deciles in the ranking system. BARROW, HANLEY Barrow, Hanley uses a value-added proprietary research process to select small capitalization, low-expectation stocks. This process is directed toward the discovery of companies in which the value of the underlying business is significantly greater than the market price. This difference in the valuation is referred to as a "value gap." The value gap is typically indicated by below average P/E ratios (on normalized earnings), above average free cash flow yields, as well as better than market levels of internal growth and return on capital. Barrow, Hanley screens the universe of roughly 1,400 companies with market capitalization between $500 million and $3 billion that possess characteristics desired by Barrow, Hanley. The result is a "Prospect List" of approximately 150 companies on which the Barrow, Hanley small cap team undertakes fundamental analysis. Firsthand fundamental research is the foundation of Barrow, Hanley's qualitative analysis. The assumptions and forecasts developed by Barrow, Hanley are installed in two real-time models used to ensure consistency and discipline in the investment process -- the Cash Flow Yield Model and the Relative Return Model. Stocks that appear undervalued on both models are candidates for purchase. New investment candidates are evaluated against existing holdings and those holdings with the smallest remaining value gap are considered for sale. Barrow, Hanley will construct its portion of the Fund's portfolio from the bottom up, one security at a time. Portfolio holdings will average approximately 35 stocks with an average weighting of 3% to 5%. PRINCIPAL RISKS Please remember that with any mutual fund investment you may lose money. This Fund is designed for investors with above-average risk tolerance. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. SMALL COMPANY RISK. Investments in small capitalization companies often involve greater risks than investments in larger, more established companies because small capitalization companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. In addition, in many instances the securities of small capitalization companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 64p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - SMALL CAP VALUE FUND PERFORMANCE (BASED ON CALENDAR YEARS) 2002 -12.13% 2003 +37.86% 2004 +20.01%
During the period shown in the bar chart, the highest return for a calendar quarter was +18.76% (quarter ended June 30, 2003) and the lowest return for a calendar quarter was -21.23% (quarter ended Sept. 30, 2002). The Fund's year-to-date return at Sept. 30, 2005 was +14.97%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR SINCE INCEPTION RiverSource VP - Small Cap Value Fund +20.01% +13.97%(a) Russell 2000(R) Value Index (reflects no deduction for fees, expenses or taxes) +22.25% +16.04%(b) Lipper Small-Cap Value Funds Index +20.65% +16.06%(b)
(a) Inception date is Aug. 14, 2001. (b) Measurement period started Sept. 1, 2001. The Russell 2000(R) Value Index, an unmanaged index, measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Small-Cap Value Funds Index includes the 30 largest small cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 65p MANAGEMENT Riversource Investments selects, contracts with and compensates the Subadvisers to manage the investment of the Fund's assets. Riversource Investments monitors the compliance of the Subadvisers with the investment objectives and related policies of the Fund, reviews the performance of the Subadvisers, and reports periodically to the Board. Riversource Investments, subject to Board approval, decides the proportion of Fund's assets to be managed by each subadviser and may change these proportions at any time. The Subadvisers each manage a portion of the Fund's assets based upon their respective experience in managing funds with investment goals and strategies substantially similar to those of the Fund. New investments in the Fund, net of any redemptions, are allocated in accordance with Riversource Investments' determination of the allocation that is in the best interests of the Fund's shareholders. ROYCE Royce is located at 1414 Avenue of the Americas, New York, New York. Royce, subject to the supervision and approval of Riversource Investments, provides investment advisory assistance and day-to-day management of a portion of the Fund's portfolio, as well as investment research and statistical information under a Subadvisory Agreement with Riversource Investments. Royce is a direct wholly-owned subsidiary of Legg Mason, Inc. located at 100 Light Street, Baltimore, Maryland. Royce & Associates, LLC has been investing in small-cap securities with a value approach for more than 30 years. The portfolio manager responsible for the day-to-day management of the portion of the Fund allocated to Royce is: - Jay S. Kaplan, Portfolio Manager. Mr. Kaplan has been employed by Royce since 2000, having previously been a Managing Director and Portfolio Manager at Prudential Investments. GSAM GSAM is located at 32 Old Slip, New York, New York. GSAM, subject to the supervision and approval of Riversource Investments, provides investment advisory assistance and day-to-day management of a portion of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Riversource Investments. GSAM is an affiliate of Goldman Sachs & Co. The team of small-cap value portfolio managers and investment professionals responsible for managing the portion of the Fund allocated to GSAM includes: - Eileen Rominger, Managing Director and Chief Investment Officer. Ms. Rominger is a portfolio manager on the U.S. Value team where she oversees the portfolio construction and investment research for the firm's value accounts. Her prior experience spanned 18 years at Oppenheimer Capital, where she was a Managing Director and member of the Executive Committee. She was a senior portfolio manager for corporate pension fund and insurance company accounts, portfolio manager of Quest Value Fund since 1988, as well as a senior research analyst responsible for several industries. Eileen received an MBA from Wharton School of Business and a BA from Fairfield University. - Chip Otness, CFA and Managing Director. Mr. Otness is a portfolio manager on the U.S. Value team, where he oversees the portfolio construction and investment research for the firm's Small Cap Value accounts. Chip brings to GSAM 30 years of fundamental-driven research and investment management experience, 20 years of that managing small cap funds. Chip started his career at JP Morgan where he spent 28 years. When he left JP Morgan he was Managing Director and ran J.P. Morgan's Small Cap Institutional group and was responsible for growing and managing $3.6 billion in assets. Chip received a BA in Economics from Harvard University. - Lisa Parisi, CFA, Managing Director and Vice President. Ms. Parisi is a portfolio manager on the U.S. Value team, where she has broad research responsibilities across the value strategies. Previously, Lisa started a small-cap value strategy for John A Levin & Co. Lisa also developed a small-cap value product and co-managed a mid-cap value product at Valenzuela Capital, where she was a managing director. Lisa started her career working at Lazard Freres on the small-cap value team and has also worked at Royce Associates and Trust Company of the West. Lisa received a BBA from Adelphi University and an MBA in Finance from the Stern School of Business at New York University. - J. Kelly Flynn, Vice President. Mr. Flynn is a portfolio manager for the U.S. Value team, where he has broad research responsibilities across the value strategies. Prior to joining GSAM Kelly spent three years at Lazard Asset Management where he was a portfolio manager for Small Cap/SMID Cap Value products. Before Lazard, Kelly was a small-cap value portfolio manager at 1838 Investment Advisors. Kelly has also spent time working for Edgewater Private Equity Fund as a research analyst and at First Boston in the mergers and acquisitions department. Kelly received a BA from Harvard in 1990 and an MBA from Wharton School of Business. - Dolores Bamford, CFA and Vice President. Ms. Bamford is a portfolio manager for the U.S. Value team, where she has broad research responsibility across the value portfolios. Prior to her arrival at GSAM, Dolores was a Portfolio Manager at Putnam Investments for various products since 1992. While at Putnam she was portfolio manager for a variety of funds including the Putnam Convertible Income-Growth Fund, the Global Resources Fund. Dolores received a BA from Wellesley College in 1988 and her MS from MIT Sloan School of Management. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 66p - Edward Perkin, CFA and Vice President. Mr. Perkin is a portfolio manager on the U.S. Value team where he has broad research responsibilities across the value strategies. Before joining GSAM, Mr. Perkin gained research experience from Fidelity Investments and Gabelli Asset Management while attending business school. Prior to that, he worked as a senior analyst at Fiserv. He received his BA from the University of California, Santa Barbara and received his MBA from Columbia Business School, and is a CFA charterholder. He joined the Value Team in 2002. - David L. Berdon, Vice President. Mr. Berdon is a portfolio manager on the U.S. Value Investment team. David joined GSAM as a research analyst in March 2001. In October 2002, he became a portfolio manager and manages other value funds for GSAM. From September 1999 to March 2001, he was a Vice President for Business Development and Strategic Alliances at Sililoquy Inc. From September 1997 to September 1999, he was a principal consultant at Diamond Technology Partners. GSAM Portfolio managers are organized along industry lines and are responsible for conducting research in their particular area of expertise. While the team debates investment ideas and overall portfolio structure, the buy/sell decision resides with the portfolio manager responsible for the industry. DONALD SMITH Donald Smith is located at 152 West 57th Street, 22nd Floor, New York, New York. Donald Smith, subject to the supervision and approval of Riversource Investments, provides investment advisory assistance and day-to-day management of a portion of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Riversource Investments. Donald Smith only has one line of business and thus is able to devote all of its time to managing client assets. This allows portfolio managers to conduct focused, detailed fundamental analysis of companies they invest in. The portfolio managers responsible for the day-to-day management of the portion of the Fund allocated to Donald Smith are: - Donald G. Smith, Chief Investment Officer. Mr. Smith has been with Donald Smith since 1980. He began his career as an analyst with Capital Research Company. He later became Director, Vice President and Portfolio Manager of Capital Guardian Trust Company. In 1980, Don accepted the responsibility of Chief Investment Officer of Home Insurance Company and President of Home Portfolio Advisors, Inc., which he bought in 1983 and changed the name to Donald Smith & Co., Inc. Don received a BS in finance and accounting from the University of Illinois, an MBA from Harvard University and a JD from UCLA Law School. - Richard L. Greenberg, CFA, Senior Portfolio Manager and Director of Research. Mr. Greenberg has been with Donald Smith since 1981. Richard began his investment career at Home Insurance Company as an industry analyst, focusing primarily on the metals, banking and housing sectors. Richard graduated Phi Beta Kappa from SUNY (Binghamton) with a BA in psychology and received his MBA from Wharton Business School. FRANKLIN PORTFOLIO ASSOCIATES Franklin Portfolio Associates is located at One Boston Place, 29th Floor, Boston, Massachusetts. Franklin Portfolio Associates, subject to the supervision and approval of Riversource Investments, provides investment advisory assistance and day-to-day management of a portion of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Riversource Investments. Franklin Portfolio Associates is an indirect wholly-owned subsidiary of Mellon Financial Corporation. The portfolio managers responsible for the day-to-day management of the portion of the Fund allocated to Franklin Portfolio Associates are: - John S. Cone, CFA, Chief Executive Officer, President and Portfolio Manager. Mr. Cone received a BA in economics from Rice University and a MS from Krannert Graduate School of Management at Purdue University where he was honored as a Krannert Associates Fellow. Mr. Cone has an extensive background in computer modeling and quantitative methods. He is a member of the Boston Security Analyst Society, Chicago Quantitative Alliance, and the Q Group. Additionally, he is on the Advisory Board of the Center for Computational Finance and Economic Systems at Rice University. - Michael F. Dunn, CFA. Mr. Dunn received a BS in mathematics and linguistics from Yale University. Prior to joining Franklin Portfolio Associates, he was responsible for quantitative research and development at Wellington Management Company and previously managed domestic index and derivative portfolios internally for the IBM Retirement Fund. - Oliver E. Buckley. Mr. Buckley received a BS degree in mathematical sciences and an MS in engineering-economic systems both from Stanford University. He received an MBA from the University of California at Berkeley. Prior to joining Franklin Portfolio Associates, Oliver was responsible for research in the Structured Products Group at INVESCO. He also previously served as a portfolio manager at Martingale Asset Management and spent five years at BARRA as the manager of Equity Consulting Services. - Kristin J. Crawford. Ms. Crawford received a BA in computer science and mathematics from Smith College and an Executive MBA from Suffolk University. Before joining Franklin Portfolio Associates, Kristin was Project Leader for equity development at Standish, Ayer & Wood, and was previously a software developer at The Boston Company Asset Management. - Langton (Tony) C. Garvin, CFA. Mr. Garvin holds his BS from the Skidmore College and an MA from the University of Massachusetts. He also completed postgraduate coursework at the Massachusetts Institute of Technology. He joined Franklin Portfolio Associates in 2004. Prior to joining Franklin Portfolio, he was a portfolio manager at Batterymarch Financial Management. He also previously served as portfolio manager and quantitative analyst at Grantham, Mayo, Van Otterloo and Company and was a consultant at Independence Investment Associates and held responsibilities related to data analysis at Nichols Research Corporation. Mr. Garvin belongs to the Boston Security Analysts Society. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 67p BARROW, HANLEY Barrow, Hanley is located at 2200 Ross Avenue, 31st Floor, 15th Floor, Dallas, Texas. Barrow, Hanley, subject to the supervision and approval of Riversource Investments, provides investment advisory assistance and day-to-day management of a portion of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with Riversource Investments. Barrow, Hanley is an independent-operated subsidiary of Old Mutual Asset Management (US) group of companies. The portfolio managers responsible for the day-to-day management of the portion of the Fund allocated to Barrow, Hanley are: - James S. McClure, CFA and Portfolio Manager. Mr. McClure joined Barrow, Hanley as a Principal in 1995 where he established the small cap strategy. Mr. McClure serves as co-portfolio manager of Barrow, Hanley's Small Cap Value Equity strategy and has 32 years of experience managing small cap portfolios. Mr. McClure has a BA and an MBA from the University of Texas. - John P. Harloe, CFA and Portfolio Manager. Mr. Harloe joined Barrow, Hanley as a Principal in 1995 where he established the small cap strategy. Mr. Harloe serves as co-portfolio manager of Barrow, Hanley's Small Cap Value Equity strategy and has 28 years of experience managing small cap portfolios. Mr. Harloe has a BA and MBA from the University of South Carolina. The SAI provides additional information about portfolio managers compensation, management of other accounts and ownership of shares in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 68p RIVERSOURCE VARIABLE PORTFOLIO - STRATEGY AGGRESSIVE FUND OBJECTIVE The Fund seeks to provide shareholders with capital appreciation. Because any investment involves risk, achieving this objective cannot be guaranteed. PRINCIPAL INVESTMENT STRATEGIES Under normal market conditions, the Fund will invest at least 80% of its net assets at the time of purchase in the common stocks of mid-capitalization companies. The Fund will provide shareholders with at least 60 days' notice of any change in the 80% policy. The investment manager defines mid-cap companies as those whose market capitalization (number of shares outstanding multiplied by the share price) falls within the range of the Russell Midcap(R) Growth Index (the Index). The market capitalization range of the companies included within the Index was $1.2 billion to $15.9 billion as of Aug. 31, 2005. Over time, the capitalizations of the companies in the Index will change. As they do, the size of the companies in which the Fund invests may change. As long as an investment continues to meet the Fund's other investment criteria, the Fund may choose to continue to hold a stock even if the company's market capitalization grows beyond the largest absolute market capitalization weighting held within the Index or falls below the market capitalization of the smallest company held within the Index. In pursuit of the Fund's objective, the investment manager chooses equity investments by: - Identifying companies that it believes exhibit the following traits: - effective management, - financial strength, - growth potential, and - competitive market position. - Identifying sectors with growth potential and weighting purchases in those sectors more heavily. - Considering market trends and identifying opportunities within multiple industries that offer a compelling risk/reward trade-off for shareholders. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to alternative investments. - The company has met the investment manager's earnings and/or growth expectations. - Political, economic, or other events could affect the company's performance. - The company or the security continues to meet the other standards described above. PRINCIPAL RISKS This Fund is designed for investors with above-average risk tolerance. Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. MID-SIZED COMPANY RISK. Investments in mid-sized companies often involve greater risks than investments in larger, more established companies because mid-sized companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of mid-sized companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 69p PAST PERFORMANCE The following bar chart and table provide some illustration of investing in the Fund by showing: - how the Fund's performance has varied for each full calendar year shown on the bar chart below, and - how the Fund's average annual total returns have varied over time compared to recognized indexes shown on the table below. Both the bar chart and the table assume that all distributions have been reinvested. The results do not reflect the expenses that apply to the subaccounts and contracts. Inclusion of these charges would reduce total return for all periods shown. For purposes of the calculations, we assumed the deduction of applicable Fund expenses. Performance reflects any fee waivers/expense caps in effect for the periods reported. In the absence of fee waivers/expense caps, performance will be lower. [CHART] RIVERSOURCE VP - STRATEGY AGGRESSIVE FUND PERFORMANCE (BASED ON CALENDAR YEARS) 1995 +31.76% 1996 +15.98% 1997 +12.64% 1998 +2.62% 1999 +71.03% 2000 -19.04% 2001 -32.91% 2001 -31.95% 2003 +28.81% 2004 +9.39%
During the period shown in the bar chart, the highest return for a calendar quarter was +56.47% (quarter ended Dec. 31, 1999) and the lowest return for a calendar quarter was -28.63% (quarter ended March 31, 2001). The Fund's year-to-date return at Sept. 30, 2005 was +20.44%. AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2004)
1 YEAR 5 YEARS 10 YEARS RiverSource VP - Strategy Aggressive Fund +9.39% -12.23% +4.64% Russell Midcap(R) Growth Index (reflects no deduction for fees, expenses or taxes) +15.48% -3.36% +11.23% Lipper Mid-Cap Growth Funds Index +14.03% -6.07% +9.68%
The Russell Midcap(R) Growth Index, an unmanaged index, measures the performance of those Russell MidCap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000(R) Growth Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Mid-Cap Growth Funds Index includes the 30 largest mid 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. MANAGEMENT PORTFOLIO MANAGER(S). The portfolio manager responsible for the day-to-day management of the Fund is: Duncan J. Evered, Portfolio Manager - Managed the Fund since 2005. - Joined RiverSource Investments (previously AEFC) in 1994. - Began investment career in 1984. - MBA, Stanford School of Business. The SAI provides additional information about the Portfolio Manager's compensation, other accounts managed by the Portfolio Manager, and the Portfolio Manager's ownership of securities in the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 70p FEES AND EXPENSES Because the Funds are the underlying investment vehicle for an annuity contract or life insurance policy, there is no sales charge for the purchase or sale of Fund shares. However, there may be charges associated with your annuity contract or life insurance policy, including those that may be associated with surrender or withdrawal. Any charges that apply to the subaccount and your contract or policy are described in the annuity contract or life insurance policy prospectus. The summary below describes the Fund fees and expenses that you would pay if you buy a variable annuity or life insurance policy and allocate your purchase payments to subaccounts or premiums that invest in the Fund. This summary does not reflect any fees or sales charges imposed by your annuity contract or life insurance policy. Expenses are based on the Fund's most recent fiscal year adjusted to reflect current fees. ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
MANAGEMENT DISTRIBUTION OTHER FUND FEES(a) (12b-1) FEES(b) EXPENSES(c) TOTAL RiverSource VP - Balanced Fund 0.63%(i) 0.13% 0.08% 0.84% RiverSource VP - Cash Management Fund 0.51% 0.13% 0.09% 0.73% RiverSource VP - Core Bond Fund 0.63% 0.13% 0.27% 1.03% RiverSource VP - Diversified Bond Fund 0.60% 0.13% 0.11% 0.84% RiverSource VP - Diversified Equity Income Fund 0.63%(i) 0.13% 0.10% 0.86% RiverSource VP - Emerging Markets Fund(d) 1.12%(h) 0.13% 0.28% 1.53% RiverSource VP - Global Bond Fund 0.83% 0.13% 0.14% 1.10% RiverSource VP - Global Inflation Protected Securities Fund 0.49% 0.13% 0.27% 0.89% RiverSource VP - Growth Fund 0.69%(i) 0.13% 0.11% 0.93% RiverSource VP - High Yield Bond Fund 0.62% 0.13% 0.10% 0.85% RiverSource VP - Income Opportunities Fund 0.64% 0.13% 0.28% 1.05% RiverSource VP - International Opportunity Fund(d) 0.80%(h) 0.13% 0.13% 1.06% RiverSource VP - Large Cap Equity Fund 0.60%(h) 0.13% 0.08% 0.81% RiverSource VP - Large Cap Value Fund 0.63%(i) 0.13% 1.80% 2.56% RiverSource VP - Mid Cap Growth 0.58%(h) 0.13% 0.11% 0.82% RiverSource VP - Mid Cap Value Fund 0.73% 0.13% 2.12% 2.98% RiverSource VP - New Dimensions Fund 0.55%(h) 0.13% 0.08% 0.76% RiverSource VP - S&P 500 Index Fund 0.29% 0.13% 0.13% 0.55% RiverSource VP - Select Value Fund(e) 0.80%(h) 0.13% 0.24% 1.17% RiverSource VP - Short Duration U.S. Government Fund 0.61% 0.13% 0.11% 0.85% RiverSource VP - Small Cap Advantage Fund(g) 0.80%(i) 0.13% 0.16% 1.09% RiverSource VP - Small Cap Value Fund(f) 0.97%(h) 0.13% 0.18% 1.28% RiverSource VP - Strategy Aggressive Fund 0.56%(h) 0.13% 0.09% 0.78% FEE WAIVER/EXPENSE NET REIMBURSEMENT(j) EXPENSES RiverSource VP - Balanced Fund 0.00% 0.84% RiverSource VP - Cash Management Fund 0.00% 0.73% RiverSource VP - Core Bond Fund 0.08% 0.95% RiverSource VP - Diversified Bond Fund 0.00% 0.84% RiverSource VP - Diversified Equity Income Fund 0.00% 0.86% RiverSource VP - Emerging Markets Fund(d) 0.00% 1.53% RiverSource VP - Global Bond Fund 0.00% 1.10% RiverSource VP - Global Inflation Protected Securities Fund 0.14% 0.75% RiverSource VP - Growth Fund 0.00% 0.93% RiverSource VP - High Yield Bond Fund 0.00% 0.85% RiverSource VP - Income Opportunities Fund 0.06% 0.99% RiverSource VP - International Opportunity Fund(d) 0.00% 1.06% RiverSource VP - Large Cap Equity Fund 0.00% 0.81% RiverSource VP - Large Cap Value Fund 1.51% 1.05% RiverSource VP - Mid Cap Growth 0.00% 0.82% RiverSource VP - Mid Cap Value Fund 1.90% 1.08% RiverSource VP - New Dimensions Fund 0.00% 0.76% RiverSource VP - S&P 500 Index Fund 0.05% 0.50% RiverSource VP - Select Value Fund(e) 0.03% 1.14% RiverSource VP - Short Duration U.S. Government Fund 0.00% 0.85% RiverSource VP - Small Cap Advantage Fund(g) 0.00% 1.09% RiverSource VP - Small Cap Value Fund(f) 0.02% 1.26% RiverSource VP - Strategy Aggressive Fund 0.00% 0.78%
(a) The Fund pays RiverSource Investments a fee for managing its assets. (b) The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of 1940. The Fund pays IDS Life Insurance Company an annual fee of up to 0.125% of average daily net assets as payment for distributing its shares and providing shareholder services. Because this fee is paid out of the Fund's assets on an on-going basis, over time this fee will increase the cost of your investment and may cost you more than paying other types of sales charges. (c) The Fund pays taxes, brokerage commissions and other nonadvisory expenses including administrative and custody services. (d) RiverSource Investments pays Threadneedle a fee for sub-investment advisory services. Threadneedle (60 St. Mary Axe, London EC3A 8OQ, England) is a direct wholly-owned subsidiary of Ameriprise Financial, Inc., the parent company of RiverSource Investments. (e) RiverSource Investments pays GAMCO Asset Management, Inc. a fee for sub-investment advisory services. (f) RiverSource Investments pays Royce, GSAM, Donald Smith, Franklin Portfolio Associates and Barrow, Hanley a fee for sub-investment advisory services. (g) RiverSource Investments pays Kenwood a fee for sub-investment advisory services. Kenwood (Accenture Tower at Metropolitan Centre, Suite 2330, 333 South 7th Street, Minneapolis, MN 55402) is an indirect subsidiary of Ameriprise Financial, Inc., the parent company of RiverSource Investments. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 71p (h) Includes the impact of a performance incentive adjustment fee that decreased the management fee by 0.05% for RiverSource VP - Emerging Markets Fund, 0.04% for RiverSource VP - International Opportunity Fund, 0.02% for RiverSource VP - Large Cap Equity Fund, 0.07% for RiverSource VP - Mid Cap Growth Fund, 0.07% for RiverSource VP - New Dimensions Fund, 0.01% for RiverSource VP - Select Value Fund, 0.04% for RiverSource VP - Small Cap Value Fund and 0.07% for RiverSource VP - Strategy Aggressive Fund. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Emerging Markets Funds Index for RiverSource VP - Emerging Markets Fund; the Lipper International Large-Cap Core Funds Index for RiverSource VP - International Opportunity Fund; the Lipper Large-Cap Core Funds Index for RiverSource VP - Large Cap Equity Fund; the Lipper Mid-Cap Growth Funds Index for RiverSource VP - Mid Cap Growth Fund; the Lipper Large-Cap Growth Funds Index for RiverSource VP - New Dimensions Fund; the Lipper Multi-Cap Value Funds Index for RiverSource VP - Select Value Fund; the Lipper Small-Cap Value Funds Index for RiverSource VP - Small Cap Value Fund; and the Lipper Mid-Cap Growth Funds Index for RiverSource VP - Strategy Aggressive Fund. (i) Includes the impact of a performance incentive adjustment that increased the management fee by 0.03% for RiverSource VP - Balanced Fund, 0.08% for RiverSource VP - Diversified Equity Income Fund, 0.06% for RiverSource VP - Growth Fund, 0.002% for RiverSource VP - Large Cap Value Fund and 0.01% for RiverSource VP - Small Cap Advantage Fund. The index against which the Fund's performance is measured for purposes of determining the performance incentive adjustment is the Lipper Balanced Funds Index for RiverSource VP - Balanced Fund; the Lipper Equity Income Funds Index for RiverSource VP - Diversified Equity Income Fund; the Lipper Large-Cap Growth Funds Index for RiverSource VP - Growth Fund; the Lipper Large-Cap Value Funds Index for RiverSource VP - Large Cap Value Fund; and the Lipper Small-Cap Core Funds Index for RiverSource VP - Small Cap Advantage Fund. (j) RiverSource Investments and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Fund's Board. Any amount waived will not be reimbursed by the Fund. Under this agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed: 0.95% for RiverSource VP - Core Bond Fund, 1.75% for RiverSource VP - Emerging Markets Fund, 0.75% for RiverSource VP - Global Inflation Protected Securities Fund, 0.99% for RiverSource VP - Income Opportunities Fund, 1.05% for RiverSource VP - Large Cap Value Fund, 1.10% for RiverSource VP - Mid Cap Growth Fund, 1.08% for RiverSource VP - Mid Cap Value Fund, 0.50% for RiverSource VP - S&P 500 Index Fund, 1.15% for RiverSource VP - Select Value Fund and 1.30% for RiverSource VP - Small Cap Value Fund. EXAMPLE THIS EXAMPLE ASSUMES THAT YOU INVEST $10,000 TO A SUBACCOUNT THAT INVESTS IN THE FUND FOR THE TIME PERIODS INDICATED AND THEN REDEEM ALL OF YOUR UNITS AT THE END OF THOSE PERIODS. THIS EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD BE:
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS RiverSource VP - Balanced Fund $ 86 $268 $ 467 $1,041 RiverSource VP - Cash Management Fund $ 75 $234 $ 407 $ 910 RiverSource VP - Core Bond Fund $ 97 $320 $ 562 $1,257 RiverSource VP - Diversified Bond Fund $ 86 $268 $ 467 $1,041 RiverSource VP - Diversified Equity Income Fund $ 88 $275 $ 478 $1,065 RiverSource VP - Emerging Markets Fund $156 $484 $ 835 $1,829 RiverSource VP - Global Bond Fund $112 $350 $ 607 $1,345 RiverSource VP - Global Inflation Protected Securities Fund $ 77 $270 $ 480 $1,088 RiverSource VP - Growth Fund $ 95 $297 $ 516 $1,147 RiverSource VP - High Yield Bond Fund $ 87 $271 $ 472 $1,053 RiverSource VP - Income Opportunities Fund $101 $328 $ 574 $1,282 RiverSource VP - International Opportunity Fund $108 $337 $ 586 $1,299 RiverSource VP - Large Cap Equity Fund $ 83 $259 $ 450 $1,006 RiverSource VP - Large Cap Value Fund $107 $653 $1,226 $2,787 RiverSource VP - Mid Cap Growth Fund $ 84 $262 $ 456 $1,018 RiverSource VP - Mid Cap Value Fund $110 $743 $1,401 $3,169 RiverSource VP - New Dimensions Fund $ 78 $243 $ 423 $ 946 RiverSource VP - S&P 500 Index Fund $ 51 $171 $ 303 $ 688 RiverSource VP - Select Value Fund $116 $369 $ 642 $1,423 RiverSource VP - Short Duration U.S. Government Fund $ 87 $271 $ 472 $1,053 RiverSource VP - Small Cap Advantage Fund $111 $347 $ 602 $1,333 RiverSource VP - Small Cap Value Fund $128 $404 $ 701 $1,548 RiverSource VP - Strategy Aggressive Fund $ 80 $249 $ 434 $ 970
THIS EXAMPLE DOES NOT REPRESENT ACTUAL EXPENSES, PAST OR FUTURE. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. THIS EXAMPLE DOES NOT REFLECT THE EXPENSES THAT APPLY TO THE SUBACCOUNTS OR THE CONTRACTS. INCLUSION OF THESE CHARGES WOULD INCREASE EXPENSES FOR ALL PERIODS SHOWN. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 72p OTHER INVESTMENT STRATEGIES AND RISKS OTHER INVESTMENT STRATEGIES. In addition to the principal investment strategies previously described, the Fund may invest in other securities and may use other investment strategies that are not principal investment strategies. Additionally, the Fund may use derivatives (financial instruments where the value depends upon, or is derived from, the value of something else) such as futures, options and forward contracts, to produce incremental earnings, to hedge existing positions or to increase flexibility. Just as with securities in which the Fund invests directly, derivatives are subject to a number of risks, including market, liquidity, interest rate and credit risk. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the Fund using derivatives. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies and holdings, and the risks of such strategies, including other derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. UNUSUAL MARKET CONDITIONS. During unusual market conditions, the Fund may temporarily invest more of its assets in money market securities than during normal market conditions. Although investing in these securities would serve primarily to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. PORTFOLIO TURNOVER. Active trading may increase the amount of commissions or mark-ups paid to broker-dealers that the Fund pays when it buys and sells securities. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." SECURITIES TRANSACTION COMMISSIONS. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities and certain derivatives. In addition, brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses," they are reflected in the total return of the Fund. DIRECTED BROKERAGE. The Fund's Board of Directors has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. INVESTMENT MANAGER AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource variable portfolio funds, and is a wholly owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for all of the RiverSource variable portfolio funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services such as separate account asset management, institutional trust and custody, and employee benefit plan administration, as well as other investment products. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement, the Fund also pays taxes, brokerage commissions and nonadvisory expenses. A discussion regarding the basis for the Board approving the Investment Management Services Agreement is available in the Fund's most recent annual report. ADDITIONAL SERVICES AND COMPENSATION As described above, RiverSource Investments receives compensation for acting as the Fund's investment manager. RiverSource Investments and its affiliates also receive compensation for providing other services to the RiverSource variable portfolio funds. ADMINISTRATION SERVICES. RiverSource Investments provides or compensates others to provide administrative services to the RiverSource variable portfolio funds. These services include administrative, accounting, treasury, and other services. Fees paid by the Fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 73p CUSTODY SERVICES. Ameriprise Trust Company, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the custodian or Ameriprise Trust Company), provides custody services for the RiverSource variable portfolio funds. In addition, Ameriprise Trust Company is paid for certain transaction fees and out of pocket expenses incurred while providing services to the funds. Fees paid by the Fund for these services are included under "Other expenses" in the expense table under "Fees and Expenses." DISTRIBUTION SERVICES. IDS Life Insurance Company, 70100 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the distributor or IDS Life), provides underwriting and distribution services to the RiverSource variable portfolio funds. Under the Distribution Agreement and related distribution plan(s), the distributor receives distribution and servicing fees. The distributor uses these fees to either pay financial advisors and/or to support its distribution and servicing activity. Fees paid by the Fund for these services are set forth under "Distribution (12b-1) fees" in the expense table under "Fees and Expenses." More information on how these fees are used is set forth in the SAI. The SAI provides additional information about the services provided for the agreements set forth above. PAYMENTS TO AFFILIATED INSURANCE COMPANIES Currently, the RiverSource variable portfolio funds are sold exclusively as underlying investment options of variable insurance policies and annuity contracts (products) offered by IDS Life and other affiliated insurance companies (IDS Life). These products may include unaffiliated mutual funds as investment options, and IDS Life receives payments from the sponsors of these unaffiliated mutual funds as a result of including these funds in the products. Within Ameriprise Financial, Inc., IDS Life is allocated resources, including revenue earned by RiverSource Investments and its affiliates for providing investment management and other services to the RiverSource variable portfolio funds, as a result of including these funds in the products. The amount of payment from an unaffiliated fund or allocation from affiliates resources varies, and may be significant. The amount of the payment or allocation IDS Life receives from a fund may create an incentive for IDS Life and may influence its decision regarding which funds to include in a product. These arrangements are sometimes are referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by IDS Life. See the product prospectus for more information regarding these payments and allocations. ADDITIONAL MANAGEMENT INFORMATION MANAGER OF MANAGER EXEMPTION. The Fund operates under an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for the Fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. Before any of RiverSource VP - Cash Management Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - High Yield Bond Fund, or RiverSource VP - Short Duration U.S. Government Fund may rely on the order, holders of a majority of the fund's outstanding voting securities will need to approve operating the fund in this manner. If shareholder approval is received, the fund may add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delay associated with obtaining shareholder approval of the change. There is no assurance shareholder approval will be received, and no changes will be made without shareholder approval until that time. ASSET ALLOCATION PROGRAM. The RiverSource Variable Portfolio Funds may be included as component funds in asset allocation programs (Programs). The Programs are available to owners of certain variable annuity contracts (contract owners), and, if available to you, is described in your annuity prospectus. Under the Programs, contract owners choose asset allocation model portfolios (model portfolios). Contract values are rebalanced on a quarterly basis and model portfolios are periodically updated. This quarterly rebalancing and periodic updating of the model portfolios can cause a component fund to incur transactional expenses as it raises cash for money flowing out of the component fund or to buy securities with money flowing into the component fund. Moreover, a large outflow of money from a fund may increase the expenses attributable to the assets remaining in the fund. These expenses can adversely affect the performance of the component fund, and could adversely affect those contract owners who own the component fund but do not participate in the Program. Large flows resulting in increased transactional expenses could detract from the achievement of a component fund's investment objective during a period of rising market prices; conversely, a large cash position may reduce the magnitude of a component fund's loss in the event of falling market prices, and provide the component fund with liquidity to make additional investments or to meet redemptions. Even if you do not participate in Programs, if you invest in a component fund, you may be impacted if the component fund is included in one or more model portfolios. FUND HOLDINGS DISCLOSURE. The Fund's Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the Fund's SAI. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 74p BUYING AND SELLING SHARES VALUING FUND SHARES The net asset value (NAV) is the value of a single share of the Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. RiverSource Variable Portfolio - Cash Management Fund's securities are valued at amortized costs. However, securities are valued primarily on the basis of market quotations obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations are not readily available, securities are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of a security held by the Fund is materially affected by events that occur after the close of the primary market on which the security is traded but prior to the time as of which the Fund's NAV is determined. Valuing securities at fair value involves reliance on judgment. The fair value of a security is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of foreign securities and other securities such as small cap stocks or high yield bonds that may be traded infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. PURCHASING SHARES You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received by the Fund or an authorized insurance company. For further information concerning minimum and maximum payments and submission and acceptance of your application, see your annuity contract or life insurance policy prospectus. TRANSFERRING/SELLING SHARES There is no sales charge for the sale of Fund shares, but there may be charges associated with the surrender or withdrawal of your annuity contract or life insurance policy. Any charges that apply to the subaccount and your contract are described in your annuity contract or life insurance policy prospectus. You may transfer all or part of your value in a subaccount investing in shares of the Fund to one or more of the other subaccounts investing in shares of other funds with different investment objectives. You may provide instructions to sell any shares you have allocated to the subaccounts. Proceeds will be mailed within seven days after your surrender or withdrawal request is accepted by an authorized agent. The amount you receive may be more or less than the amount you invested. Your sale price will be the next NAV calculated after your request is received by the Fund or an authorized insurance company. Please refer to your annuity contract or life insurance policy prospectus for more information about transfers among subaccounts as well as surrenders and withdrawals. MARKET TIMING The Board of Directors has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing portfolio managers from fully investing the assets of the fund, diluting the value of shares, or increasing the fund's transaction costs. To the extent the Fund has significant holdings in foreign securities, including emerging markets securities, small cap stocks and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. The Fund is offered only through variable annuity contracts and life insurance policies, and shares of the Fund are held in affiliated insurance company subaccounts. Because insurance companies process contract and policyholder's Fund trades in the subaccounts on an omnibus basis, the Funds' Board of Directors has not adopted procedures to monitor market timing activity at the Fund level, but rather has approved monitoring procedures designed to detect and deter market timing activities at the contract or policy level. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 75p Please refer to your annuity contract or life insurance policy prospectus for specific details on transfers between accounts and market timing policies and procedures. The procedures that are designed to detect and deter market timing activities at the contract or policy level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some contracts and policies may prevent or restrict the effectiveness of the market timing procedures from stopping certain market timing activity. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. DISTRIBUTIONS AND TAXES The Fund distributes to shareholders (subaccounts) dividends and capital gains to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. REINVESTMENT Since the distributions are automatically reinvested in additional Fund shares, the total value of your holdings will not change. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. Important: This information is a brief and selective summary of some of the tax rules that apply to the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. FEDERAL INCOME TAXATION OF SUBACCOUNTS, LIFE INSURANCE COMPANIES AND ANNUITY CONTRACTS OR LIFE INSURANCE POLICIES IS DISCUSSED IN YOUR ANNUITY CONTRACT OR LIFE INSURANCE POLICY PROSPECTUS. FINANCIAL HIGHLIGHTS THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU UNDERSTAND THE FUND'S FINANCIAL PERFORMANCE. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLES REPRESENT THE RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS). THE RETURNS DO NOT REFLECT THE EXPENSES THAT APPLY TO THE SUBACCOUNTS OR THE CONTRACTS. INCLUSION OF THESE CHARGES WOULD REDUCE TOTAL RETURN FOR ALL PERIODS SHOWN. THIS INFORMATION HAS BEEN AUDITED BY KPMG LLP, WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL STATEMENTS, IS INCLUDED IN THE ANNUAL REPORT WHICH, IF NOT INCLUDED WITH THIS PROSPECTUS, IS AVAILABLE UPON REQUEST. RIVERSOURCE VP - BALANCED FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $14.17 $13.00 $12.32 $ 15.30 $ 20.81 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .35 .31 .31 .33 .44 Net gains (losses) (both realized and unrealized) 1.02 1.17 .82 (1.88) (4.32) -------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.37 1.48 1.13 (1.55) (3.88) -------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.36) (.31) (.31) (.34) (.39) Distributions from realized gains -- -- (.14) (1.09) (1.24) -------------------------------------------------------------------------------------------------------------------- Total distributions (.36) (.31) (.45) (1.43) (1.63) -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $15.18 $14.17 $13.00 $ 12.32 $ 15.30 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2,437 $2,664 $2,416 $ 2,709 $ 3,759 Ratio of expenses to average daily net assets(b) .82% .78% .80% .77% .76% Ratio of net investment income (loss) to average daily net assets 2.34% 2.16% 2.48% 2.31% 2.46% Portfolio turnover rate (excluding short-term securities) 131% 133% 119% 103% 63% -------------------------------------------------------------------------------------------------------------------- Total return(c) 9.68% 11.39% 9.40% (10.91%) (19.37%) --------------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 76p RIVERSOURCE VP - CASH MANAGEMENT FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $1.00 $1.00 $1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 -- .01 .02 .05 LESS DISTRIBUTIONS: Dividends from net investment income (.02) -- (.01) (.02) (.05) Net asset value, end of period $1.00 $1.00 $1.00 $ 1.00 $ 1.00 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 688 $ 773 $ 868 $1,123 $1,063 Ratio of expenses to average daily net assets(b) .70% .69% .70% .69% .68% Ratio of net investment income (loss) to average daily net assets 1.88% .47% .72% 1.61% 4.76% -------------------------------------------------------------------------------------------------------------- Total return(c) 1.92% .48% .72% 1.59% 4.94% --------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - CORE BOND FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004(b) Net asset value, beginning of period $10.01 $ 9.98 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .31 .14 Net gains (losses) (both realized and unrealized) .04 .03 ------------------------------------------------------------------------------------ Total from investment operations .35 .17 ------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.31) (.14) Net asset value, end of period $10.05 $10.01 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 58 $ 36 Ratio of expenses to average daily net assets(c),(d) .95% .95%(e) Ratio of net investment income (loss) to average daily net assets 3.10% 2.33%(e) Portfolio turnover rate (excluding short-term securities) 339% 221% ------------------------------------------------------------------------------------ Total return(f) 3.64% 1.67%(g) ------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.01% and 1.13% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 77p RIVERSOURCE VP - DIVERSIFIED BOND FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.62 $10.40 $10.38 $10.61 $10.29 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .39 .38 .44 .56 .70 Net gains (losses) (both realized and unrealized) .06 .22 .02 (.23) .30 ------------------------------------------------------------------------------------------------------------------ Total from investment operations .45 .60 .46 .33 1.00 ------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.41) (.38) (.44) (.56) (.68) Net asset value, end of period $10.66 $10.62 $10.40 $10.38 $10.61 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,824 $1,696 $1,765 $1,814 $1,626 Ratio of expenses to average daily net assets(b) .82% .81% .81% .80% .80% Ratio of net investment income (loss) to average daily net assets 3.65% 3.60% 4.23% 5.41% 6.72% Portfolio turnover rate (excluding short-term securities) 293% 295% 251% 167% 122% ------------------------------------------------------------------------------------------------------------------ Total return(c) 4.27% 5.84% 4.50% 3.20% 10.07% ------------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $11.17 $ 9.65 $ 8.41 $ 10.20 $10.05 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .20 .17 .17 .13 .11 Net gains (losses) (both realized and unrealized) 2.65 1.51 1.24 (1.75) .15 ------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.85 1.68 1.41 (1.62) .26 ------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.19) (.16) (.17) (.13) (.11) Distributions from realized gains -- -- -- (.04) -- ------------------------------------------------------------------------------------------------------------------- Total distributions (.19) (.16) (.17) (.17) (.11) ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.83 $11.17 $ 9.65 $ 8.41 $10.20 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,679 $ 843 $ 370 $ 267 $ 106 Ratio of expenses to average daily net assets(b) .84% .86% .76% .87% .91%(c) Ratio of net investment income (loss) to average daily net assets 1.66% 1.77% 2.13% 1.59% 1.49% Portfolio turnover rate (excluding short-term securities) 25% 19% 39% 35% 68% ------------------------------------------------------------------------------------------------------------------- Total return(d) 25.59% 17.53% 17.00% (16.16%) 2.56% -------------------------------------------------------------------------------------------------------------------
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.17% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 78p RIVERSOURCE VP - EMERGING MARKETS FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 9.80 $ 8.44 $ 7.04 $6.68 $ 9.61 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .09 .04 .02 .01 Net gains (losses) (both realized and unrealized) 3.72 1.39 1.38 .34 (2.94) --------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.78 1.48 1.42 .36 (2.93) --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.12) (.02) -- -- Distributions from realized gains (.38) -- -- -- -- --------------------------------------------------------------------------------------------------------------------- Total distributions (.44) (.12) (.02) -- -- --------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.14 $ 9.80 $ 8.44 $7.04 $ 6.68 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 192 $ 46 $ 16 $ 10 $ 6 Ratio of expenses to average daily net assets(b) 1.55% 1.61%(c) 1.75%(c) 1.68%(c) 1.75%(c) Ratio of net investment income (loss) to average daily net assets .58% .65% .67% .31% .20% Portfolio turnover rate (excluding short-term securities) 120% 117% 191% 215% 203% --------------------------------------------------------------------------------------------------------------------- Total return(d) 39.60% 17.63% 20.25% 5.45% (30.49%) ---------------------------------------------------------------------------------------------------------------------
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.67%, 2.04%, 2.36% and 3.49% for the years ended Aug. 31, 2004, 2003, 2002 and 2001, respectively. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - GLOBAL BOND FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.82 $10.40 $10.02 $ 9.76 $9.34 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .34 .35 .34 .38 .43 Net gains (losses) (both realized and unrealized) .39 .73 .61 .36 .23 --------------------------------------------------------------------------------------------------------------------- Total from investment operations .73 1.08 .95 .74 .66 --------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.53) (.66) (.57) (.48) (.24) Net asset value, end of period $11.02 $10.82 $10.40 $10.02 $9.76 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 575 $ 409 $ 312 $ 233 $ 191 Ratio of expenses to average daily net assets(b) 1.08% 1.08% 1.09% 1.08% 1.07% Ratio of net investment income (loss) to average daily net assets 2.63% 2.76% 3.08% 3.92% 4.54% Portfolio turnover rate (excluding short-term securities) 79% 105% 102% 46% 34% --------------------------------------------------------------------------------------------------------------------- Total return(c) 6.75% 10.57% 9.56% 7.83% 7.14% ---------------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 79p RIVERSOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005(b) Net asset value, beginning of period $10.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .32 Net gains (losses) (both realized and unrealized) .19 -------------------------------------------------------------------------- Total from investment operations .51 -------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.32) Net asset value, end of period $10.19 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 116 Ratio of expenses to average daily net assets(c),(d) .75%(e) Ratio of net investment income (loss) to average daily net assets 3.42%(e) Portfolio turnover rate (excluding short-term securities) 29% -------------------------------------------------------------------------- Total return(f) 5.22%(g) --------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.87% for the period ended Aug. 31, 2005. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VP - GROWTH FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 5.69 $5.45 $5.00 $ 6.48 $ 13.46 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .02 .01 -- (.01) Net gains (losses) (both realized and unrealized) .91 .24 .45 (1.48) (6.97) ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .94 .26 .46 (1.48) (6.98) ---------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.02) (.01) -- -- Net asset value, end of period $ 6.61 $5.69 $5.45 $ 5.00 $ 6.48 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 392 $ 261 $ 223 $ 144 $ 177 Ratio of expenses to average daily net assets(b) .92% .85% .99% .81% .90%(c) Ratio of net investment income (loss) to average daily net assets .42% .27% .20% --% (.19%) Portfolio turnover rate (excluding short-term securities) 154% 192% 199% 272% 41% ---------------------------------------------------------------------------------------------------------------------- Total return(d) 16.74% 4.64% 9.29% (22.80%) (51.87%) ----------------------------------------------------------------------------------------------------------------------
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.91% for the year ended Aug 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 80p RIVERSOURCE VP - HIGH YIELD BOND FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 6.60 $ 6.22 $ 5.66 $ 6.83 $ 7.76 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .44 .47 .48 .56 .79 Net gains (losses) (both realized and unrealized) .16 .38 .54 (1.17) (.95) ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .60 .85 1.02 (.61) (.16) ---------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.44) (.47) (.46) (.56) (.77) Net asset value, end of period $ 6.76 $ 6.60 $ 6.22 $ 5.66 $ 6.83 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,246 $1,130 $ 843 $ 577 $ 609 Ratio of expenses to average daily net assets(b) .83% .82% .83% .83% .82% Ratio of net investment income (loss) to average daily net assets 6.58% 7.30% 8.31% 8.91% 11.04% Portfolio turnover rate (excluding short-term securities) 106% 139% 141% 135% 86% ---------------------------------------------------------------------------------------------------------------------- Total return(c) 9.31% 14.03% 18.81% (9.33%) (1.89%) ----------------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - INCOME OPPORTUNITIES FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004(b) Net asset value, beginning of period $10.29 $ 9.93 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .59 .15 Net gains (losses) (both realized and unrealized) .18 .36 ------------------------------------------------------------------------------------ Total from investment operations .77 .51 ------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.59) (.15) Distributions from realized gains (.08) -- ------------------------------------------------------------------------------------ Total distributions (.67) (.15) ------------------------------------------------------------------------------------ Net asset value, end of period $10.39 $10.29 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 45 $ 16 Ratio of expenses to average daily net assets(c),(d) .99 .99%(e) Ratio of net investment income (loss) to average daily net assets 5.69% 6.03%(e) Portfolio turnover rate (excluding short-term securities) 93% 36% ------------------------------------------------------------------------------------ Total return(f) 7.73% 5.17%(g) ------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.03% and 1.55% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 81p RIVERSOURCE VP - INTERNATIONAL OPPORTUNITY FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 8.23 $ 7.19 $7.00 $ 8.39 $ 16.98 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .11 .08 .08 .07 .03 Net gains (losses) (both realized and unrealized) 1.80 1.05 .16 (1.35) (5.57) ----------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.91 1.13 .24 (1.28) (5.54) ----------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.12) (.09) (.05) (.07) (.03) Distributions from realized gains -- -- -- (.01) (2.97) Excess distributions from net investment income -- -- -- (.03) (.05) ----------------------------------------------------------------------------------------------------------------------- Total distributions (.12) (.09) (.05) (.11) (3.05) ----------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.02 $ 8.23 $7.19 $ 7.00 $ 8.39 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1,184 $ 974 $ 738 $ 873 $ 1,310 Ratio of expenses to average daily net assets(b) 1.04% .98% 1.06% 1.07% 1.04% Ratio of net investment income (loss) to average daily net assets 1.19% .99% 1.19% .83% .31% Portfolio turnover rate (excluding short-term securities) 90% 142% 102% 140% 278% ----------------------------------------------------------------------------------------------------------------------- Total return(c) 23.29% 15.77% 3.48% (15.38%) (36.90%) -----------------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - LARGE CAP EQUITY FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $19.32 $18.04 $16.48 $ 20.87 $ 37.21 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .24 .14 .10 .10 .05 Net gains (losses) (both realized and unrealized) 2.15 1.28 1.56 (2.83) (12.96) ------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.39 1.42 1.66 (2.73) (12.91) ------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.23) (.14) (.10) (.09) (.04) Distributions from realized gains -- -- -- (1.57) (3.39) ------------------------------------------------------------------------------------------------------------------------ Total distributions (.23) (.14) (.10) (1.66) (3.43) ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $21.48 $19.32 $18.04 $ 16.48 $ 20.87 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2,510 $2,535 $1,982 $ 2,227 $ 3,270 Ratio of expenses to average daily net assets(b) .80% .85% .85% .80% .78% Ratio of net investment income (loss) to average daily net assets 1.13% .72% .62% .52% .13% Portfolio turnover rate (excluding short-term securities) 132% 114% 115% 146% 62% ------------------------------------------------------------------------------------------------------------------------ Total return(c) 12.42% 7.87% 10.16% (14.08%) (36.48%) ------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 82p RIVERSOURCE VP - LARGE CAP VALUE FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004(b) Net asset value, beginning of period $10.00 $ 9.99 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14 .05 Net gains (losses) (both realized and unrealized) 1.06 .02 ------------------------------------------------------------------------------------ Total from investment operations 1.20 .07 ------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.14) (.06) Distributions from realized gains (.07) -- ------------------------------------------------------------------------------------ Total distributions (.21) (.06) ------------------------------------------------------------------------------------ Net asset value, end of period $10.99 $10.00 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 15 $ 7 Ratio of expenses to average daily net assets(c),(d) 1.05% 1.05%(e) Ratio of net investment income (loss) to average daily net assets 1.37% 1.03%(e) Portfolio turnover rate (excluding short-term securities) 52% 24% ------------------------------------------------------------------------------------ Total return(f) 12.04% .69%(g) ------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 2.55% and 2.85% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VP - MID CAP GROWTH FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001(b) Net asset value, beginning of period $10.11 $10.09 $ 8.54 $ 9.57 $10.27 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.05) (.05) (.04) (.01) Net gains (losses) (both realized and unrealized) 2.36 .07 1.60 (.99) (.69) -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.32 .02 1.55 (1.03) (.70) -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $12.43 $10.11 $10.09 $ 8.54 $ 9.57 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 255 $ 225 $ 170 $ 72 $ 14 Ratio of expenses to average daily net assets(c) .82% .85% 1.06% 1.10%(d) 1.10%(d),(e) Ratio of net investment income (loss) to average daily net assets (.32%) (.49%) (.71%) (.76%) (.45%)(e) Portfolio turnover rate (excluding short-term securities) 34% 25% 19% 20% 19% -------------------------------------------------------------------------------------------------------------------------- Total return(f) 23.03% .13% 18.20% (10.77%) (6.82%)(g) --------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 1, 2001 (date the Fund became available) to Aug. 31, 2001. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.39% and 2.99% for the periods ended Aug. 31, 2002 and 2001, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 83p RIVERSOURCE VP - MID CAP VALUE FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005(b) Net asset value, beginning of period $10.15 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 Net gains (losses) (both realized and unrealized) 1.28 -------------------------------------------------------------------------- Total from investment operations 1.29 -------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) Net asset value, end of period $11.42 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $7 Ratio of expenses to average daily net assets(c),(d) 1.08%(e) Ratio of net investment income (loss) to average daily net assets .62%(e) Portfolio turnover rate (excluding short-term securities) 7% -------------------------------------------------------------------------- Total return(f) 12.70%(g) --------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 2.97% for the period ended Aug. 31, 2005. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VP - NEW DIMENSIONS FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $14.52 $14.29 $13.06 $ 15.49 $ 25.03 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .15 .10 .08 .07 .02 Net gains (losses) (both realized and unrealized) .91 .23 1.23 (2.42) (8.01) ------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.06 .33 1.31 (2.35) (7.99) ------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.15) (.10) (.08) (.07) (.02) Distributions from realized gains -- -- -- (.01) (1.53) ------------------------------------------------------------------------------------------------------------------------ Total distributions (.15) (.10) (.08) (.08) (1.55) ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $15.43 $14.52 $14.29 $ 13.06 $ 15.49 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2,200 $2,932 $3,115 $ 3,045 $ 3,892 Ratio of expenses to average daily net assets(b) .75% .72% .82% .79% .79% Ratio of net investment income (loss) to average daily net assets 1.01% .66% .64% .47% .12% Portfolio turnover rate (excluding short-term securities) 89% 55% 23% 27% 27% ------------------------------------------------------------------------------------------------------------------------ Total return(c) 7.28% 2.29% 10.11% (15.17%) (33.05%) ------------------------------------------------------------------------------------------------------------------------
(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 credit on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 84p RIVERSOURCE VP - S&P 500 INDEX FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 7.54 $ 6.88 $ 6.24 $ 7.71 $ 10.38 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .09 .08 .07 .06 Net gains (losses) (both realized and unrealized) .76 .66 .64 (1.47) (2.65) ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations .89 .75 .72 (1.40) (2.59) ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) (.09) (.08) (.07) (.06) Distributions from realized gains -- -- -- -- (.02) ----------------------------------------------------------------------------------------------------------------------------- Total distributions (.13) (.09) (.08) (.07) (.08) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 8.30 $ 7.54 $ 6.88 $ 6.24 $ 7.71 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 367 $ 283 $ 171 $ 99 $ 56 Ratio of expenses to average daily net assets(b),(c) .50% .49% .50% .50% .49% Ratio of net investment income (loss) to average daily net assets 1.65% 1.21% 1.31% 1.01% .85% Portfolio turnover rate (excluding short-term securities) 5% --% 5% 72% 137% ----------------------------------------------------------------------------------------------------------------------------- Total return(d) 11.98% 10.84% 11.51% (18.29%) (24.96%) -----------------------------------------------------------------------------------------------------------------------------
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 0.56%, 0.57%, 0.64%, 0.82% and 1.31% for the years ended Aug. 31, 2005, 2004, 2003, 2002 and 2001, respectively. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - SELECT VALUE FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004(b) Net asset value, beginning of period $ 9.95 $ 9.98 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .02 Net gains (losses) (both realized and unrealized) 1.55 (.03) ----------------------------------------------------------------------------------------- Total from investment operations 1.60 (.01) ----------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.02) Distributions from realized gains (.05) -- ----------------------------------------------------------------------------------------- Total distributions (.10) (.02) ----------------------------------------------------------------------------------------- Net asset value, end of period $ 11.45 $ 9.95 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 23 $ 9 Ratio of expenses to average daily net assets(c),(d) 1.15% 1.15%(e) Ratio of net investment income (loss) to average daily net assets .45% .50%(e) Portfolio turnover rate (excluding short-term securities) 31% 13% ----------------------------------------------------------------------------------------- Total return(f) 16.18% (.11%)(g) -----------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.17% and 1.97% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 85p RIVERSOURCE VP - SHORT DURATION U.S. GOVERNMENT FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 10.34 $ 10.46 $ 10.55 $ 10.34 $ 9.95 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .27 .25 .27 .34 .52 Net gains (losses) (both realized and unrealized) (.13) (.07) (.05) .23 .39 ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations .14 .18 .22 .57 .91 ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.27) (.25) (.27) (.34) (.52) Distributions from realized gains -- (.05) (.04) (.02) -- ----------------------------------------------------------------------------------------------------------------------------- Total distributions (.27) (.30) (.31) (.36) (.52) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.21 $ 10.34 $ 10.46 $ 10.55 $ 10.34 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 484 $ 506 $ 479 $ 276 $ 106 Ratio of expenses to average daily net assets(b) .83% .82% .82% .83% .84%(c) Ratio of net investment income (loss) to average daily net assets 2.67% 2.36% 2.47% 3.24% 4.94% Portfolio turnover rate (excluding short-term securities) 171% 135% 179% 292% 95% ----------------------------------------------------------------------------------------------------------------------------- Total return(d) 1.43% 1.70% 2.06% 5.42% 9.29% -----------------------------------------------------------------------------------------------------------------------------
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.87% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 12.64 $ 11.25 $ 8.79 $ 10.13 $ 12.58 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.05) (.02) (.02) (.01) Net gains (losses) (both realized and unrealized) 3.14 1.44 2.48 (1.32) (2.09) ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 3.10 1.39 2.46 (1.34) (2.10) ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Distributions from realized gains (.63) -- -- -- (.35) Net asset value, end of period $ 15.11 $ 12.64 $ 11.25 $ 8.79 $ 10.13 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 235 $ 184 $ 102 $ 59 $ 49 Ratio of expenses to average daily net assets(b) 1.07% 1.10% 1.19% 1.11% 1.16%(c) Ratio of net investment income (loss) to average daily net assets (.28%) (.42%) (.20%) (.21%) (.08%) Portfolio turnover rate (excluding short-term securities) 112% 104% 124% 156% 152% ----------------------------------------------------------------------------------------------------------------------------- Total return(d) 24.88% 12.40% 27.96% (13.28%) (16.68%) -----------------------------------------------------------------------------------------------------------------------------
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.26% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 86p RIVERSOURCE VP - SMALL CAP VALUE FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001(b) Net asset value, beginning of period $ 13.10 $ 11.39 $ 9.52 $ 9.84 $ 10.01 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 (.02) (.03) (.03) (.01) Net gains (losses) (both realized and unrealized) 2.53 1.92 1.95 (.29) (.16) --------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.55 1.90 1.92 (.32) (.17) --------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- (.01) -- -- Distributions from realized gains (1.18) (.19) (.04) -- -- ----------------------------------------------------------------------------------------------------------------------------- Total distributions (1.19) (.19) (.05) -- -- ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 14.46 $ 13.10 $ 11.39 $ 9.52 $ 9.84 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 412 $ 229 $ 134 $ 63 $ 5 Ratio of expenses to average daily net assets(c) 1.28% 1.27% 1.55% 1.48% 1.50%(d),(e) Ratio of net investment income (loss) to average daily net assets .12% (.20%) (.43%) (.67%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 65% 84% 87% 12% --% --------------------------------------------------------------------------------------------------------------------------- Total return(f) 20.02% 16.78% 20.24% (3.19%) (1.77%)(g) ---------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 14, 2001 (date the Fund became available) to Aug. 31, 2001. (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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 6.86% for the period ended Aug. 31, 2001. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. RIVERSOURCE VP - STRATEGY AGGRESSIVE FUND PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED AUG. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 6.80 $ 6.99 $ 5.72 $ 8.29 $ 27.82 INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.03) (.03) (.04) .01 Net gains (losses) (both realized and unrealized) 1.51 (.16) 1.30 (2.53) (13.01) ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.47 (.19) 1.27 (2.57) (13.00) ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- (.02) Distributions from realized gains -- -- -- -- (6.51) ----------------------------------------------------------------------------------------------------------------------------- Total distributions -- -- -- -- (6.53) ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 8.27 $ 6.80 $ 6.99 $ 5.72 $ 8.29 RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 687 $ 783 $ 969 $ 991 $ 1,815 Ratio of expenses to average daily net assets(b) .78% .72% .83% .81% .78% Ratio of net investment income (loss) to average daily net assets (.33%) (.43%) (.54%) (.50%) .10% Portfolio turnover rate (excluding short-term securities) 28% 53% 27% 180% 166% ----------------------------------------------------------------------------------------------------------------------------- Total return(c) 21.58% (2.67%) 22.16% (30.97%) (53.61%) -----------------------------------------------------------------------------------------------------------------------------
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- PROSPECTUS 87p Additional information about the Funds and their investments is available in the Fund's SAI, annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Funds during their most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Funds or to make a shareholder inquiry, contact your financial advisor, investment professional or RiverSource Service Corporation. RiverSource Variable Portfolio Funds 70100 Ameriprise Financial Center Minneapolis, MN 55474 (800) 862-7919 TTY: (800) 846-4852 You may review and copy information about the Fund, including the SAI, at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-942-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Section of the Commission, Washington, D.C. 20549-0102. Investment Company Act File #s: RiverSource Variable Portfolio - Balanced Fund 811-4252 RiverSource Variable Portfolio - Cash Management Fund 811-3190 RiverSource Variable Portfolio - Core Bond Fund 811-3219 RiverSource Variable Portfolio - Diversified Bond Fund 811-3219 RiverSource Variable Portfolio - Diversified Equity Income Fund 811-4252 RiverSource Variable Portfolio - Emerging Markets Fund 811-3218 RiverSource Variable Portfolio - Global Bond Fund 811-3219 RiverSource Variable Portfolio - Global Inflation Protected Securities Fund 811-3219 RiverSource Variable Portfolio - Growth Fund 811-3218 RiverSource Variable Portfolio - High Yield Bond Fund 811-3219 RiverSource Variable Portfolio - Income Opportunities Fund 811-3219 RiverSource Variable Portfolio - International Opportunity Fund 811-3218 RiverSource Variable Portfolio - Large Cap Equity Fund 811-3218 RiverSource Variable Portfolio - Large Cap Value Fund 811-3218 RiverSource Variable Portfolio - Mid Cap Growth Fund 811-3218 RiverSource Variable Portfolio - Mid Cap Value Fund 811-3218 RiverSource Variable Portfolio - New Dimensions Fund 811-3218 RiverSource Variable Portfolio - S&P 500 Index Fund 811-3218 RiverSource Variable Portfolio - Select Value Fund 811-10383 RiverSource Variable Portfolio - Short Duration U.S. Government Fund 811-3219 RiverSource Variable Portfolio - Small Cap Advantage Fund 811-3218 RiverSource Variable Portfolio - Small Cap Value Fund 811-10383 RiverSource Variable Portfolio - Strategy Aggressive Fund 811-3218
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 70100 Ameriprise Financial Center Minneapolis, MN 55474 S-6466-99 Y (10/05) STATEMENT OF ADDITIONAL INFORMATION FOR AXP(R) VARIABLE PORTFOLIO - INCOME SERIES, INC. RIVERSOURCE(SM) VARIABLE PORTFOLIO - CORE BOND FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - DIVERSIFIED BOND FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - GLOBAL BOND FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - GLOBAL INFLATION PROTECTED SECURITIES FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - HIGH YIELD BOND FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - INCOME OPPORTUNITIES FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - SHORT DURATION U.S. GOVERNMENT FUND AXP(R) VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. RIVERSOURCE(SM) VARIABLE PORTFOLIO - EMERGING MARKETS FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - GROWTH FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - INTERNATIONAL OPPORTUNITY FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - LARGE CAP EQUITY FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - LARGE CAP VALUE FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - MID CAP GROWTH FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - MID CAP VALUE FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - NEW DIMENSIONS FUND(R) RIVERSOURCE(SM) VARIABLE PORTFOLIO - S&P 500 INDEX FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - SMALL CAP ADVANTAGE FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - STRATEGY AGGRESSIVE FUND AXP(R) VARIABLE PORTFOLIO - MANAGED SERIES, INC. RIVERSOURCE(SM) VARIABLE PORTFOLIO - BALANCED FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - DIVERSIFIED EQUITY INCOME FUND AXP(R) VARIABLE PORTFOLIO - MONEY MARKET SERIES, INC RIVERSOURCE(SM) VARIABLE PORTFOLIO - CASH MANAGEMENT FUND AXP(R) VARIABLE PORTFOLIO - PARTNERS SERIES, INC. RIVERSOURCE(SM) VARIABLE PORTFOLIO - SELECT VALUE FUND RIVERSOURCE(SM) VARIABLE PORTFOLIO - SMALL CAP VALUE FUND (singularly and collectively, where the context requires, referred to as the Fund) As of Oct. 1, 2005, the RiverSource brand replaced "American Express" and "AXP" in the name of the American Express(R) Variable Portfolio Funds. In addition to the brand name change, the following funds changed their names: AXP Variable Portfolio - Equity Select Fund changed its name to RiverSource Variable Portfolio - Mid Cap Growth Fund, AXP Variable Portfolio - Managed Fund changed its name to RiverSource Variable Portfolio - Balanced Fund, AXP Variable Portfolio - Partners Select Value Fund changed its name to RiverSource Variable Portfolio - Select Value Fund, AXP Variable Portfolio - Partners Small Cap Value Fund changed its name to RiverSource Variable Portfolio - Small Cap Value Fund, AXP Variable Portfolio - Threadneedle Emerging Markets Fund changed its name to RiverSource Variable Portfolio - Emerging Markets Fund and AXP Variable Portfolio - Threadneedle International Fund changed its name to RiverSource Variable Portfolio - International Opportunity Fund. OCT. 28, 2005 This Statement of Additional Information (SAI) is not a prospectus. It should be read together with the prospectus and the financial statements contained in the most recent Annual Report to shareholders (Annual Report) that may be obtained, without charge, from your financial advisor or by writing to Ameriprise Financial Services (formerly American Express Financial Advisors), 70100 Ameriprise Financial Center, Minneapolis, MN 55474 or by calling (800) 862-7919. The Independent Registered Public Accounting Firm's Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities, contained in the Annual Report are incorporated in this SAI by reference. No other portion of the Annual Report, however, is incorporated by reference. The prospectus for the Fund, dated the same date as this SAI, also is incorporated in this SAI by reference. Each fund is governed by a Board of Directors/Trustees (Board) that meets regularly to review a wide variety of matters affecting the funds. Detailed information about fund governance, the funds' investment manager, RiverSource Investments, LLC (the investment manager or RiverSource Investments), a wholly owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), and other aspects of fund management can be found by referencing the Table of Contents below. TABLE OF CONTENTS Fundamental and Nonfundamental Investment Policies p. 3 Investment Strategies and Types of Investments p. 9 Information Regarding Risks and Investment Strategies p. 13 Securities Transactions p. 31 Brokerage Commissions Paid to Brokers Affiliated with the Investment Manager p. 38 Valuing Fund Shares p. 39 Portfolio Holdings Disclosure p. 40 Proxy Voting p. 42 Selling Shares p. 43 Capital Loss Carryover p. 43 Taxes p. 43 Agreements p. 44 Organizational Information p. 67 Board Members and Officers p. 69 Control Persons and Principal Holders of Securities p. 74 Independent Registered Public Accounting Firm p. 74 Appendix A: Description of Money Market Securities p. 75 Appendix B: Description of Ratings p. 78 Appendix C: Additional Information About the Index p. 82 CORPORATE REORGANIZATION On Sept. 30, 2005, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) was spun off to shareholders of its parent corporation, American Express Company (American Express) and is now a separate company trading under the ticker symbol AMP. Ameriprise Financial provides administrative services to the Funds and is the parent company of the Funds' investment manager, RiverSource Investments, LLC and the Funds' distributor, IDS Life Insurance Company. Ameriprise Financial and its subsidiaries are no longer affiliated with American Express. The Board of Directors has approved in principle the merger of RiverSource Variable Portfolio - New Dimensions Fund into RiverSource Variable Portfolio - Large Cap Equity Fund and the merger of RiverSource Variable Portfolio - Strategy Aggressive Fund into RiverSource Variable Portfolio - Mid Cap Growth Fund. The mergers are subject to approval by shareholders of RiverSource Variable Portfolio - New Dimensions Fund and RiverSource Variable Portfolio - Strategy Aggressive Fund. It is currently anticipated that proxy materials regarding the mergers will be distributed to shareholders in December 2005, and that a meeting for shareholders to consider the mergers will be held in February 2006. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 2 Throughout this SAI, the funds are referred to as follows: RiverSource Variable Portfolio - Balanced Fund (Balanced) RiverSource Variable Portfolio - Cash Management Fund (Cash Management) RiverSource Variable Portfolio - Core Bond Fund (Core Bond) RiverSource Variable Portfolio - Diversified Bond Fund (Diversified Bond) RiverSource Variable Portfolio - Diversified Equity Income Fund (Diversified Equity Income) RiverSource Variable Portfolio - Emerging Markets Fund (Emerging Markets) RiverSource Variable Portfolio - Global Bond Fund (Global Bond) RiverSource Variable Portfolio - Global Inflation Protected Securities Fund (Global Inflation Protected Securities) RiverSource Variable Portfolio - Growth Fund (Growth) RiverSource Variable Portfolio - High Yield Bond Fund (High Yield Bond) RiverSource Variable Portfolio - Income Opportunities Fund (Income Opportunities) RiverSource Variable Portfolio - International Opportunity Fund (International Opportunity) RiverSource Variable Portfolio - Large Cap Equity Fund (Large Cap Equity) RiverSource Variable Portfolio - Large Cap Value Fund (Large Cap Value) RiverSource Variable Portfolio - Mid Cap Growth Fund (Mid Cap Growth) RiverSource Variable Portfolio - Mid Cap Value Fund (Mid Cap Value) RiverSource Variable Portfolio - New Dimensions Fund (New Dimensions) RiverSource Variable Portfolio - S&P 500 Index Fund (S&P 500 Index) RiverSource Variable Portfolio - Select Value Fund (Select Value) RiverSource Variable Portfolio - Short Duration U.S. Government Fund (Short Duration U.S. Government) RiverSource Variable Portfolio - Small Cap Advantage Fund (Small Cap Advantage) RiverSource Variable Portfolio - Small Cap Value Fund (Small Cap Value) RiverSource Variable Portfolio - Strategy Aggressive Fund (Strategy Aggressive) FUNDAMENTAL AND NONFUNDAMENTAL INVESTMENT POLICIES Fundamental investment policies adopted by a fund cannot be changed without the approval of a majority of the outstanding voting securities of the fund as defined in the Investment Company Act of 1940, as amended (the 1940 Act). Nonfundamental investment policies may be changed by the Board at any time. Notwithstanding any of a fund's other investment policies, each fund may invest its assets in an open-end management investment company having substantially the same investment objectives, policies, and restrictions as the fund for the purpose of having those assets managed as part of a combined pool. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 3 FUNDAMENTAL POLICIES Fundamental policies are policies that can be changed only with shareholder approval. The chart below shows fundamental policies that are in addition to any fundamental policy described in the prospectus. The chart indicates whether or not the fund has a policy on a particular topic. The specific policy is stated in the paragraphs that follow the table. TABLE 1. FUNDAMENTAL POLICIES Unless holders of a majority of the outstanding voting securities agree to make the change, the fund will not:
A B C D E F G H I J K L M BUY INVEST MORE MORE CONCEN- BUY BUY LEND ISSUE THAN THAN TRATE BUY ON BUY ACT AS MAKE OR SELL OR SELL FUND SENIOR 10% 5% IN ANY MARGIN STOCKS, UNDER- CASH REAL COM- SECURI- SECURI- OF AN IN AN BORROW ONE LOAN OR SELL BONDS, WRITER LOANS ESTATE MODITIES TIES TIES ISSUER ISSUER MONEY INDUSTRY ASSETS SHORT(I) ETC. ----------------------------------------------------------------------------------------------------------------------------- Balanced 1 1 1 1 1 1 2 2 4 1 1 Cash Management 1 2 2 1 1 3 3 2 1 1 Core Bond 1 1 1 1 1 1 1 2 2 1 Diversified Bond 1 1 1 1 1 2 2 3 1 Diversified Equity Income 1 1 1 1 1 1 2 2 4 1 Emerging Markets 1 1 1 1 1 1 2 2 4 1 1 Global Bond 1 1 1 1 1 1 2 4 1 1 Global Inflation Protected Securities 1 1 1 1 1 1 2 1 Growth 1 1 1 1 1 1 2 2 4 1 1 High Yield Bond 1 1 1 1 1 1 2 2 4 1 Income Opportunities 1 1 1 1 1 1 1 2 2 1 International Opportunity 1 1 1 1 1 1 2 2 3 1 1 Large Cap Equity 1 1 1 1 1 2 2 3 1 Large Cap Value 1 1 1 2 1 1 1 1 2 1 Mid Cap Growth 1 1 1 1 1 2 2 4 1 Mid Cap Value 1 1 1 1 1 1 1 2 2 1 New Dimensions 1 1 1 1 1 2 2 4 1 1 S&P 500 Index 1 1 1 1 1 1 4 1 1 Select Value 1 1 1 2 1 1 2 1 1 1 1 Short Duration U.S. Government 1 1 1 1 1 1 2 2 4 1 1 Small Cap Advantage 1 1 1 1 1 1 2 2 4 1 Small Cap Value 1 1 1 2 1 1 1 1 Strategy Aggressive 1 1 1 1 1 2 2 3 1 1
(i) Nonfundamental policy for all funds except Cash Management. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 4 A. ACT AS UNDERWRITER 1 - Act as an underwriter (sell securities for others). However, under the securities laws, the fund may be deemed to be an underwriter when it purchases securities directly from the issuer and later resells them. It may be considered an underwriter under securities laws when it sells restricted securities. B. MAKE CASH LOANS 1 - Make cash loans if the total commitment amount exceeds 5% of the fund's total assets. 2 - Make cash loans. However, the Fund does make short-term investments which it may have an agreement with the seller to reacquire. C. BUY OR SELL REAL ESTATE 1 - Buy or sell real estate, unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business or real estate investment trusts. For purposes of this policy, real estate includes real estate limited partnerships. 2 - Buy or sell real estate, commodities or commodity contracts. For purposes of this policy, real estate includes real estate limited partnerships. D. BUY OR SELL PHYSICAL COMMODITIES 1 - Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options and futures contracts or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. 2 - Buy or sell physical commodities unless acquired as a result of ownership of securities or other instruments, except this shall not prevent the fund from buying or selling options, futures contracts and foreign currency or from investing in securities or other instruments backed by, or whose value is derived from, physical commodities. E. LEND FUND SECURITIES 1 - Lend fund securities in excess of 30% of its net assets. F. ISSUE SENIOR SECURITIES 1 - Issue senior securities, except as permitted under the 1940 Act. G. BUY MORE THAN 10% OF AN ISSUER 1 - Purchase more than 10% of the outstanding voting securities of an issuer, except that up to 25% of the fund's assets may be invested without regard to this 10% limitation. 2 - Purchase more than 10% of the outstanding voting securities of an issuer. H. INVEST MORE THAN 5% IN AN ISSUER 1 - Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, or other registered investment companies and except up to 25% of the fund's total assets may be invested without regard to this 5% limitation. 2 - Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities, and except up to 25% of the fund's total assets may be invested without regard to this 5% limitation. 3 - Invest more than 5% of its total assets in securities of any one company, government, or political subdivision thereof, except the limitation will not apply to investments in securities issued by the U.S. government, its agencies, or instrumentalities. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 5 I. BORROW MONEY 1 - Borrow money in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. Under current Board policy, the fund has no current intention to borrow to a material extent. 2 - Borrow money except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The fund has no current intention to borrow to a material extent. 3 - Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The fund will not purchase additional securities at any time borrowing for temporary purposes exceeds 5%. The fund has no current intention to borrow to a material extent. 4 - Borrow money or property, except as a temporary measure for extraordinary or emergency purposes, in an amount not exceeding one-third of the market value of its total assets (including borrowings) less liabilities (other than borrowings) immediately after the borrowing. The fund has no current intention to borrow to a material extent. J. CONCENTRATE 1 - Concentrate in any one industry. According to the present interpretation by the Securities and Exchange Commission (SEC), this means that up to 25% of the fund's total assets, based on current market value at time of purchase, can be invested in any one industry. 2 - Intentionally invest more than 25% of the fund's assets taken at market value in any particular industry, except with respect to investing in U.S. government or agency securities and bank obligations. Investments are varied according to what is judged advantageous under different economic conditions. K. LOAN ASSETS 1 - Make a loan of any part of its assets to the investment manager, to the board members and officers of the investment manager or to its own board members and officers. L. BUY ON MARGIN OR SELL SHORT 1 - Buy on margin or sell short or deal in options to buy or sell securities. M. BUY STOCKS, BONDS, ETC. 1 - Purchase common stocks, preferred stocks, warrants, other equity securities, corporate bonds or debentures, state bonds, municipal bonds, or industrial revenue bonds. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 6 NONFUNDAMENTAL POLICIES Nonfundamental policies are policies that can be changed by the Board without shareholder approval. The chart below shows nonfundamental policies that are in addition to those described in the prospectus. The chart indicates whether or not the fund has a policy on a particular topic. The specific policy is stated in the paragraphs that follow the table. TABLE 2. NONFUNDAMENTAL POLICIES The following are guidelines that may be changed by the Board at any time:
A B C D E F G H I J INVESTING DEPOSIT ILLIQUID INVEST- MARGIN, MONEY TO FOREIGN DEBT EQUITY INVEST ON SECURITIES; MENT SELLING MARKET CONTROL OR SECURI- SECURI- SECURI- WHILE FUTURES BULLION COMPANIES SHORT SECURITIES MANAGE TIES(1) TIES TIES BORROWING ----------------------------------------------------------------------------------------------------------------------------------- Balanced 1 1 1 2 1 1 25% 3 Cash Management 2 1 See 25% 9 Table 1 Core Bond 1 1 2 4 1 1 15% Diversified Bond 1 1 1 3 1 1 Diversified Equity Income 1 1 1 2 1 1 25% 7 Emerging Markets 1 1 1 1 1 1 1,5 Global Bond 1 1 1 2 1 1 8 Global Inflation Protected Securities 1 1 1 4 15% Growth 1 1 1 4 1 1 25% 3 High Yield Bond 1 1 1 3 1 1 25% 1 Income Opportunities 1 1 1 4 1 1 25% International Opportunity 1 1 3 1 1 1 Large Cap Equity 1 1 1 4 1 1 25% Large Cap Value 1 1 1 1 1 1 20% 5 Mid Cap Growth 1 1 1 1 1 1 15% 4 Mid Cap Value 1 1 1 2 1 1 25% 6 New Dimensions 1 1 1 4 1 1 30% S&P 500 Index 1 1 6 Select Value 1 1 2 1 1 20% 2 1 Short Duration U.S. Government 1 1 1 5 1 1 Small Cap Advantage 1 1 1 1 1 Small Cap Value 1 1 1 1 1 1 Strategy Aggressive 1 1 1 6 1 1 25% 2
* Normally, investments in U.S. issuers generally will constitute less than 20% of the Fund's total assets. A. DEPOSIT ON FUTURES/PREMIUMS ON OPTIONS 1 - No more than 5% of the fund's net assets can be used at any one time for good faith deposits on futures and premiums for options on futures that do not offset existing investment positions. B. ILLIQUID SECURITIES 1 - No more than 10% of the fund's net assets will be held in securities and other instruments that are illiquid. 2 - The fund will not invest more than 10% of its net assets in securities that are illiquid whether or not registration or the filing of a notification under the Securities Act of 1933 or the taking of similar action under other securities laws relating to the sale of securities is required. A risk of any such investment is that it might not be able to be easily liquidated. For the purpose of this policy, repurchase agreements with maturities greater than seven days and non-negotiable fixed time deposits will be treated as illiquid securities. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 7 C. INVESTMENT COMPANIES 1 - The fund will not invest more than 10% of its total assets in the securities of investment companies. 2 - The fund will not invest more than 10% of its total assets in the securities of investment companies, unless a higher amount is permitted under an SEC exemptive order. 3 - The fund will not invest more than 10% of its total assets in securities of investment companies except by purchase in the open market where the dealer's or sponsor's profit is the regular commission. D. MARGIN/SELLING SHORT 1 - The fund will not buy on margin or sell securities short, except the fund may make margin payments in connection with transactions in derivative instruments. 2 - The fund will not buy on margin or sell securities short, except the fund may make margin payments in connection with transactions in futures contracts. 3 - The fund will not buy on margin or sell short, except the fund may enter into interest rate futures contracts. 4 - The fund will not buy on margin or sell securities short, except the fund may make margin payments in connection with transactions in stock index futures contracts. 5 - The fund will not buy on margin, except the fund may make margin payments in connection with interest rate futures contracts. 6 - The fund will not buy on margin, except the fund may make margin payments in connection with transactions in futures contracts. E. MONEY MARKET SECURITIES 1 - Ordinarily, less than 25% of the fund's total assets are invested in money market instruments. F. INVESTING TO CONTROL OR MANAGE 1 - The fund will not invest in a company to control or manage it. G. FOREIGN SECURITIES 1 - The fund may invest its total assets, up to the amount shown, in foreign investments. H. DEBT SECURITIES 1 - The fund may invest up to 20% of its net assets in bonds. 2 - The fund normally will purchase only investment grade convertible debt securities with a rating of, or equivalent to, at least BBB by S&P or, in the case of unrated securities, judged by the subadviser to be of comparable quality. The fund may invest in more speculative convertible debt securities, provided that such securities have a rating of, or equivalent to, at least an S&P rating of B and provided also that the total investment in such securities remains below 15% of the fund's assets. 3 - The fund may not purchase debt securities rated below investment grade. 4 - The fund only invests in bonds given the four highest ratings by Moody's or by S&P or in bonds of comparable quality in the judgment of the investment manager. 5 - The fund may invest up to 10% of its net assets in bonds rated below investment grade 6 - No more than 10% of the fund's net assets may be invested in bonds below investment grade unless the bonds are convertible securities. 7 - No more than 20% of the fund's net assets may be invested in bonds below investment grade unless the bonds are convertible securities. 8 - The fund may not invest in debt securities rated lower than B (or in unrated bonds of comparable quality). 9 - The fund may invest in commercial paper rated in the highest rating category by at least two nationally recognized statistical rating organizations (or by one, if only one rating is assigned) and in unrated paper determined by the Board to be of comparable quality. The fund also may invest up to 5% of its total assets in commercial paper receiving the second highest rating or in unrated paper determined to be of comparable quality. I. EQUITY SECURITIES 1 - The fund may invest up to 10% of its total assets in common stocks, preferred stocks that do not pay dividends and warrants to purchase common stocks. 2 - Under normal market conditions, at least 65% of the fund's total assets are invested in equity securities. 3 - Under normal market conditions, the Fund invests at least 50% of its total assets in common stock. J. INVEST WHILE BORROWING 1 - The fund will not make additional investments while any borrowing remains outstanding. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 8 INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS This table shows various investment strategies and investments that many funds are allowed to engage in and purchase. It is intended to show the breadth of investments that the investment manager may make on behalf of the Fund. For a description of principal risks, please see the prospectus. Notwithstanding the Fund's ability to utilize these strategies and techniques, the investment manager is not obligated to use them at any particular time. For example, even though the investment manager is authorized to adopt temporary defensive positions and is authorized to hedge against certain types of risk, these practices are left to the investment manager's sole discretion. INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
ALLOWABLE FOR THE FUND? ------------------------------------------------------------------ DIVERSIFIED CASH CORE DIVERSIFIED EQUITY EMERGING BALANCED MANAGEMENT BOND BOND INCOME MARKETS Agency and Government Securities yes yes yes yes yes yes Borrowing yes yes yes yes yes yes Cash/Money Market Instruments yes yes yes yes yes yes Collateralized Bond Obligations yes no yes yes yes yes Commercial Paper yes yes yes yes yes yes Common Stock yes no yes yes yes yes Convertible Securities yes no yes yes yes yes Corporate Bonds yes no yes yes yes yes Debt Obligations yes yes yes yes yes yes Depositary Receipts yes no yes yes yes yes Derivative Instruments (including Options and Futures) yes no yes yes yes yes Exchange-Traded Funds yes no yes yes yes yes Foreign Currency Transactions yes no yes yes yes yes Foreign Securities yes yes yes yes yes yes Funding Agreements yes yes yes yes yes yes High-Yield (High-Risk) Debt Securities (Junk Bonds) yes no* no* yes yes yes Illiquid and Restricted Securities yes yes yes yes yes yes Indexed Securities yes no yes yes yes yes Inflation Protected Securities yes no yes yes yes yes Inverse Floaters yes no yes yes no no Investment Companies yes yes yes yes yes yes Lending of Portfolio Securities yes yes yes yes yes yes Loan Participations yes no yes yes yes yes Mortgage- and Asset-Backed Securities yes yes yes yes yes yes Mortgage Dollar Rolls yes no yes yes no no Municipal Obligations yes no yes yes yes yes Preferred Stock yes no yes yes yes yes Real Estate Investment Trusts yes no yes yes yes yes Repurchase Agreements yes yes yes yes yes yes Reverse Repurchase Agreements yes yes yes yes yes yes Short Sales no no no no no no Sovereign Debt yes yes yes yes yes yes Structured Investments yes no yes yes yes yes Swap Agreements yes no yes yes no no Variable- or Floating-Rate Securities yes yes yes yes yes yes Warrants yes no yes yes yes yes When-Issued Securities and Forward Commitments yes no yes yes yes yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes no yes yes yes yes
* The Fund may hold bonds that are downgraded to junk bond status, if the bonds were rated investment grade at the time of purchase. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 9 INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
ALLOWABLE FOR THE FUND? ---------------------------------------------------------------------------- GLOBAL INFLATION GLOBAL PROTECTED HIGH YIELD INCOME INTERNATIONAL BOND SECURITIES GROWTH BOND OPPORTUNITIES OPPORTUNITY Agency and Government Securities yes yes yes yes yes yes Borrowing yes yes yes yes yes yes Cash/Money Market Instruments yes yes yes yes yes yes Collateralized Bond Obligations yes yes yes yes yes yes Commercial Paper yes yes yes yes yes yes Common Stock yes yes yes yes yes yes Convertible Securities yes yes yes yes yes yes Corporate Bonds yes yes yes yes yes yes Debt Obligations yes yes yes yes yes yes Depositary Receipts yes yes yes yes yes yes Derivative Instruments (including Options and Futures) yes yes yes yes yes yes Exchange-Traded Funds yes yes yes yes yes yes Foreign Currency Transactions yes yes yes yes yes yes Foreign Securities yes yes yes yes yes yes Funding Agreements yes yes yes yes yes yes High-Yield (High-Risk) Debt Securities (Junk Bonds) yes no* no* yes yes no* Illiquid and Restricted Securities yes yes yes yes yes yes Indexed Securities yes yes yes yes yes yes Inflation Protected Securities yes yes yes yes yes yes Inverse Floaters yes yes no yes yes no Investment Companies yes yes yes yes yes yes Lending of Portfolio Securities yes yes yes yes yes yes Loan Participations yes yes yes yes yes yes Mortgage- and Asset-Backed Securities yes yes yes yes yes yes Mortgage Dollar Rolls yes yes no yes yes no Municipal Obligations yes yes yes yes yes yes Preferred Stock yes yes yes yes yes yes Real Estate Investment Trusts yes yes yes yes yes yes Repurchase Agreements yes yes yes yes yes yes Reverse Repurchase Agreements yes yes yes yes yes yes Short Sales no no no no no no Sovereign Debt yes yes yes yes yes yes Structured Investments yes yes yes yes yes yes Swap Agreements yes no yes yes yes no Variable- or Floating-Rate Securities yes yes yes yes yes yes Warrants yes yes yes yes yes yes When-Issued Securities and Forward Commitments yes yes yes yes yes yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes yes yes yes yes yes
* The Fund may hold bonds that are downgraded to junk bond status, if the bonds were rated investment grade at the time of purchase. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 10 INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
ALLOWABLE FOR THE FUND? -------------------------------------------------------------------------- LARGE CAP LARGE CAP MID CAP MID CAP NEW S&P 500 EQUITY VALUE GROWTH VALUE DIMENSIONS INDEX Agency and Government Securities yes yes yes yes yes yes Borrowing yes yes yes yes yes yes Cash/Money Market Instruments yes yes yes yes yes yes Collateralized Bond Obligations yes yes yes yes yes yes Commercial Paper yes yes yes yes yes yes Common Stock yes yes yes yes yes yes Convertible Securities yes yes yes yes yes yes Corporate Bonds yes yes yes yes yes yes Debt Obligations yes yes yes yes yes yes Depositary Receipts yes yes yes yes yes yes Derivative Instruments (including Options and Futures) yes yes yes yes yes yes Exchange-Traded Funds yes yes yes yes yes yes Foreign Currency Transactions yes yes yes yes yes yes Foreign Securities yes yes yes yes yes yes Funding Agreements yes yes yes yes yes yes High-Yield (High-Risk) Debt Securities (Junk Bonds) yes yes no* yes yes no* Illiquid and Restricted Securities yes yes yes yes yes yes Indexed Securities yes yes yes yes yes yes Inflation Protected Securities yes yes yes yes yes yes Inverse Floaters yes no no no no no Investment Companies yes yes yes yes yes yes Lending of Portfolio Securities yes yes yes yes yes yes Loan Participations yes yes yes yes yes yes Mortgage- and Asset-Backed Securities yes yes yes yes yes no Mortgage Dollar Rolls yes no no no no no Municipal Obligations yes yes yes yes yes yes Preferred Stock yes yes yes yes yes yes Real Estate Investment Trusts yes yes yes yes yes yes Repurchase Agreements yes yes yes yes yes yes Reverse Repurchase Agreements yes yes yes yes yes yes Short Sales no no no no no yes Sovereign Debt yes yes yes yes yes yes Structured Investments yes yes yes yes yes yes Swap Agreements no no no no no no Variable- or Floating-Rate Securities yes yes yes yes yes yes Warrants yes yes yes yes yes yes When-Issued Securities and Forward Commitments yes yes yes yes yes yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes yes yes yes yes yes
* The Fund may hold bonds that are downgraded to junk bond status, if the bonds were rated investment grade at the time of purchase. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 11 INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS
ALLOWABLE FOR THE FUND? ------------------------------------------------------------ SELECT SHORT DURATION SMALL CAP SMALL CAP STRATEGY VALUE U.S. GOVERNMENT ADVANTAGE VALUE AGGRESSIVE Agency and Government Securities yes yes yes yes yes Borrowing yes yes yes yes yes Cash/Money Market Instruments yes yes yes yes yes Collateralized Bond Obligations no yes no no yes Commercial Paper yes yes yes yes yes Common Stock yes no yes yes yes Convertible Securities yes no yes yes yes Corporate Bonds yes yes yes yes yes Debt Obligations yes yes yes yes yes Depositary Receipts yes no yes yes yes Derivative Instruments (including Options and Futures) yes yes yes yes yes Exchange-Traded Funds yes yes yes yes yes Foreign Currency Transactions yes no yes yes yes Foreign Securities yes yes yes yes yes Funding Agreements yes yes yes yes yes High-Yield (High-Risk) Debt Securities (Junk Bonds) yes no* no* yes yes Illiquid and Restricted Securities yes yes yes yes yes Indexed Securities yes yes yes yes yes Inflation Protected Securities yes yes yes yes yes Inverse Floaters no yes no no no Investment Companies yes yes yes yes yes Lending of Portfolio Securities yes yes yes yes yes Loan Participations yes yes yes no yes Mortgage- and Asset-Backed Securities yes yes no yes yes Mortgage Dollar Rolls no yes no no no Municipal Obligations yes yes yes yes yes Preferred Stock yes no yes yes yes Real Estate Investment Trusts yes yes yes yes yes Repurchase Agreements yes yes yes yes yes Reverse Repurchase Agreements yes yes yes yes yes Short Sales no yes no no no Sovereign Debt no yes no no yes Structured Investments yes yes yes yes yes Swap Agreements no yes no no no Variable- or Floating-Rate Securities yes yes yes yes yes Warrants yes yes yes yes yes When-Issued Securities and Forward Commitments yes yes yes yes yes Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities yes yes yes yes yes
* The Fund may hold bonds that are downgraded to junk bond status, if the bonds were rated investment grade at the time of purchase. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 12 INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES RISKS The following is a summary of common risk characteristics. Following this summary is a description of certain investments and investment strategies and the risks most commonly associated with them (including certain risks not described below and, in some cases, a more comprehensive discussion of how the risks apply to a particular investment or investment strategy). Please remember that a mutual fund's risk profile is largely defined by the fund's primary securities and investment strategies. However, most mutual funds are allowed to use certain other strategies and investments that may have different risk characteristics. Accordingly, one or more of the following types of risk may be associated with the Fund at any time (for a description of principal risks, please see the prospectus): ACTIVE MANAGEMENT RISK. The fund is actively managed and its performance therefore will reflect in part the investment manager's ability to make investment decisions which are suited to achieving the fund's investment objective. Due to its active management, the fund could underperform other mutual funds with similar investment objectives. AFFILIATED FUND RISK. The risk that the investment manager may have potential conflicts of interest in selecting underlying funds because the fees paid to it by some underlying funds are higher than the fees paid by other underlying funds. However, the investment manager is a fiduciary to the funds and is legally obligated to act in their best interests when selecting underlying funds, without taking fees into consideration. ALLOCATION RISK. The risk that the investment manager's evaluations regarding asset classes or underlying funds may be incorrect. There is no guarantee that the underlying funds will achieve their investment objectives. There is also a risk that the selected underlying funds' performance may be lower than the performance of the asset class they were selected to represent or may be lower than the performance of alternative underlying funds that could have been selected to represent the asset class. CREDIT RISK. For Cash Management and Core Bond. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the fund purchases unrated securities, or if the rating of a security is reduced after purchase, the fund will depend on the investment manager's analysis of credit risk more heavily than usual. For all Fixed Income Funds except Core Bond and Balanced Funds. The risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing company to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. DERIVATIVES RISK. Derivatives are financial instruments where value depends upon, or is derived from, the value of something else, such as one or more underlying investments, pools of investments, options, futures, indexes or currencies. Just as with securities in which the Fund invests directly, derivatives are subject to a number of risks, including market, correlation, liquidity, interest rate and credit risk. In addition, gains or losses involving derivatives may be substantial, because a relatively small price movement in the underlying security, currency or index may result in a substantial gain or loss for the Fund. The successful use of derivatives depends on our ability to manage these complex instruments. DIVERSIFICATION RISK. A non-diversified fund may invest more of its assets in fewer companies than if it were a diversified fund. Because each investment has a greater effect on the fund's performance, the fund may be more exposed to the risks of loss and volatility then a fund that invests more broadly. FOREIGN/EMERGING MARKETS RISKS. The following are all components of foreign/emerging markets risk: COUNTRY RISK includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. CURRENCY RISK results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add or subtract from the value of the investment. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 13 CUSTODY RISK refers to the process of clearing and settling trades. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. EMERGING MARKETS RISK includes the dramatic pace of change (economic, social, and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. INDEXING RISK. The fund is managed to an index and the fund's performance therefore will rise and fall as the performance of the index rises and falls. INFLATION RISK. Also known as purchasing power risk, inflation risk reflects the effects of continually rising prices on investments. If an investment's return is lower than the rate of inflation, your money will have less purchasing power as time goes on. INFLATION PROTECTED SECURITIES RISK. Inflation-protected debt securities tend to react to change in real interest rates. Real interest rates can be described as nominal interest rates minus the expected impact of inflation. In general, the price of an inflation-protected debt security falls when real interest rates rise, and rises when real interest rates fall. Interest payments on inflation-protected debt securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary bonds. In periods of deflation, the fund may have no income at all. Income earned by a shareholder depends on the amount of principal invested and that principal will not grow with inflation unless the investor reinvests the portion of fund distributions that comes from inflation adjustments. INTEREST RATE RISK. The risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. ISSUER RISK. An issuer, or the value of its stocks or bonds, may perform poorly. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors. LEGAL/LEGISLATIVE RISK. Congress and other governmental units have the power to change existing laws affecting securities. A change in law might affect an investment adversely. LIQUIDITY RISK. The risk associated from a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. For Equity Funds and Balanced Funds. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. For Fixed Income Funds. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. MID-SIZED COMPANY RISK. Investments in mid-sized companies often involve greater risks than investments in larger, more established companies because mid-sized companies may lack the management experience, financial resources, product diversification, and competitive strengths of larger companies. In addition, in many instances the securities of mid-sized companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. PREPAYMENT AND EXTENSION RISK. The risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. REINVESTMENT RISK. The risk that an investor will not be able to reinvest income or principal at the same rate it currently is earning. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 14 SECTOR RISK. For Global Bond Fund and Emerging Markets Fund. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk and potentially reduces the risks of loss and volatility. For Mid Cap Value Fund. Companies that operate in different but closely related industries are sometimes described as being in the same broad economic sector. The values of stocks of many different companies in a market sector may be similarly affected by particular economic or market events. Although the Fund does not intend to focus on any particular sector, at times the Fund may have a significant portion of its assets invested in a particular sector. For Money Market Fund. Investments that are concentrated in a particular issuer, geographic region, or sector will be more susceptible to changes in price. The more a fund diversifies, the more it spreads risk. For example, if the fund concentrates its investments in banks, the value of these investments may be adversely affected by economic or regulatory developments in the banking industry. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. SMALL COMPANY RISK. Investments in small capitalization companies often involve greater risks than investments in larger, more established companies because small capitalization companies may lack the management experience, financial resources, product diversification, experience, and competitive strengths of larger companies. In addition, in many instances the securities of small capitalization companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. TRACKING ERROR RISK. The fund may not track the index perfectly because differences between the index and the fund's portfolio can cause differences in performance. The investment manager purchases securities and other instruments in an attempt to replicate the performance of the index. However, the tools that the investment manager uses to replicate the index are not perfect and the fund's performance is affected by factors such as the size of the fund's portfolio, transaction costs, management fees and expenses, brokerage commissions and fees, the extent ant timing of cash flows in and out of the fund and changes in the index. In addition, the returns from a specific type of security (for example, mid-cap stocks) may trail returns from other asset classes or the overall market. Each type of security will go through cycles of doing better or worse than stocks or bonds in general. These periods last for several years. INVESTMENT STRATEGIES The following information supplements the discussion of the Fund's investment objectives, policies, and strategies that are described in the prospectus and in this SAI. The following describes many strategies that many mutual funds use and types of securities that they purchase. Please refer to the section titled Investment Strategies and Types of Investments to see which are applicable to the Fund. AGENCY AND GOVERNMENT SECURITIES The U.S. government and its agencies issue many different types of securities. U.S. Treasury bonds, notes, and bills and securities, including mortgage pass through certificates of the Government National Mortgage Association (GNMA), are guaranteed by the U.S. government. Other U.S. government securities are issued or guaranteed by federal agencies or government-sponsored enterprises but are not guaranteed by the U.S. government. This may increase the credit risk associated with these investments. Government-sponsored entities issuing securities include privately owned, publicly chartered entities created to reduce borrowing costs for certain sectors of the economy, such as farmers, homeowners, and students. They include the Federal Farm Credit Bank System, Farm Credit Financial Assistance Corporation, Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), Student Loan Marketing Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored entities may issue discount notes (with maturities ranging from overnight to 360 days) and bonds. Agency and government securities are subject to the same concerns as other debt obligations. (See also Debt Obligations and Mortgage- and Asset-Backed Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with agency and government securities include: Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and Reinvestment Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 15 BORROWING A fund may borrow money for temporary or emergency purposes, to make other investments or to engage in other transactions permissible under the 1940 Act that may be considered a borrowing (such as derivative instruments). Borrowings are subject to costs (in addition to any interest that may be paid) and typically reduce a fund's total return. Except as qualified above, however, a fund may not buy securities on margin. Although one or more of the other risks described in this SAI may apply, the largest risks associated with borrowing include: Inflation Risk and Management Risk. CASH/MONEY MARKET INSTRUMENTS Cash-equivalent investments include short-term U.S. and Canadian government securities and negotiable certificates of deposit, non-negotiable fixed-time deposits, bankers' acceptances, and letters of credit of banks or savings and loan associations having capital, surplus, and undivided profits (as of the date of its most recently published annual financial statements) in excess of $100 million (or the equivalent in the instance of a foreign branch of a U.S. bank) at the date of investment. A fund also may purchase short-term notes and obligations of U.S. and foreign banks and corporations and may use repurchase agreements with broker-dealers registered under the Securities Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.) These types of instruments generally offer low rates of return and subject a fund to certain costs and expenses. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with cash/money market instruments include: Credit Risk, Inflation Risk, and Management Risk. COLLATERALIZED BOND OBLIGATIONS Collateralized bond obligations (CBOs) are investment grade bonds backed by a pool of junk bonds. CBOs are similar in concept to collateralized mortgage obligations (CMOs), but differ in that CBOs represent different degrees of credit quality rather than different maturities. (See also Mortgage- and Asset-Backed Securities.) Underwriters of CBOs package a large and diversified pool of high-risk, high-yield junk bonds, which is then separated into "tiers." Typically, the first tier represents the higher quality collateral and pays the lowest interest rate; the second tier is backed by riskier bonds and pays a higher rate; the third tier represents the lowest credit quality and instead of receiving a fixed interest rate receives the residual interest payments -- money that is left over after the higher tiers have been paid. CBOs, like CMOs, are substantially overcollateralized and this, plus the diversification of the pool backing them, earns them investment-grade bond ratings. Holders of third-tier CBOs stand to earn high yields or less money depending on the rate of defaults in the collateral pool. (See also High-Yield (High-Risk) Securities (Junk Bonds).) Although one or more of the other risks described in this SAI may apply, the largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, and Management Risk. COMMERCIAL PAPER Commercial paper is a short-term debt obligation with a maturity ranging from 2 to 270 days issued by banks, corporations, and other borrowers. It is sold to investors with temporary idle cash as a way to increase returns on a short-term basis. These instruments are generally unsecured, which increases the credit risk associated with this type of investment. (See also Debt Obligations and Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with commercial paper include: Credit Risk, Liquidity Risk, and Management Risk. COMMON STOCK Common stock represents units of ownership in a corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings. In the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock. The price of common stock is generally determined by corporate earnings, type of products or services offered, projected growth rates, experience of management, liquidity, and general market conditions for the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with common stock include: Event Risk, Issuer Risk, Legal/Legislative Risk, Management Risk, Market Risk, and Small and Medium Company Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 16 CONVERTIBLE SECURITIES Convertible securities are bonds, debentures, notes, preferred stocks, or other securities that may be converted into common, preferred or other securities of the same or a different issuer within a particular period of time at a specified price. Some convertible securities, such as preferred equity-redemption cumulative stock (PERCs), have mandatory conversion features. Others are voluntary. A convertible security entitles the holder to receive interest normally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted, or exchanged. Convertible securities have unique investment characteristics in that they generally (i) have higher yields than common stocks but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying stock since they have fixed income characteristics, and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases. The value of a convertible security is a function of its "investment value" (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its "conversion value" (the security's worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. Generally, the conversion value decreases as the convertible security approaches maturity. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with convertible securities include: Call/Prepayment Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and Reinvestment Risk. CORPORATE BONDS Corporate bonds are debt obligations issued by private corporations, as distinct from bonds issued by a government agency or a municipality. Corporate bonds typically have four distinguishing features: (1) they are taxable; (2) they have a par value of $1,000; (3) they have a term maturity, which means they come due all at once; and (4) many are traded on major exchanges. Corporate bonds are subject to the same concerns as other debt obligations. (See also Debt Obligations and High-Yield (High-Risk) Debt Securities (Junk Bonds).) Corporate bonds may be either secured or unsecured. Unsecured corporate bonds are generally referred to as "debentures." See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with corporate bonds include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. DEBT OBLIGATIONS Many different types of debt obligations exist (for example, bills, bonds, or notes). Issuers of debt obligations have a contractual obligation to pay interest at a fixed, variable or floating rate on specified dates and to repay principal on a specified maturity date. Certain debt obligations (usually intermediate- and long-term bonds) have provisions that allow the issuer to redeem or "call" a bond before its maturity. Issuers are most likely to call these securities during periods of falling interest rates. When this happens, an investor may have to replace these securities with lower yielding securities, which could result in a lower return. The market value of debt obligations is affected primarily by changes in prevailing interest rates and the issuers perceived ability to repay the debt. The market value of a debt obligation generally reacts inversely to interest rate changes. When prevailing interest rates decline, the price usually rises, and when prevailing interest rates rise, the price usually declines. In general, the longer the maturity of a debt obligation, the higher its yield and the greater the sensitivity to changes in interest rates. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. As noted, the values of debt obligations also may be affected by changes in the credit rating or financial condition of their issuers. Generally, the lower the quality rating of a security, the higher the degree of risk as to the payment of interest and return of principal. To compensate investors for taking on such increased risk, those issuers deemed to be less creditworthy generally must offer their investors higher interest rates than do issuers with better credit ratings. (See also Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk) Debt Securities (Junk Bonds).) RIVERSOURCE VARIABLE PORTFOLIO FUNDS 17 Generally, debt obligations that are investment grade are those that have been rated in one of the top four credit quality categories by two out of the three independent rating agencies. In the event that a debt obligation has been rated by only two agencies, the most conservative, or lower, rating must be in one of the top four credit quality categories in order for the security to be considered investment grade. If only one agency has rated the debt obligation, that rating must be in one of the top four credit quality categories for the security to be considered investment grade. See the appendix for a discussion of securities ratings. All ratings limitations are applied at the time of purchase. Subsequent to purchase, a debt security may cease to be rated or its rating may be reduced below the minimum required for purchase by the fund. Neither event will require the sale of such a security, but it will be a factor in considering whether to continue to hold the security. To the extent that ratings change as a result of changes in a rating agency or its rating systems, the Fund will attempt to use comparable ratings as standards for selecting investments. Although one or more of the other risks described in this SAI may apply, the largest risks associated with debt obligations include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment Risk. DEPOSITARY RECEIPTS Some foreign securities are traded in the form of American Depositary Receipts (ADRs). ADRs are receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities of foreign issuers. European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts typically issued by foreign banks or trust companies, evidencing ownership of underlying securities issued by either a foreign or U.S. issuer. Generally, depositary receipts in registered form are designed for use in the U.S. and depositary receipts in bearer form are designed for use in securities markets outside the U.S. Depositary receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. Depositary receipts involve the risks of other investments in foreign securities. In addition, ADR holders may not have all the legal rights of shareholders and may experience difficulty in receiving shareholder communications. (See also Common Stock and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with depositary receipts include: Foreign/Emerging Markets Risk, Issuer Risk, Management Risk, and Market Risk. DERIVATIVE INSTRUMENTS Derivative instruments are commonly defined to include securities or contracts whose values depend, in whole or in part, on (or "derive" from) the value of one or more other assets, such as securities, currencies, or commodities. A derivative instrument generally consists of, is based upon, or exhibits characteristics similar to options or forward contracts. Such instruments may be used to maintain cash reserves while remaining fully invested, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, or to pursue higher investment returns. Derivative instruments are characterized by requiring little or no initial payment. Their value changes daily based on a security, a currency, a group of securities or currencies, or an index. A small change in the value of the underlying security, currency, or index can cause a sizable percentage gain or loss in the price of the derivative instrument. Options and forward contracts are considered to be the basic "building blocks" of derivatives. For example, forward-based derivatives include forward contracts, swap contracts, and exchange-traded futures. Forward-based derivatives are sometimes referred to generically as "futures contracts." Option-based derivatives include privately negotiated, over-the-counter (OTC) options (including caps, floors, collars, and options on futures) and exchange-traded options on futures. Diverse types of derivatives may be created by combining options or futures in different ways, and by applying these structures to a wide range of underlying assets. OPTIONS. An option is a contract. A person who buys a call option for a security has the right to buy the security at a set price for the length of the contract. A person who sells a call option is called a writer. The writer of a call option agrees for the length of the contract to sell the security at the set price when the buyer wants to exercise the option, no matter what the market price of the security is at that time. A person who buys a put option has the right to sell a security at a set price for the length of the contract. A person who writes a put option agrees to buy the security at the set price if the purchaser wants to exercise the option during the length of the contract, no matter what the market price of the security is at that time. An option is covered if the writer owns the security (in the case of a call) or sets aside the cash or securities of equivalent value (in the case of a put) that would be required upon exercise. The price paid by the buyer for an option is called a premium. In addition to the premium, the buyer generally pays a broker a commission. The writer receives a premium, less another commission, at the time the option is written. The premium received by the writer is retained whether or not the option is exercised. A writer of a call option may have to sell the security for a below-market price if the market price rises above the exercise price. A writer of a put option may have to pay an above-market price for the security if its market price decreases below the exercise price. When an option is purchased, the buyer pays a premium and a commission. It then pays a second commission on the purchase or sale of the underlying security when the option is exercised. For record keeping and tax purposes, the price obtained on the sale of the underlying security is the combination of the exercise price, the premium, and both commissions. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 18 One of the risks an investor assumes when it buys an option is the loss of the premium. To be beneficial to the investor, the price of the underlying security must change within the time set by the option contract. Furthermore, the change must be sufficient to cover the premium paid, the commissions paid both in the acquisition of the option and in a closing transaction or in the exercise of the option and sale (in the case of a call) or purchase (in the case of a put) of the underlying security. Even then, the price change in the underlying security does not ensure a profit since prices in the option market may not reflect such a change. Options on many securities are listed on options exchanges. If a fund writes listed options, it will follow the rules of the options exchange. Options are valued at the close of the New York Stock Exchange. An option listed on a national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price or, if such a price is not readily available, at the mean of the last bid and ask prices. Options on certain securities are not actively traded on any exchange, but may be entered into directly with a dealer. These options may be more difficult to close. If an investor is unable to effect a closing purchase transaction, it will not be able to sell the underlying security until the call written by the investor expires or is exercised. FUTURES CONTRACTS. A futures contract is a sales contract between a buyer (holding the "long" position) and a seller (holding the "short" position) for an asset with delivery deferred until a future date. The buyer agrees to pay a fixed price at the agreed future date and the seller agrees to deliver the asset. The seller hopes that the market price on the delivery date is less than the agreed upon price, while the buyer hopes for the contrary. Many futures contracts trade in a manner similar to the way a stock trades on a stock exchange and the commodity exchanges. Generally, a futures contract is terminated by entering into an offsetting transaction. An offsetting transaction is effected by an investor taking an opposite position. At the time a futures contract is made, a good faith deposit called initial margin is set up. Daily thereafter, the futures contract is valued and the payment of variation margin is required so that each day a buyer would pay out cash in an amount equal to any decline in the contract's value or receive cash equal to any increase. At the time a futures contract is closed out, a nominal commission is paid, which is generally lower than the commission on a comparable transaction in the cash market. Futures contracts may be based on various securities, securities indices (such as the S&P 500 Index), foreign currencies and other financial instruments and indices. A fund may engage in futures and related options transactions to produce incremental earnings, to hedge existing positions, and to increase flexibility. The fund intends to comply with Rule 4.5 of the Commodity Futures Trading Commission (CFTC), under which a mutual fund is exempt from the definition of a "commodity pool operator." The fund, therefore, is not subject to registration or regulation as a pool operator, meaning that the fund may invest in futures contracts without registering with the CFTC. OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give the holder a right to buy or sell futures contracts in the future. Unlike a futures contract, which requires the parties to the contract to buy and sell a security on a set date (some futures are settled in cash), an option on a futures contract merely entitles its holder to decide on or before a future date (within nine months of the date of issue) whether to enter into a contract. If the holder decides not to enter into the contract, all that is lost is the amount (premium) paid for the option. Further, because the value of the option is fixed at the point of sale, there are no daily payments of cash to reflect the change in the value of the underlying contract. However, since an option gives the buyer the right to enter into a contract at a set price for a fixed period of time, its value does change daily. One of the risks in buying an option on a futures contract is the loss of the premium paid for the option. The risk involved in writing options on futures contracts an investor owns, or on securities held in its portfolio, is that there could be an increase in the market value of these contracts or securities. If that occurred, the option would be exercised and the asset sold at a lower price than the cash market price. To some extent, the risk of not realizing a gain could be reduced by entering into a closing transaction. An investor could enter into a closing transaction by purchasing an option with the same terms as the one previously sold. The cost to close the option and terminate the investor's obligation, however, might still result in a loss. Further, the investor might not be able to close the option because of insufficient activity in the options market. Purchasing options also limits the use of monies that might otherwise be available for long-term investments. OPTIONS ON STOCK INDEXES. Options on stock indexes are securities traded on national securities exchanges. An option on a stock index is similar to an option on a futures contract except all settlements are in cash. A fund exercising a put, for example, would receive the difference between the exercise price and the current index level. TAX AND ACCOUNTING TREATMENT. As permitted under federal income tax laws and to the extent a fund is allowed to invest in futures contracts, a fund would intend to identify futures contracts as mixed straddles and not mark them to market, that is, not treat them as having been sold at the end of the year at market value. If a fund is using short futures contracts for hedging purposes, the fund may be required to defer recognizing losses incurred on short futures contracts and on underlying securities. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 19 Federal income tax treatment of gains or losses from transactions in options on futures contracts and indexes will depend on whether the option is a section 1256 contract. If the option is a non-equity option, a fund would either make a 1256(d) election and treat the option as a mixed straddle or mark to market the option at fiscal year end and treat the gain/loss as 40% short-term and 60% long-term. The IRS has ruled publicly that an exchange-traded call option is a security for purposes of the 50%-of-assets test and that its issuer is the issuer of the underlying security, not the writer of the option, for purposes of the diversification requirements. Accounting for futures contracts will be according to generally accepted accounting principles. Initial margin deposits will be recognized as assets due from a broker (a fund's agent in acquiring the futures position). During the period the futures contract is open, changes in value of the contract will be recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments will be made or received depending upon whether gains or losses are incurred. All contracts and options will be valued at the last-quoted sales price on their primary exchange. OTHER RISKS OF DERIVATIVES. The primary risk of derivatives is the same as the risk of the underlying asset, namely that the value of the underlying asset may go up or down. Adverse movements in the value of an underlying asset can expose an investor to losses. Derivative instruments may include elements of leverage and, accordingly, the fluctuation of the value of the derivative instrument in relation to the underlying asset may be magnified. The successful use of derivative instruments depends upon a variety of factors, particularly the investment manager's ability to predict movements of the securities, currencies, and commodity markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed. Another risk is the risk that a loss may be sustained as a result of the failure of a counterparty to comply with the terms of a derivative instrument. The counterparty risk for exchange-traded derivative instruments is generally less than for privately-negotiated or OTC derivative instruments, since generally a clearing agency, which is the issuer or counterparty to each exchange-traded instrument, provides a guarantee of performance. For privately-negotiated instruments, there is no similar clearing agency guarantee. In all transactions, an investor will bear the risk that the counterparty will default, and this could result in a loss of the expected benefit of the derivative transaction and possibly other losses. When a derivative transaction is used to completely hedge another position, changes in the market value of the combined position (the derivative instrument plus the position being hedged) result from an imperfect correlation between the price movements of the two instruments. With a perfect hedge, the value of the combined position remains unchanged for any change in the price of the underlying asset. With an imperfect hedge, the values of the derivative instrument and its hedge are not perfectly correlated. For example, if the value of a derivative instrument used in a short hedge (such as writing a call option, buying a put option, or selling a futures contract) increased by less than the decline in value of the hedged investment, the hedge would not be perfectly correlated. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculative or other pressures on the markets in which these instruments are traded. Derivatives also are subject to the risk that they cannot be sold, closed out, or replaced quickly at or very close to their fundamental value. Generally, exchange contracts are very liquid because the exchange clearinghouse is the counterparty of every contract. OTC transactions are less liquid than exchange-traded derivatives since they often can only be closed out with the other party to the transaction. Another risk is caused by the legal unenforcibility of a party's obligations under the derivative. A counterparty that has lost money in a derivative transaction may try to avoid payment by exploiting various legal uncertainties about certain derivative products. (See also Foreign Currency Transactions.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with derivative instruments include: Leverage Risk, Liquidity Risk, and Management Risk. EXCHANGE-TRADED FUNDS Exchange-traded funds (ETFs) represent shares of ownership in mutual funds, unit investment trusts or depositary receipts. ETFs hold portfolios of securities that closely track the performance and dividend yield of specific domestic or foreign market indexes. Although one or more of the other risks described in this SAI may apply, the largest risks associated with ETFs include: Management Risk and Market Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 20 FOREIGN CURRENCY TRANSACTIONS Investments in foreign countries usually involve currencies of foreign countries. In addition, a fund may hold cash and cash-equivalent investments in foreign currencies. As a result, the value of a fund's assets as measured in U.S. dollars may be affected favorably or unfavorably by changes in currency exchange rates and exchange control regulations. Also, a fund may incur costs in connection with conversions between various currencies. Currency exchange rates may fluctuate significantly over short periods of time causing a fund's NAV to fluctuate. Currency exchange rates are generally determined by the forces of supply and demand in the foreign exchange markets, actual or anticipated changes in interest rates, and other complex factors. Currency exchange rates also can be affected by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments. SPOT RATES AND DERIVATIVE INSTRUMENTS. A fund may conduct its foreign currency exchange transactions either at the spot (cash) rate prevailing in the foreign currency exchange market or by entering into forward currency exchange contracts (forward contracts). (See also Derivative Instruments.) These contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such derivative instruments, a fund could be disadvantaged by having to deal in the odd lot market for the underlying foreign currencies at prices that are less favorable than for round lots. A fund may enter into forward contracts for a variety of reasons. A fund may enter into forward contracts to settle a security transaction or handle dividend and interest collection. When a fund enters into a contract for the purchase or sale of a security denominated in a foreign currency or has been notified of a dividend or interest payment, it may desire to lock in the price of the security or the amount of the payment in dollars. By entering into a forward contract, a fund would be able to protect itself against a possible loss resulting from an adverse change in the relationship between different currencies from the date the security is purchased or sold to the date on which payment is made or received or when the dividend or interest is actually received. A fund may enter into forward contracts when management of the fund believes the currency of a particular foreign country may decline in value relative to another currency. When selling currencies forward in this fashion, a fund may seek to hedge the value of foreign securities it holds against an adverse move in exchange rates. The precise matching of forward contract amounts and the value of securities involved generally will not be possible since the future value of securities in foreign currencies more than likely will change between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movements is extremely difficult and successful execution of a short-term hedging strategy is highly uncertain. A fund would not enter into such forward contracts or maintain a net exposure to such contracts when consummating the contracts would obligate it to deliver an amount of foreign currency in excess of the value of its securities or other assets denominated in that currency. A fund may designate cash or securities in an amount equal to the value of the fund's total assets committed to consummating forward contracts entered into under the circumstance set forth immediately above. If the value of the securities declines, additional cash or securities will be designated on a daily basis so that the value of the cash or securities will equal the amount of the fund's commitments on such contracts. This method of protecting the value of the fund's securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange that can be achieved at some point in time. Although forward contracts tend to minimize the risk of loss due to a decline in value of hedged currency, they tend to limit any potential gain that might result should the value of such currency increase. A fund also may enter into forward contracts when its management believes the currency of a particular country will increase in value relative to another currency. Although forward contracts entered into by the fund will typically involve the purchase or sale of a foreign currency. At maturity of a forward contract, a fund may either deliver (if a contract to sell) or take delivery of (if a contract to buy) the foreign currency or terminate its contractual obligation by entering into an offsetting contract with the same currency trader, the same maturity date, and covering the same amount of foreign currency. If a fund engages in an offsetting transaction, it would incur a gain or loss to the extent there has been movement in forward contract prices. If a fund engages in an offsetting transaction, it may subsequently enter into a new forward contract to buy or sell the foreign currency. Although a fund values its assets each business day in terms of U.S. dollars, it may not intend to convert its foreign currencies into U.S. dollars on a daily basis. It would do so from time to time, and shareholders should be aware of currency conversion costs. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (spread) between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a fund at one rate, while offering a lesser rate of exchange should a fund desire to resell that currency to the dealer. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 21 OPTIONS ON FOREIGN CURRENCIES. A fund may buy put and call options and write covered call and cash-secured put options on foreign currencies for hedging purposes and to gain exposure to foreign currencies. For example, a decline in the dollar value of a foreign currency in which securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against the diminutions in the value of securities, a fund may buy put options on the foreign currency. If the value of the currency does decline, a fund would have the right to sell the currency for a fixed amount in dollars and would offset, in whole or in part, the adverse effect on its portfolio that otherwise would have resulted. Conversely, where a change in the dollar value of a currency would increase the cost of securities a fund plans to buy, or where a fund would benefit from increased exposure to the currency, a fund may buy call options on the foreign currency. The purchase of the options could offset, at least partially, the changes in exchange rates. As in the case of other types of options, however, the benefit to a fund derived from purchases of foreign currency options would be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a fund could sustain losses on transactions in foreign currency options that would require it to forego a portion or all of the benefits of advantageous changes in rates. A fund may write options on foreign currencies for the same types of purposes. For example, when a fund anticipates a decline in the dollar value of foreign-denominated securities due to adverse fluctuations in exchange rates it could, instead of purchasing a put option, write a call option on the relevant currency. If the expected decline occurs, the option would most likely not be exercised and the diminution in value of securities would be fully or partially offset by the amount of the premium received. Similarly, instead of purchasing a call option when a foreign currency is expected to appreciate, a fund could write a put option on the relevant currency. If rates move in the manner projected, the put option would expire unexercised and allow the fund to hedge increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the fund would be required to buy or sell the underlying currency at a loss that may not be offset by the amount of the premium. Through the writing of options on foreign currencies, the fund also may be required to forego all or a portion of the benefits that might otherwise have been obtained from favorable movements on exchange rates. All options written on foreign currencies will be covered. An option written on foreign currencies is covered if a fund holds currency sufficient to cover the option or has an absolute and immediate right to acquire that currency without additional cash consideration upon conversion of assets denominated in that currency or exchange of other currency held in its portfolio. An option writer could lose amounts substantially in excess of its initial investments, due to the margin and collateral requirements associated with such positions. Options on foreign currencies are traded through financial institutions acting as market-makers, although foreign currency options also are traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby reducing the risk of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in certain foreign countries for that purpose. As a result, the OCC may, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on OCC or its clearing member, impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 22 FOREIGN CURRENCY FUTURES AND RELATED OPTIONS. A fund may enter into currency futures contracts to buy or sell currencies. It also may buy put and call options and write covered call and cash-secured put options on currency futures. Currency futures contracts are similar to currency forward contracts, except that they are traded on exchanges (and have margin requirements) and are standardized as to contract size and delivery date. Most currency futures call for payment of delivery in U.S. dollars. A fund may use currency futures for the same purposes as currency forward contracts, subject to Commodity Futures Trading Commission (CFTC) limitations. Currency futures and options on futures values can be expected to correlate with exchange rates, but will not reflect other factors that may affect the value of the fund's investments. A currency hedge, for example, should protect a Yen-denominated bond against a decline in the Yen, but will not protect a fund against price decline if the issuer's creditworthiness deteriorates. Because the value of a fund's investments denominated in foreign currency will change in response to many factors other than exchange rates, it may not be possible to match the amount of a forward contract to the value of a fund's investments denominated in that currency over time. A fund will hold securities or other options or futures positions whose values are expected to offset its obligations. The fund would not enter into an option or futures position that exposes the fund to an obligation to another party unless it owns either (i) an offsetting position in securities or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. (See also Derivative Instruments and Foreign Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign currency transactions include: Correlation Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk. FOREIGN SECURITIES Foreign securities, foreign currencies, and securities issued by U.S. entities with substantial foreign operations involve special risks, including those set forth below, which are not typically associated with investing in U.S. securities. Foreign companies are not generally subject to uniform accounting, auditing, and financial reporting standards comparable to those applicable to domestic companies. Additionally, many foreign stock markets, while growing in volume of trading activity, have substantially less volume than the New York Stock Exchange, and securities of some foreign companies are less liquid and more volatile than securities of domestic companies. Similarly, volume and liquidity in most foreign bond markets are less than the volume and liquidity in the U.S. and, at times, volatility of price can be greater than in the U.S. Further, foreign markets have different clearance, settlement, registration, and communication procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions making it difficult to conduct such transactions. Delays in such procedures could result in temporary periods when assets are uninvested and no return is earned on them. The inability of an investor to make intended security purchases due to such problems could cause the investor to miss attractive investment opportunities. Payment for securities without delivery may be required in certain foreign markets and, when participating in new issues, some foreign countries require payment to be made in advance of issuance (at the time of issuance, the market value of the security may be more or less than the purchase price). Some foreign markets also have compulsory depositories (i.e., an investor does not have a choice as to where the securities are held). Fixed commissions on some foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. Further, an investor may encounter difficulties or be unable to pursue legal remedies and obtain judgments in foreign courts. There is generally less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in the U.S. It may be more difficult for an investor's agents to keep currently informed about corporate actions such as stock dividends or other matters that may affect the prices of portfolio securities. Communications between the U.S. and foreign countries may be less reliable than within the U.S., thus increasing the risk of delays or loss of certificates for portfolio securities. In addition, with respect to certain foreign countries, there is the possibility of nationalization, expropriation, the imposition of additional withholding or confiscatory taxes, political, social, or economic instability, diplomatic developments that could affect investments in those countries, or other unforeseen actions by regulatory bodies (such as changes to settlement or custody procedures). The risks of foreign investing may be magnified for investments in emerging markets, which may have relatively unstable governments, economies based on only a few industries, and securities markets that trade a small number of securities. The introduction of a single currency, the euro, on Jan. 1, 1999 for participating European nations in the Economic and Monetary Union ("EU") presents unique uncertainties, including the legal treatment of certain outstanding financial contracts after Jan. 1, 1999 that refer to existing currencies rather than the euro; the establishment and maintenance of exchange rates; the fluctuation of the euro relative to non-euro currencies; whether the interest rate, tax or labor regimes of European countries participating in the euro will converge over time; and whether the conversion of the currencies of other EU countries such as the United Kingdom and Denmark into the euro and the admission of other non-EU countries such as Poland, Latvia, and Lithuania as members of the EU may have an impact on the euro. Although one or more of the other risks described in this SAI may apply, the largest risks associated with foreign securities include: Foreign/Emerging Markets Risk, Issuer Risk, and Management Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 23 FUNDING AGREEMENTS A Fund may invest in funding agreements issued by domestic insurance companies. Funding agreements are short-term, privately placed, debt obligations of insurance companies that offer a fixed- or floating-rate of interest. These investments are not readily marketable and therefore are considered to be illiquid securities. (See also Illiquid and Restricted Securities.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with funding agreements include: Credit Risk and Liquidity Risk. HIGH-YIELD (HIGH-RISK) DEBT SECURITIES (JUNK BONDS) High yield (high-risk) debt securities are sometimes referred to as junk bonds. They are non-investment grade (lower quality) securities that have speculative characteristics. Lower quality securities, while generally offering higher yields than investment grade securities with similar maturities, involve greater risks, including the possibility of default or bankruptcy. They are regarded as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal. The special risk considerations in connection with investments in these securities are discussed below. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) All interest-bearing securities typically experience appreciation when interest rates decline and depreciation when interest rates rise. The market values of lower-quality and comparable unrated securities tend to reflect individual corporate developments to a greater extent than do higher rated securities, which react primarily to fluctuations in the general level of interest rates. Lower-quality and comparable unrated securities also tend to be more sensitive to economic conditions than are higher-rated securities. As a result, they generally involve more credit risks than securities in the higher-rated categories. During an economic downturn or a sustained period of rising interest rates, highly leveraged issuers of lower-quality securities may experience financial stress and may not have sufficient revenues to meet their payment obligations. The issuer's ability to service its debt obligations also may be adversely affected by specific corporate developments, the issuer's inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by an issuer of these securities is significantly greater than issuers of higher-rated securities because such securities are generally unsecured and are often subordinated to other creditors. Further, if the issuer of a lower quality security defaulted, an investor might incur additional expenses to seek recovery. Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of lower-quality securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the condition of the issuer that affect the market value of the securities. Consequently, credit ratings are used only as a preliminary indicator of investment quality. An investor may have difficulty disposing of certain lower-quality and comparable unrated securities because there may be a thin trading market for such securities. Because not all dealers maintain markets in all lower quality and comparable unrated securities, there is no established retail secondary market for many of these securities. To the extent a secondary trading market does exist, it is generally not as liquid as the secondary market for higher-rated securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. The lack of a liquid secondary market for certain securities also may make it more difficult for an investor to obtain accurate market quotations. Market quotations are generally available on many lower-quality and comparable unrated issues only from a limited number of dealers and may not necessarily represent firm bids of such dealers or prices for actual sales. Legislation may be adopted from time to time designed to limit the use of certain lower quality and comparable unrated securities by certain issuers. Although one or more of the other risks described in this SAI may apply, the largest risks associated with high-yield (high-risk) securities include: Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and Management Risk. ILLIQUID AND RESTRICTED SECURITIES Illiquid securities are securities that are not readily marketable. These securities may include, but are not limited to, certain securities that are subject to legal or contractual restrictions on resale, certain repurchase agreements, and derivative instruments. To the extent a fund invests in illiquid or restricted securities, it may encounter difficulty in determining a market value for the securities. Disposing of illiquid or restricted securities may involve time-consuming negotiations and legal expense, and it may be difficult or impossible for a fund to sell the investment promptly and at an acceptable price. In determining the liquidity of all securities and derivatives, such as Rule 144A securities, which are unregistered securities offered to qualified institutional buyers, and interest-only and principal-only fixed mortgage-backed securities (IOs and POs) issued by the U.S. government or its agencies and instrumentalities the investment manager, under guidelines established by the board, will consider any relevant factors including the frequency of trades, the number of dealers willing to purchase or sell the security and the nature of marketplace trades. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 24 Although one or more of the other risks described in this SAI may apply, the largest risks associated with illiquid and restricted securities include: Liquidity Risk and Management Risk. INDEXED SECURITIES The value of indexed securities is linked to currencies, interest rates, commodities, indexes, or other financial indicators. Most indexed securities are short- to intermediate-term fixed income securities whose values at maturity or interest rates rise or fall according to the change in one or more specified underlying instruments. Indexed securities may be more volatile than the underlying instrument itself and they may be less liquid than the securities represented by the index. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with indexed securities include: Liquidity Risk, Management Risk, and Market Risk. INFLATION PROTECTED SECURITIES Inflation is a general rise in prices of goods and services. Inflation erodes the purchasing power of an investor's assets. For example, if an investment provides a total return of 7% in a given year and inflation is 3% during that period, the inflation-adjusted, or real, return is 4%. Inflation protected securities are debt securities whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. One type of inflation-protected debt security is issued by the U.S. Treasury. The principal of these securities is adjusted for inflation as indicated by the Consumer Price Index for Urban Consumers (CPI) and interest is paid on the adjusted amount. The CPI is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. If the CPI falls, the principal value of inflation-protected securities will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Conversely, if the CPI rises, the principal value of inflation-protected securities will be adjusted upward, and consequently the interest payable on these securities will be increased. Repayment of the original bond principal upon maturity is guaranteed in the case of U.S. Treasury inflation-protected securities, even during a period of deflation. However, the current market value of the inflation-protected securities is not guaranteed and will fluctuate. Other inflation-indexed securities include inflation-related bonds, which may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal. Other issuers of inflation-protected debt securities include other U.S. government agencies or instrumentalities, corporations and foreign governments. There can be no assurance that the CPI or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond's inflation measure. Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, a fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders. Although one or more of the other risks described in this SAI may apply, the largest risks associated with inflation-protected securities include: Interest Rate Risk and Market Risk. INVERSE FLOATERS Inverse floaters are created by underwriters using the interest payment on securities. A portion of the interest received is paid to holders of instruments based on current interest rates for short-term securities. The remainder, minus a servicing fee, is paid to holders of inverse floaters. As interest rates go down, the holders of the inverse floaters receive more income and an increase in the price for the inverse floaters. As interest rates go up, the holders of the inverse floaters receive less income and a decrease in the price for the inverse floaters. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with inverse floaters include: Interest Rate Risk and Management Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 25 INVESTMENT COMPANIES Investing in securities issued by registered and unregistered investment companies may involve the duplication of advisory fees and certain other expenses. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the securities of other investment companies include: Management Risk and Market Risk. LENDING OF PORTFOLIO SECURITIES A fund may lend certain of its portfolio securities. The current policy of the Fund's board is to make these loans, either long- or short-term, to broker-dealers. In making loans, the lender receives the market price in cash, U.S. government securities, letters of credit, or such other collateral as may be permitted by regulatory agencies and approved by the board. If the market price of the loaned securities goes up, the lender will get additional collateral on a daily basis. If the market price of the loaned securities goes down, the borrower may request that some collateral be returned. The risks are that the borrower may not provide additional collateral when required or return the securities when due. During the existence of the loan, the lender receives cash payments equivalent to all interest or other distributions paid on the loaned securities. The lender may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash or money market instruments held as collateral to the borrower or placing broker. The lender will receive reasonable interest on the loan or a flat fee from the borrower and amounts equivalent to any dividends, interest, or other distributions on the securities loaned. Although one or more of the other risks described in this SAI may apply, the largest risks associated with the lending of portfolio securities include: Credit Risk and Management Risk. LOAN PARTICIPATIONS Loans, loan participations, and interests in securitized loan pools are interests in amounts owed by a corporate, governmental, or other borrower to a lender or consortium of lenders (typically banks, insurance companies, investment banks, government agencies, or international agencies). Loans involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to an investor in the event of fraud or misrepresentation. Although one or more of the other risks described in this SAI may apply, the largest risks associated with loan participations include: Credit Risk and Management Risk. MORTGAGE- AND ASSET-BACKED SECURITIES Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and Collateralized Mortgage Obligations (CMOs). These securities may be issued or guaranteed by U.S. government agencies or instrumentalities (see also Agency and Government Securities), or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers, and special purpose entities. Mortgage-backed securities issued by private lenders may be supported by pools of mortgage loans or other mortgage-backed securities that are guaranteed, directly or indirectly, by the U.S. government or one of its agencies or instrumentalities, or they may be issued without any governmental guarantee of the underlying mortgage assets but with some form of non-governmental credit enhancement. Commercial mortgage-backed securities (CMBS) are a specific type of mortgage-backed security collateralized by a pool of mortgages on commercial real estate. Stripped mortgage-backed securities are a type of mortgage-backed security that receive differing proportions of the interest and principal payments from the underlying assets. Generally, there are two classes of stripped mortgage-backed securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder to receive distributions consisting of all or a portion of the interest on the underlying pool of mortgage loans or mortgage-backed securities. POs entitle the holder to receive distributions consisting of all or a portion of the principal of the underlying pool of mortgage loans or mortgage-backed securities. The cash flows and yields on IOs and POs are extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage loans or mortgage-backed securities. A rapid rate of principal payments may adversely affect the yield to maturity of IOs. A slow rate of principal payments may adversely affect the yield to maturity of POs. If prepayments of principal are greater than anticipated, an investor in IOs may incur substantial losses. If prepayments of principal are slower than anticipated, the yield on a PO will be affected more severely than would be the case with a traditional mortgage-backed security. CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans or other mortgage-related securities, such as mortgage pass through securities or stripped mortgage-backed securities. CMOs may be structured into multiple classes, often referred to as "tranches," with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. Principal prepayments on collateral underlying a CMO may cause it to be retired substantially earlier than its stated maturity. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 26 The yield characteristics of mortgage-backed securities differ from those of other debt securities. Among the differences are that interest and principal payments are made more frequently on mortgage-backed securities, usually monthly, and principal may be repaid at any time. These factors may reduce the expected yield. Asset-backed securities have structural characteristics similar to mortgage-backed securities. Asset-backed debt obligations represent direct or indirect participation in, or secured by and payable from, assets such as motor vehicle installment sales contracts, other installment loan contracts, home equity loans, leases of various types of property, and receivables from credit card or other revolving credit arrangements. The credit quality of most asset-backed securities depends primarily on the credit quality of the assets underlying such securities, how well the entity issuing the security is insulated from the credit risk of the originator or any other affiliated entities, and the amount and quality of any credit enhancement of the securities. Payments or distributions of principal and interest on asset-backed debt obligations may be supported by non-governmental credit enhancements including letters of credit, reserve funds, overcollateralization, and guarantees by third parties. The market for privately issued asset-backed debt obligations is smaller and less liquid than the market for government sponsored mortgage-backed securities. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage- and asset-backed securities include: Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and Management Risk. MORTGAGE DOLLAR ROLLS Mortgage dollar rolls are investments in which an investor sells mortgage-backed securities for delivery in the current month and simultaneously contracts to purchase substantially similar securities on a specified future date. While an investor foregoes principal and interest paid on the mortgage-backed securities during the roll period, the investor is compensated by the difference between the current sales price and the lower price for the future purchase as well as by any interest earned on the proceeds of the initial sale. The investor also could be compensated through the receipt of fee income equivalent to a lower forward price. Although one or more of the other risks described in this SAI may apply, the largest risks associated with mortgage dollar rolls include: Credit Risk, Interest Rate Risk, and Management Risk. MUNICIPAL OBLIGATIONS Municipal obligations include debt obligations issued by or on behalf of states, territories, possessions, or sovereign nations within the territorial boundaries of the United States (including the District of Columbia and Puerto Rico). The interest on these obligations is generally exempt from federal income tax. Municipal obligations are generally classified as either "general obligations" or "revenue obligations." General obligation bonds are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of interest and principal. Revenue bonds are payable only from the revenues derived from a project or facility or from the proceeds of a specified revenue source. Industrial development bonds are generally revenue bonds secured by payments from and the credit of private users. Municipal notes are issued to meet the short-term funding requirements of state, regional, and local governments. Municipal notes include tax anticipation notes, bond anticipation notes, revenue anticipation notes, tax and revenue anticipation notes, construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes, and similar instruments. Municipal lease obligations may take the form of a lease, an installment purchase, or a conditional sales contract. They are issued by state and local governments and authorities to acquire land, equipment, and facilities. An investor may purchase these obligations directly, or it may purchase participation interests in such obligations. Municipal leases may be subject to greater risks than general obligation or revenue bonds. State constitutions and statutes set forth requirements that states or municipalities must meet in order to issue municipal obligations. Municipal leases may contain a covenant by the state or municipality to budget for and make payments due under the obligation. Certain municipal leases may, however, provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Yields on municipal bonds and notes depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The municipal bond market has a large number of different issuers, many having smaller sized bond issues, and a wide choice of different maturities within each issue. For these reasons, most municipal bonds do not trade on a daily basis and many trade only rarely. Because many of these bonds trade infrequently, the spread between the bid and offer may be wider and the time needed to develop a bid or an offer may be longer than other security markets. See the appendix for a discussion of securities ratings. (See also Debt Obligations.) TAXABLE MUNICIPAL OBLIGATIONS. There is another type of municipal obligation that is subject to federal income tax for a variety of reasons. These municipal obligations do not qualify for the federal income exemption because (a) they did not receive necessary authorization for tax-exempt treatment from state or local government authorities, (b) they exceed certain regulatory limitations on the cost of issuance for tax-exempt financing or (c) they finance public or private activities that do not qualify for the federal income tax exemption. These non-qualifying activities might include, for example, certain types of multi-family housing, certain professional and local sports facilities, refinancing of certain municipal debt, and borrowing to replenish a municipality's underfunded pension plan. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 27 Although one or more of the other risks described in this SAI may apply, the largest risks associated with municipal obligations include: Credit Risk, Event Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market Risk. PREFERRED STOCK Preferred stock is a type of stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights. The price of a preferred stock is generally determined by earnings, type of products or services, projected growth rates, experience of management, liquidity, and general market conditions of the markets on which the stock trades. Although one or more of the other risks described in this SAI may apply, the largest risks associated with preferred stock include: Issuer Risk, Management Risk, and Market Risk. REAL ESTATE INVESTMENT TRUSTS Real estate investment trusts (REITs) are pooled investment vehicles that manage a portfolio of real estate or real estate related loans to earn profits for their shareholders. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property, such as shopping centers, nursing homes, office buildings, apartment complexes, and hotels, and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. REITs can be subject to extreme volatility due to fluctuations in the demand for real estate, changes in interest rates, and adverse economic conditions. Similar to investment companies, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the tax law. The failure of a REIT to continue to qualify as a REIT for tax purposes can materially affect its value. A fund will indirectly bear its proportionate share of any expenses paid by a REIT in which it invests. Although one or more of the other risks described in this SAI may apply, the largest risks associated with REITs include: Issuer Risk, Management Risk, Market Risk and Interest Rate Risk. REPURCHASE AGREEMENTS Repurchase agreements may be entered into with certain banks or non-bank dealers. In a repurchase agreement, the purchaser buys a security at one price, and at the time of sale, the seller agrees to repurchase the obligation at a mutually agreed upon time and price (usually within seven days). The repurchase agreement determines the yield during the purchaser's holding period, while the seller's obligation to repurchase is secured by the value of the underlying security. Repurchase agreements could involve certain risks in the event of a default or insolvency of the other party to the agreement, including possible delays or restrictions upon the purchaser's ability to dispose of the underlying securities. Although one or more of the other risks described in this SAI may apply, the largest risks associated with repurchase agreements include: Credit Risk and Management Risk. REVERSE REPURCHASE AGREEMENTS In a reverse repurchase agreement, an investor sells a security and enters into an agreement to repurchase the security at a specified future date and price. The investor generally retains the right to interest and principal payments on the security. Since the investor receives cash upon entering into a reverse repurchase agreement, it may be considered a borrowing. (See also Derivative Instruments.) Although one or more of the other risks described in this SAI may apply, the largest risks associated with reverse repurchase agreements include: Credit Risk, Interest Rate Risk, and Management Risk. SHORT SALES With short sales, an investor sells a security that it does not own in anticipation of a decline in the market value of the security. To complete the transaction, the investor must borrow the security to make delivery to the buyer. The investor is obligated to replace the security that was borrowed by purchasing it at the market price at the time of replacement. The price at such time may be more or less than the price at which the investor sold the security. A fund that is allowed to engage in short sales will designate cash or liquid securities to cover its open short positions. Those funds also may engage in "short sales against the box," a form of short-selling that involves selling a security that an investor owns (or has an unconditioned right to purchase) for delivery at a specified date in the future. This technique allows an investor to hedge protectively against anticipated declines in the market of its securities. If the value of the securities sold short increased between the date of the short sale and the date on which the borrowed security is replaced, the investor loses the opportunity to participate in the gain. A "short sale against the box" will result in a constructive sale of appreciated securities thereby generating capital gains to the Fund. Although one or more of the other risks described in this SAI may apply, the largest risks associated with short sales include: Management Risk and Market Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 28 SOVEREIGN DEBT A sovereign debtor's willingness or ability to repay principal and pay interest in a timely manner may be affected by a variety of factors, including its cash flow situation, the extent of its reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor's policy toward international lenders, and the political constraints to which a sovereign debtor may be subject. (See also Foreign Securities.) With respect to sovereign debt of emerging market issuers, investors should be aware that certain emerging market countries are among the largest debtors to commercial banks and foreign governments. At times, certain emerging market countries have declared moratoria on the payment of principal and interest on external debt. Certain emerging market countries have experienced difficulty in servicing their sovereign debt on a timely basis that led to defaults and the restructuring of certain indebtedness. Sovereign debt includes Brady Bonds, which are securities issued under the framework of the Brady Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. Although one or more of the other risks described in this SAI may apply, the largest risks associated with sovereign debt include: Credit Risk, Foreign/Emerging Markets Risk, and Management Risk. STRUCTURED INVESTMENTS A structured investment is a security whose return is tied to an underlying index or to some other security or pool of assets. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are created and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, of specified instruments, such as commercial bank loans, and the issuance by that entity of one or more classes of debt obligations ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities, and interest rate provisions. The extent of the payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Structured securities are often offered in different classes. As a result a given class of a structured security may be either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and at any given time there may be no active trading market for a particular structured security. Although one or more of the other risks described in this SAI may apply, the largest risks associated with structured investments include: Credit Risk, Liquidity Risk, and Management Risk. SWAP AGREEMENTS Swap agreements obligate one party to make payments to the other party based on the change in the market value of an index or other asset. In return, the other party agrees to make payments to the first party based on the return of another index or asset. Swap agreements entail the risk that a party will default on its payment obligations. INTEREST RATE SWAPS. Interest rate swap agreements are used to obtain or preserve a desired return or spread at a lower cost than through a direct investment in an instrument that yields the desired return or spread. Swaps also may protect against changes in the price of securities that an investor anticipates buying or selling at a later date. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to several years. In a standard interest rate swap transaction, two parties agree to exchange their respective commitments to pay fixed or floating rates on a predetermined notional amount. The swap agreement notional amount is the predetermined basis for calculating the obligations that the swap counterparties have agreed to exchange. Under most swap agreements, the obligations of the parties are exchanged on a net basis. The two payment streams are netted out, with each party receiving or paying, as the case may be, only the net amount of the two payments. Swap agreements are usually entered into at a zero net market value of the swap agreement commitments. The market values of the underlying commitments will change over time resulting in one of the commitments being worth more than the other and the net market value creating a risk exposure for one counterparty to the other. Swap agreements may include embedded interest rate caps, floor and collars. In interest rate cap transactions, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap. Interest rate floor transactions require one party, in exchange for a premium to agree to make payments to the other to the extent that interest rates fall below a specified level, or floor. In interest rate collar transactions, one party sells a cap and purchases a floor, or vice versa, in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels or collar amounts. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 29 Swap agreements are traded in the over-the-counter market and may be considered to be illiquid. The Fund will enter into interest rate swap agreements only if the claims-paying ability of the other party or its guarantor is considered to be investment grade by the Advisor. Generally, the unsecured senior debt or the claims-paying ability of the other party or its guarantor must be rated in one of the three highest rating categories of at least one NRSRO at the time of entering into the transaction. If there is a default by the other party to such a transaction, the Fund will have to rely on its contractual remedies (which may be limited by bankruptcy, insolvency or similar laws) pursuant to the agreements related to the transaction. In certain circumstances, the Fund may seek to minimize counterparty risk by requiring the counterparty to post collateral. CMBS TOTAL RETURN SWAPS. CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of collateralized mortgage-backed securities. CURRENCY SWAPS. Currency swaps are similar to interest rate swaps, except that they involve currencies instead of interest rates. Although one or more of the other risks described in this SAI may apply, the largest risks associated with swaps include: Liquidity Risk, Credit Risk and Correlation Risk. VARIABLE- OR FLOATING-RATE SECURITIES Variable-rate securities provide for automatic establishment of a new interest rate at fixed intervals (e.g., daily, monthly, semiannually, etc.). Floating-rate securities generally provide for automatic adjustment of the interest rate whenever some specified interest rate index changes. Variable- or floating-rate securities frequently include a demand feature enabling the holder to sell the securities to the issuer at par. In many cases, the demand feature can be exercised at any time. Some securities that do not have variable or floating interest rates may be accompanied by puts producing similar results and price characteristics. Variable-rate demand notes include master demand notes that are obligations that permit the investor to invest fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the investor as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations normally has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days' notice to the holders of such obligations. Because these obligations are direct lending arrangements between the lender and borrower, it is not contemplated that such instruments generally will be traded. There generally is not an established secondary market for these obligations. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the lender's right to redeem is dependent on the ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies and may involve heightened risk of default by the issuer. Although one or more of the other risks described in this SAI may apply, the largest risks associated with variable- or floating-rate securities include: Credit Risk and Management Risk. WARRANTS Warrants are securities giving the holder the right, but not the obligation, to buy the stock of an issuer at a given price (generally higher than the value of the stock at the time of issuance) during a specified period or perpetually. Warrants may be acquired separately or in connection with the acquisition of securities. Warrants do not carry with them the right to dividends or voting rights and they do not represent any rights in the assets of the issuer. Warrants may be considered to have more speculative characteristics than certain other types of investments. In addition, the value of a warrant does not necessarily change with the value of the underlying securities, and a warrant ceases to have value if it is not exercised prior to its expiration date. Although one or more of the other risks described in this SAI may apply, the largest risks associated with warrants include: Management Risk and Market Risk. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS When-issued securities and forward commitments involve a commitment to purchase or sell specific securities at a predetermined price or yield in which payment and delivery take place after the customary settlement period for that type of security. Normally, the settlement date occurs within 45 days of the purchase although in some cases settlement may take longer. The investor does not pay for the securities or receive dividends or interest on them until the contractual settlement date. Such instruments involve the risk of loss if the value of the security to be purchased declines prior to the settlement date and the risk that the security will not be issued as anticipated. If the security is not issued as anticipated, the Fund may lose the opportunity to obtain a price and yield considered to be advantageous. Although one or more of the other risks described in this SAI may apply, the largest risks associated with when-issued securities and forward commitments include: Credit Risk and Management Risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 30 ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES These securities are debt obligations that do not make regular cash interest payments (see also Debt Obligations). Zero-coupon and step-coupon securities are sold at a deep discount to their face value because they do not pay interest until maturity. Pay-in-kind securities pay interest through the issuance of additional securities. Because these securities do not pay current cash income, the price of these securities can be extremely volatile when interest rates fluctuate. See the appendix for a discussion of securities ratings. Although one or more of the other risks described in this SAI may apply, the largest risks associated with zero-coupon, step-coupon, and pay-in-kind securities include: Credit Risk, Interest Rate Risk, and Management Risk. The Fund cannot issue senior securities but this does not prohibit certain investment activities for which assets of the Fund are set aside, or margin, collateral or escrow arrangements are established, to cover the related obligations. Examples of those activities include borrowing money, delayed-delivery and when-issued securities transactions, and contracts to buy or sell options, derivatives, and hedging instruments. SECURITIES TRANSACTIONS Except as otherwise noted, the description of policies and procedures in this section also applies to any Fund subadviser. Subject to policies set by the board, as well as the terms of the investment advisory and subadvisory agreements, the investment manager and all applicable subadvisers (individually and collectively "the investment manager") are authorized to determine, consistent with the Fund's investment goal and policies, which securities will be purchased, held, or sold. In determining where the buy and sell orders are to be placed, the investment manager has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the board. In selecting broker-dealers to execute transactions, the investment manager may consider the price of the security, including commission or mark-up, the size and difficulty of the order, the reliability, integrity, financial soundness, and general operation and execution capabilities of the broker, the broker's expertise in particular markets, and research services provided by the broker. The Fund, the investment manager, any subadviser and Ameriprise Financial Services, Inc. (the Distributor) each have a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Fund. The Fund's securities may be traded on a principal rather than an agency basis. In certain circumstances, the investment manager will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. The investment manager does not pay the dealer commissions. Instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The board has adopted a policy authorizing the investment manager to do so to the extent authorized by law, if the investment manager determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or the investment manager's overall responsibilities with respect to the Fund and the other RiverSource funds for which it acts as investment manager (or by any Fund subadviser to any other client of such subadviser). Research provided by brokers supplements the investment manager's own research activities. Such services include economic data on, and analysis of, U.S. and foreign economies; information on specific industries; information about specific companies, including earnings estimates; purchase recommendations; portfolio strategy services; political, economic, business, and industry trend assessments; historical statistical information; market data services providing information on specific issues and prices; and technical analysis of various aspects of the securities markets, including technical charts. Research services may take the form of written reports, computer software, or personal contact by telephone or at seminars or other meetings. The investment manager has obtained, and in the future may obtain, computer hardware from brokers, including but not limited to personal computers that will be used exclusively for investment decision-making purposes, which include the research, portfolio management, and trading functions and other services to the extent permitted under an interpretation by the SEC. When paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge, the investment manager must follow procedures authorized by the board. To date, three procedures have been authorized. One procedure permits the investment manager to direct an order to buy or sell a security traded on a national securities exchange to a specific broker for research services it has provided. The second procedure permits the investment manager, in order to obtain research, to direct an order on an agency basis to buy or sell a security traded in the over-the-counter market to a firm that does not make a market in that security. The commission paid generally includes compensation for research services. The third procedure permits the investment manager in order to obtain research and brokerage services, to cause the Fund to pay a commission in RIVERSOURCE VARIABLE PORTFOLIO FUNDS 31 excess of the amount another broker might have charged. The investment manager has advised the Fund that it is necessary to do business with a number of brokerage firms on a continuing basis to obtain such services as the handling of large orders, the willingness of a broker to risk its own money by taking a position in a security, and the specialized handling of a particular group of securities that only certain brokers may be able to offer. As a result of this arrangement, some portfolio transactions may not be effected at the lowest commission, but the investment manager believes it may obtain better overall execution. The investment manager has represented that under all three procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services performed or research provided. All other transactions will be placed on the basis of obtaining the best available price and the most favorable execution. In so doing, if in the professional opinion of the person responsible for selecting the broker or dealer, several firms can execute the transaction on the same basis, consideration will be given by such person to those firms offering research services. Such services may be used by the investment manager in providing advice to all RiverSource funds (or by any Fund subadviser to any other client of such subadviser) even though it is not possible to relate the benefits to any particular fund. Each investment decision made for the Fund is made independently from any decision made for another portfolio, fund, or other account advised by the investment manager or any of its subsidiaries. When the Fund buys or sells the same security as another portfolio, fund, or account, the investment manager carries out the purchase or sale in a way believed to be fair to the Fund. Although sharing in large transactions may adversely affect the price or volume purchased or sold by the Fund, the Fund hopes to gain an overall advantage in execution. On occasion, the Fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. On a periodic basis, the investment manager makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions. The review evaluates execution, operational efficiency, and research services. For fiscal periods noted below, each Fund paid the following total brokerage commissions. Substantially all firms through whom transactions were executed provide research services.
AUG. 31, 2005 AUG. 31, 2004 AUG. 31, 2003 Balanced $2,213,104 $2,129,661 $4,515,096 Cash Management 0 0 0 Core Bond 1,332 200(a) N/A Diversified Bond 75,344 73,033 160,924 Diversified Equity Income 1,115,276 618,138 404,266 Emerging Markets 946,745 278,501 140,367 Global Bond 6,636 3,972 10,757 Global Inflation Protected Securities 0(b) N/A N/A Growth 1,601,547 1,787,494 1,602,857 High Yield Bond 0 1,774 0 Income Opportunities 0 0(c) N/A International Opportunity 2,686,564 2,646,422 3,486,330 Large Cap Equity 9,980,403 5,718,476 8,716,167 Large Cap Value 17,813 7,034(a) N/A Mid Cap Growth 213,445 121,200 87,081 Mid Cap Value 3,616(d) N/A N/A New Dimensions 6,256,488 4,321,309 2,120,523 S&P 500 Index 22,302 27,420 24,385 Select Value 23,335 16,415(a) N/A Short Duration U.S. Government 10,692 33,970 64,310 Small Cap Advantage 742,376 770,263 569,268 Small Cap Value 742,999 579,839 473,123 Strategy Aggressive 847,503 1,581,098 1,046,957
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 32 In fiscal year 2005, the following transactions and commissions were specifically directed to firms in exchange for research services:
TRANSACTIONS OF SHARES COMMISSIONS Balanced $28,496,602 $ 40,573 Cash Management -- -- Core Bond -- -- Diversified Bond -- -- Diversified Equity Income 789,666 2,160 Emerging Markets -- -- Global Bond -- -- Global Inflation Protected Securities -- -- Growth 7,624,051 10,668 High Yield Bond -- -- Income Opportunities -- -- International Opportunity -- -- Large Cap Equity 62,610,340 148,439 Large Cap Value 145,260 179 Mid Cap Growth -- -- Mid Cap Value -- -- New Dimensions 35,871,781 48,651 S&P 500 Index -- -- Select Value 11,125,648 18,923 Short Duration U.S. Government -- -- Small Cap Advantage 11,514,246 28,174 Small Cap Value 45,922,108 55,963 Strategy Aggressive 14,041,675 17,487
As of the end of the most recent fiscal year, Emerging Markets, Global Inflation Protected Securities, International Opportunity, Mid Cap Value, Select Value and Strategy Aggressive held no securities of its regular brokers or dealers or of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 33 As of the end of the most recent fiscal year, each Fund held securities of its regular brokers or dealers of the parent of those brokers or dealers that derived more than 15% of gross revenue from securities-related activities as presented below:
VALUE OF SECURITIES FUND NAME OF ISSUER OWNED AT END OF FISCAL PERIOD VP Balanced Bear Stearns Adjustable Rate Mortgage Trust $ 2,579,659 Bear Stearns Commercial Mtge Securities 6,503,025 Citigroup 64,033,119 Citigroup Commercial Mortgage Trust 4,187,795 CS First Boston Mtge Securities 4,555,229 E*Trade Financial 1,749,632 Franklin Resources 6,093,089 GS Mtge Securities II 3,661,262 J.P. Morgan Chase & Co. 28,881,431 J.P. Morgan Chase Commercial Mtge Securities 12,434,124 LB-UBS Commercial Mtge Trust 19,968,470 Legg Mason 3,764,543 Lehman Brothers Holdings 9,546,381 Merrill Lynch & Co. 9,939,667 Merrill Lynch Mtge Trust 1,706,093 Morgan Stanley 18,904,665 Morgan Stanley Capital 1 6,308,861 Morgan Stanley, Dean Witter Capital 1 2,267,353 PNC Financial Services Group 8,110,840 VP Cash Management Bear Stearns Companies 22,429,667 Credit Suisse First Boston NY 10,000,000 Goldman Sachs Group 15,000,000 Lehman Brothers Holdings 8,000,000 Merrill Lynch & Co. 5,000,000 Morgan Stanley & Co. 2,989,687 VP Core Bond Bear Stearns Commercial Mtg Securities 439,011 Bear Stearns Adjustable Rate Mortgage Trust 255,472 Citigroup 810,745 Citigroup Commercial Mortgage Trust 186,124 CS First Boston Mtge Securities 295,798 GS Mtge Securities 200,418 LB-UBS Commercial Mtge Trust 963,203 J.P. Morgan Chase Commercial Mtge Securities 826,679 Merrill Lynch Mtge Trust 97,491 Morgan Stanley Capital 1 205,508 Morgan Stanley, Dean Witter Capital 1 134,962
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 34
VALUE OF SECURITIES FUND NAME OF ISSUER OWNED AT END OF FISCAL PERIOD VP Diversified Bond Bear Stearns Commercial Mtge Securities $ 9,041,464 Bear Stearns Adjustable Rate Mortgage Trust 9,007,333 Citigroup 26,047,139 Citigroup Commercial Mortgage Trust 7,444,967 CS First Boston Mtge Securities 10,834,107 GS Mtge Securities II 7,074,603 LB-UBS Commercial Mtge Trust 39,289,661 J.P. Morgan Chase Commercial Mtge Securities 27,345,498 Merrill Lynch Mtge Trust 3,241,578 Morgan Stanley Capital 1 11,064,475 Morgan Stanley, Dean Witter Capital 1 7,757,587 VP Diversified Equity Income Citigroup 56,463,300 Lehman Brothers Holdings 5,378,094 Merrill Lynch & Co. 9,397,104 Morgan Stanley 4,720,736 VP Global Bond Bear Stearns Commercial Mtge Securities 2,281,142 Citigroup 3,341,795 Citigroup Commercial Mortgage Trust 3,214,997 CS First Boston Mtge Securities 3,572,166 GS Mtge Securities 2,132,298 J.P. Morgan Chase Commercial Mtge Securities 3,243,374 LB-UBS Commercial Mtge Trust 9,406,791 Merrill Lynch Mtge Trust 1,121,147 Morgan Stanley Capital I 689,607 Morgan Stanley, Dean Witter Capital I 1,457,584 Morgan Stanley Group 2,561,131 VP Growth Bear Stearns Companies 899,228 Franklin Resources 1,292,027 VP High Yield Bond LaBranche & Co. 8,454,575 Morgan Stanley & Co. 9,979,233 VP Income Opportunities LaBranche & Co. 248,625 VP Large Cap Equity Citigroup 42,516,426 E*Trade Financial 2,819,120 Franklin Resources 9,819,552 J.P. Morgan Chase & Co. 22,594,124 Legg Mason 1,977,080 Lehman Brothers Holdings 8,742,414 Merrill Lynch & Co. 5,220,194 Morgan Stanley 16,217,052 PNC Financial Services Group 8,915,604
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 35
VALUE OF SECURITIES FUND NAME OF ISSUER OWNED AT END OF FISCAL PERIOD VP Large Cap Value Citigroup $ 475,474 E*Trade Financial 16,048 Franklin Resources 55,906 J.P. Morgan Chase 264,816 Legg Mason 34,495 Lehman Brothers Holdings 87,486 Merrill Lynch & Co. 91,113 Morgan Stanley 173,315 PNC Financial Services Group 74,392 VP Mid Cap Growth Legg Mason 7,516,439 VP New Dimensions Citigroup 18,745,247 Schwab (Charles) 60,554,936 VP S&P 500 Index American Express 2,098,236 Bear Stearns Companies 370,544 Citigroup 7,384,918 E*Trade Financial 191,200 Franklin Resources 516,827 Goldman Sachs Group 1,593,765 Lehman Brothers Holdings 948,193 J.P. Morgan Chase & Co. 3,867,696 Merrill Lynch & Co. 1,752,354 Morgan Stanley 1,807,766 PNC Financial Services Group 516,979 Schwab (Charles) 500,015 VP Short Duration U.S. Government Bear Stearns Alternative Trust 2,237,618 CitigroupCommercial Mortgage Trust 4,907,532 LB-UBS Commercial Mtge Trust 1,488,270 Morgan Stanley Capital 1 2,744,591 Morgan Stanley Mtge Loan Trust 2,383,552 VP Small Cap Advantage Investment Technology Group 863,879 Jefferies Group 489,552 VP Small Cap Value Affiliated Managers Group 656,394 Investment Technology Group 518,805 Morgan Stanley & Co. 6,099,395 optionsXpress Holdings 101,219
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 36 The portfolio turnover rates for the two most recent fiscal years were as follows:
AUG. 31, 2005 AUG. 31, 2004 Balanced 131% 133% Core Bond 339 221(a) Diversified Bond 293 295 Diversified Equity Income 25 19 Emerging Markets 120 117 Global Bond 79 105 Global Inflation Protected Securities 29(b) N/A Growth 154 192 High Yield Bond 106 139 Income Opportunities 93 36(c) International Opportunity 90 142 Large Cap Equity 132 114 Large Cap Value 52 24(a) Mid Cap Growth 34 25 Mid Cap Value 7(d) N/A New Dimensions 89 55 S&P 500 Index 5 -- Select Value 31 13(a) Short Duration U.S. Government 171 135 Small Cap Advantage 112 104 Small Cap Value 65 84 Strategy Aggressive 28 53
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. A higher turnover rate is the result of more frequent trading of portfolio securities. Frequent tradings may increase the amount of commissions or mark-ups paid to broker-dealers when they buy and sell securities. For Core Bond the variation in turnover rate can be attributed to the following: A significant portion of the turnover was the result of "roll" transactions in the liquid derivatives and Treasury securities. In the derivative transactions, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. In the Treasury transactions, existing holdings are sold to purchase newly issued securities with slightly longer maturity dates. Although these transactions affect the turnover rate of the portfolio, they do not change the risk exposure or result in material transaction costs. The remaining turnover resulted from strategic reallocations and relative value trading. After transaction costs, we expect this activity to enhance the returns on the overall fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 37 BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE INVESTMENT MANAGER Affiliates of the investment manager may engage in brokerage and other securities transactions on behalf of the Fund according to procedures adopted by the board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. The investment manager will use an affiliate only if (i) the investment manager determines that the Fund will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Fund and (ii) the affiliate charges the Fund commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Investment Management Services Agreement. Information about brokerage commissions paid by each Fund for the last three fiscal periods to brokers affiliated with the investment manager is contained in the following table: AS OF THE END OF FISCAL PERIOD
2005 2004 2003 --------------------------------------------- ---------------- ----------------- PERCENT OF AGGREGATE DOLLAR AMOUNT OF AGGREGATE DOLLAR PERCENT OF TRANSACTIONS AGGREGATE DOLLAR AGGREGATE DOLLAR AMOUNT OF AGGREGATE INVOLVING AMOUNT OF AMOUNT OF NATURE OF COMMISSIONS BROKERAGE PAYMENT OF COMMISSIONS COMMISSIONS FUND BROKER AFFILIATION PAID TO BROKER COMMISSIONS COMMISSIONS PAID TO BROKER PAID TO BROKER ----------------------------------------------------------------------------------------------------------------------------------- Balanced (1) (2) $3,299* 0.15% 0.05% $10,766* $172,596* Diversified Equity Income (1) (2) 1,052* 0.09 0.29 3,759* 9,635* Growth (1) (2) 714* 0.04 0.21 24,351* 31,108* Large Cap Equity (1) (2) 14,132* 0.14 0.33 45,985* 23,751* Large Cap Value (1) (2) 0* -- -- 17* 0* Mid Cap Growth (1) (2) 0* -- -- 1,650* 0* New Dimensions (1) (2) 11,952* 0.19 0.31 122,042* 32,412* Select Value Gabelli Company (3) 3,655 15.66 15.41 11,460 0 Small Cap Advantage (1) (2) 0* -- -- 0* 57* Small Cap Value M.J. Whittman LLC (4) 0 -- -- 45,845 74,790* Small Cap Value (cont.) Goldman Sachs (5) 457 0.06 0.03 3,806 0 Small Cap Value (cont.) Legg Mason (6) 297 0.04 0.06 0* 0 Wood Walker, Inc. Strategy Aggressive (1) (2) 0* -- -- 14,828* 18,428*
(1) American Enterprise Investment Services Inc. (2) Wholly-owned subsidiary of Ameriprise Financial. (3) Affiliate of GAMCO Asset Management, Inc. (4) Affiliate of Third Avenue Management LLC. (5) Affiliate of Goldman Sachs Management L.P. (6) Affiliate of Royce & Associates, LLC. * Represents brokerage clearing fees. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 38 VALUING FUND SHARES As of the end of the most recent fiscal year, the computation looked like this:
FUND NET ASSETS SHARES OUTSTANDING NET ASSET VALUE OF ONE SHARE Balanced $2,437,326,325 divided by 160,604,257 equals $15.18 Cash Management 687,605,127 687,850,731 1.00 Core Bond 57,939,791 5,763,369 10.05 Diversified Bond 1,824,269,923 171,153,440 10.66 Diversified Equity Income 1,679,081,197 121,431,081 13.83 Emerging Markets 191,960,884 14,604,276 13.14 Global Bond 575,292,316 52,208,744 11.02 Global Inflation Protected Securities 116,396,963 11,418,190 10.19 Growth 391,901,125 59,247,936 6.61 High Yield Bond 1,246,475,365 184,385,297 6.76 Income Opportunities 44,562,877 4,288,162 10.39 International Opportunity 1,184,338,421 118,141,847 10.02 Large Cap Equity 2,510,377,690 116,870,943 21.48 Large Cap Value 14,820,620 1,348,162 10.99 Mid Cap Growth 255,204,566 20,527,588 12.43 Mid Cap Value 7,115,835 623,021 11.42 New Dimensions 2,199,595,699 142,589,501 15.43 S&P 500 Index 367,350,623 44,241,047 8.30 Select Value 23,473,237 2,050,743 11.45 Short Duration U.S. Government 484,483,590 47,457,973 10.21 Small Cap Advantage 235,445,556 15,583,696 15.11 Small Cap Value 412,109,466 28,503,827 14.46 Strategy Aggressive 686,645,200 83,019,997 8.27
In determining net assets before shareholder transactions, the Fund's securities are valued as follows as of the close of business of the New York Stock Exchange (the Exchange): - Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. - Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. - Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. - Securities included in the NASDAQ National Market System for which a last-quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. - Futures and options traded on major exchanges are valued at the last-quoted sales price on their primary exchange. - Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars at the current rate of exchange. - Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 39 - Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. - Securities without a readily available market price and other assets are valued at fair value as determined in good faith by the board. The board is responsible for selecting methods it believes provide fair value. When possible, bonds are valued by a pricing service independent from the Fund. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. In accordance with Rule 2a-7 of the 1940 Act, all of the securities in Cash Management's portfolio are valued at amortized cost. The amortized cost method of valuation is an approximation of market value determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. It does not take into consideration unrealized capital gains or losses. The board has established procedures designed to stabilize the fund's price per share for purposes of sales and redemptions at $1, to the extent that it is reasonably possible to do so. These procedures include review of Cash Management's securities by the board, at intervals deemed appropriate by it, to determine whether Cash Management's net asset value per share computed by using available market quotations deviates from a share value of $1 as computed using the amortized cost method. The board must consider any deviation that appears and if it exceeds 0.5% it must determine what action, if any, needs to be taken. If the board determines a deviation exists that may result in a material dilution of the holdings of current shareholders or investors, or in other unfair consequences for such persons, it must undertake remedial action that it deems necessary and appropriate. Such action may include withholding dividends, calculating net asset value per share for purposes of sales and redemptions using available market quotations, making redemptions in kind, and selling securities before maturity in order to realize capital gains or losses or to shorten average portfolio maturity. While the amortized cost method provides certainty and consistency in portfolio valuation, it may result in valuations of securities that are either somewhat higher or lower than the prices at which the securities could be sold. This means that during times of declining interest rates the yield on Cash Management's shares may be higher than if valuations of securities were made based on actual market prices and estimates of market prices. Accordingly, if using the amortized cost method were to result in a lower portfolio value, a prospective investor in Cash Management would be able to obtain a somewhat higher yield than he would get if portfolio valuation were based on actual market values. Existing shareholders, on the other hand, would receive a somewhat lower yield than they would otherwise receive. The opposite would happen during a period of rising interest rates. PORTFOLIO HOLDINGS DISCLOSURE The Fund's board of directors and the investment manager believe that the investment ideas of the investment manager and any Fund Subadviser with respect to management of a Fund should benefit the Fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating Fund trading strategies or by using Fund portfolio holdings information for stock picking. However, the Fund's board also believes that knowledge of the Fund's portfolio holdings can assist shareholders in monitoring their investments, making asset allocation decisions, and evaluating portfolio management techniques. The Fund's board has therefore adopted the investment manager's policies and approved the investment manager's procedures, including the investment manager's oversight of Subadviser practices relating to disclosure of the Funds' portfolio securities. These policies and procedures are intended to protect the confidentiality of Fund portfolio holdings information and generally prohibit the release of such information until such information is made public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the Fund not to provide or permit others to provide holdings information on a selective basis, and the investment manager does not intend to selectively disclose holdings information or expect that such holdings information will be selectively disclosed, except where necessary for the Fund's operation or where there are legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the Fund and its shareholders. Although the investment manager seeks to limit the selective disclosure of portfolio holdings information and such selective disclosure is monitored under the Fund's compliance program for conformity with the policies and procedures, there can be no assurance that these policies will protect the Fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may the investment manager, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 40 A complete schedule of the Fund's portfolio holdings is available semi-annually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws and are generally available within sixty (60) days of the end of the Fund's fiscal quarter, on the Securities and Exchange Commission's Website. Once holdings information is filed with the SEC, it will also be posted on the website (www.riversource.com), and it may be mailed, e-mailed or otherwise transmitted to any person. In addition, the investment manager makes publicly available, on a monthly basis, information regarding the Fund's top ten holdings (including name and percentage of a Fund's assets invested in each such holding) and the percentage breakdown of a Fund's investments by country, sector and industry, as applicable. This holdings information is generally made available through the website, marketing communications (including printed advertisements and sales literature), and/or telephone customer service centers that support the Fund. This holdings information is generally not released until it is at least 30 days old. From time to time, the investment manager may make partial or complete Fund holdings information that is not publicly available on the website or otherwise available in advance of the time restrictions noted above (1) to its affiliated and unaffiliated service providers that require the information in the normal course of business in order to provide services to the Fund (including, without limitation entities identified by name in the Fund's prospectus or this SAI), such as custodians, auditors, subadvisers, financial printers (Cenveo, Inc., Vestek), pricing services (including Reuters Pricing Service, FT Interactive Data Corporation, Bear Stearns Pricing Service, and Kenny S&P), proxy voting services (Investor Responsibility Research Center, Inc.), and companies that deliver or support systems that provide analytical or statistical information (including, for example, Factset Research Systems, Bloomberg, L.P.), (2) to facilitate the review and/or rating of the Fund by ratings and rankings agencies (including, for example, Morningstar, Inc., Thomson Financial and Lipper Inc.), and (3) other entities that provide trading, research or other investment related services. In such situations, the information is released subject to confidentiality agreements, duties imposed under applicable policies and procedures (e.g., applicable codes of ethics) designed to prevent the misuse of confidential information, general duties under applicable laws and regulations, or other such duties of confidentiality. In addition, the Fund discloses holdings information as required by federal or state securities laws, and may disclose holdings information in response to requests by governmental authorities. The Fund's board has adopted the policies of the investment manager and approved the procedures Ameriprise Financial has established to ensure that the Fund's holdings information is only disclosed in accordance with these policies. Before any selective disclosure of holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee ("PHC"). The PHC is comprised of members from the investment manager's General Counsel's Office, Compliance, and Communications. The PHC has been authorized by the Funds' board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of the Fund and its shareholders, to consider any potential conflicts of interest between the Fund, the investment manager, and its affiliates, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized, including a duty not to trade on such information. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by the Fund's Chief Compliance Officer or the Fund's General Counsel. On at least an annual basis the PHC reviews the approved recipients of selective disclosure and, where appropriate, requires a resubmission of the request, in order to re-authorize any ongoing arrangements. These procedures are intended to be reasonably designed to protect the confidentiality of Fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the Funds' shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above. Although the investment manager has set up these procedures to monitor and control selective disclosure of holdings information, there can be no assurance that these procedures will protect the Fund from the potential misuse of holdings information by individuals or firms in possession of that information. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 41 PROXY VOTING GENERAL GUIDELINES The Fund upholds a long tradition of sound and principled corporate governance. For approximately 30 years, the Board of Directors, which consists of a majority of independent directors, has voted proxies. The funds administrator, Ameriprise Financial, provides support to the Board in connection with the proxy voting process. General guidelines are: - CORPORATE GOVERNANCE MATTERS -- The board supports proxy proposals that require changes or encourage decisions that have been shown to add shareholder value over time and votes against proxy proposals that entrench management. - CHANGES IN CAPITAL STRUCTURE -- The board votes for amendments to corporate documents that strengthen the financial condition of a business. - STOCK OPTION PLANS AND OTHER MANAGEMENT COMPENSATION ISSUES -- The board expects thoughtful consideration to be given by a company's management to developing a balanced compensation structure providing competitive current income with long-term employee incentives directly tied to the interest of shareholders and votes against proxy proposals that dilute shareholder value excessively. - SOCIAL AND CORPORATE POLICY ISSUES -- The board believes that proxy proposals should address the business interests of the corporation. Such proposals typically request that the company disclose or amend certain business practices but lack a compelling economic impact on shareholder value. In general, these matters are primarily the responsibility of management and should be reviewed by the corporation's board of directors, unless they have a substantial impact on the value of the Fund's investment. Each proposal is viewed in light of the circumstances of the company submitting the proposal. POLICY AND PROCEDURES The policy of the board is to vote all proxies of the companies in which the Fund holds investments. The Board has implemented policies and procedures reasonably designed to ensure that there are no conflicts between interests of a fund's shareholders and those of the fund's investment manager, RiverSource Investments, or other affiliated entities. The recommendation of the management of a company as set out in the company's proxy statement is considered. In each instance in which the Fund votes against the recommendation, the board sends a letter to senior management of the company explaining the basis for its vote. This has permitted both the company's management and the Fund's board to gain better insight into issues presented by proxy proposals. In the case of foreign corporations, proxies of companies located in some countries may not be voted due to requirements of locking up the voting shares and when time constraints prohibit the processing of proxies. From time to time a proxy proposal is presented that has not been previously considered by the board or that the investment manager recommends be voted different from the votes cast for similar proposals. In making recommendations to the board about voting on a proposal, the investment manager relies on its own investment personnel (or the investment personnel of the Fund's subadvisers) and information obtained from outside resources, including Glass Lewis & Co. The investment manager makes the recommendation in writing. The process established by the board to vote proxies requires that either Board members or officers who are independent from the investment manager consider the recommendation and decide how to vote the proxy proposal. PROXY VOTING RECORD Information regarding how a fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 can be obtained without charge: - Through www.riversource.com/investments, - On a website maintained by the SEC, www.sec.gov, or - By calling the fund's administrator, Board Services Corporation, collect at (612) 330-9283. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 42 SELLING SHARES The Fund will sell any shares presented by the shareholders (variable accounts or subaccounts) for sale. The policies on when or whether to buy or sell shares are described in your annuity or life insurance prospectus. During an emergency the board can suspend the computation of net asset value, stop accepting payments for purchase of shares, or suspend the duty of the Fund to sell shares for more than seven days. Such emergency situations would occur if: - The Exchange closes for reasons other than the usual weekend and holiday closings or trading on the Exchange is restricted, or - Disposal of the Fund's securities is not reasonably practicable or it is not reasonably practicable for the Fund to determine the fair value of its net assets, or - The SEC, under the provisions of the 1940 Act, declares a period of emergency to exist. Should the Fund stop selling shares, the board may make a deduction from the value of the assets held by the Fund to cover the cost of future liquidations of the assets so as to distribute these costs fairly among all contract owners. REJECTION OF BUSINESS The Fund reserves the right to reject any business, in its sole discretion. CAPITAL LOSS CARRYOVER For federal income tax purposes, each Fund had total capital loss carryovers at the end of the most recent fiscal period in an amount that if not offset by subsequent capital gains, will expire as follows:
AMOUNT EXPIRING TOTAL CAPITAL ------------------------------------------------------------------------------------------------ FUND LOSS CARRYOVERS 2007 2008 2009 2010 2011 2012 2013 2014 Balanced $ 71,249,204 $ -- $11,355,730 $59,893,474 $ -- $ -- $ -- $ -- $ -- Cash Management 1,797 -- 1,797 -- -- -- -- -- -- Diversified Bond 136,697,943 5,732,021 53,324,465 47,894,894 9,863,475 15,651,825 4,231,263 -- -- Growth 115,755,420 -- -- -- 36,012,947 79,742,473 -- -- -- High Yield Bond 222,337,062 -- -- 15,326,726 100,694,093 106,316,243 -- -- -- International Opportunity 690,331,815 -- 26,384,784 18,436,163 533,046,310 90,583,080 21,881,478 -- -- Large Cap Equity 416,160,189 -- -- 117,244,575 12,004,786 286,910,828 -- -- -- New Dimensions 254,908,325 -- -- -- 104,527,778 150,380,547 -- -- -- Short Duration U.S. Government 7,170,145 -- -- -- -- 68,452 -- 4,186,493 2,915,200 Strategy Aggressive 1,337,919,255 -- -- 118,368,309 869,472,336 310,534,170 39,544,440 -- --
It is unlikely that the board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules. TAXES The Fund may be subject to U.S. taxes resulting from holdings in a passive foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or more of its gross income for the taxable year is passive income or 50% or more of the average value of its assets consists of assets that produce or could produce passive income. Income earned by the Fund may have had foreign taxes imposed and withheld on it in foreign countries. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 43 AGREEMENTS INVESTMENT MANAGEMENT SERVICES AGREEMENT RiverSource Investments, a wholly-owned subsidiary of Ameriprise Financial, is the investment manager for the Fund. Under the Investment Management Services Agreement, the investment manager, subject to the policies set by the board, provides investment management services. For its services, the investment manager is paid a fee monthly based on the following schedule. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. BALANCED
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.50 0.630% Next 0.50 0.615 Next 1.00 0.600 Next 1.00 0.585 Next 3.00 0.570 Over 6.00 0.550
CASH MANAGEMENT
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.510% Next 0.50 0.493 Next 0.50 0.475 Next 0.50 0.458 Over 2.50 0.440
CORE BOND
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.630% Next 1.00 0.615 Next 1.00 0.600 Next 3.00 0.585 Next 3.00 0.570 Over 9.00 0.555
DIVERSIFIED BOND
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.610% Next 1.00 0.595 Next 1.00 0.580 Next 3.00 0.565 Next 3.00 0.550 Over 9.00 0.535
DIVERSIFIED EQUITY INCOME
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.50 0.560% Next 0.50 0.545 Next 1.00 0.530 Next 1.00 0.515 Next 3.00 0.500 Over 6.00 0.470
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 44 EMERGING MARKETS
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 1.170% Next 0.25 1.155 Next 0.25 1.140 Next 0.25 1.125 Next 1.00 1.110 Over 2.00 1.095
GLOBAL BOND
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 0.840% Next 0.25 0.825 Next 0.25 0.810 Next 0.25 0.795 Over 1.00 0.780
GLOBAL INFLATION PROTECTED SECURITIES
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.490% Next 1.00 0.475 Next 1.00 0.460 Next 3.00 0.445 Next 3.00 0.430 Over 9.00 0.415
GROWTH
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.630% Next 1.00 0.615 Next 1.00 0.600 Next 3.00 0.585 Over 6.00 0.570
HIGH YIELD BOND
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.620% Next 1.00 0.605 Next 1.00 0.590 Next 3.00 0.575 Next 3.00 0.560 Over 9.00 0.545
INCOME OPPORTUNITIES
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.640% Next 1.00 0.625 Next 1.00 0.610 Next 3.00 0.595 Next 3.00 0.580 Over 9.00 0.565
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 45 INTERNATIONAL OPPORTUNITY
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 0.870% Next 0.25 0.855 Next 0.25 0.840 Next 0.25 0.825 Next 1.00 0.810 Over 2.00 0.795
LARGE CAP EQUITY
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.630% Next 1.00 0.615 Next 1.00 0.600 Next 3.00 0.585 Over 6.00 0.570
LARGE CAP VALUE
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.630% Next 1.00 0.615 Next 1.00 0.600 Next 3.00 0.585 Over 6.00 0.570
MID CAP GROWTH
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 0.650% Next 0.25 0.635 Next 0.25 0.620 Next 0.25 0.605 Next 1.00 0.590 Next 1.00 0.575 Over 3.00 0.560
MID CAP VALUE
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $ 1.0 0.730% Next 1.0 0.705 Next 1.0 0.680 Next 3.0 0.655 Next 6.0 0.630 Next 12.0 0.620 Over 24.0 0.610
NEW DIMENSIONS
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.630% Next 1.00 0.615 Next 1.00 0.600 Next 3.00 0.585 Over 6.00 0.570
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 46 S&P 500 INDEX
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.290% Next 1.00 0.280 Next 3.00 0.270 Over 5.00 0.260
SELECT VALUE
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.50 0.810% Next 0.50 0.795 Next 1.00 0.780 Next 1.00 0.765 Next 3.00 0.750 Over 6.00 0.720
SHORT DURATION U.S. GOVERNMENT
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $1.00 0.610% Next 1.00 0.595 Next 1.00 0.580 Next 3.00 0.565 Next 3.00 0.550 Over 9.00 0.535
SMALL CAP ADVANTAGE
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 0.790% Next 0.25 0.770 Next 0.25 0.750 Next 0.25 0.730 Next 1.00 0.710 Over 2.00 0.650
SMALL CAP VALUE
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 1.020% Next 0.25 1.000 Next 0.25 0.980 Next 0.25 0.960 Next 1.00 0.940 Over 2.00 0.920
STRATEGY AGGRESSIVE
ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL First $0.25 0.650% Next 0.25 0.635 Next 0.25 0.620 Next 0.25 0.605 Next 1.00 0.590 Over 2.00 0.575
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 47 On the last day of the most recent fiscal period, the daily rate applied to the Fund's net assets was equal to the following percentage on an annual basis. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day.
FUND DAILY RATE Balanced 0.607% Cash Management 0.510 Core Bond 0.630 Diversified Bond 0.603 Diversified Equity Income 0.543 Emerging Markets 1.170 Global Bond 0.830 Global Inflation Protected Securities 0.490 Growth 0.630 High Yield Bond 0.617 Income Opportunities 0.640 International Opportunity 0.842 Large Cap Equity 0.618 Large Cap Value 0.630 Mid Cap Growth 0.650 Mid Cap Value 0.730 New Dimensions 0.620 S&P 500 Index 0.290 Select Value 0.810 Short Duration U.S. Government 0.610 Small Cap Advantage 0.790 Small Cap Value 1.012 Strategy Aggressive 0.636
For Balanced, Diversified Equity Income, Emerging Markets, Growth, International Opportunity, Large Cap Equity, Large Cap Value, Mid Cap Growth, Mid Cap Value, New Dimensions, Select Value, Small Cap Advantage, Small Cap Value and Strategy Aggressive, before the fee based on the asset charge is paid, it is adjusted for the Fund's investment performance relative to the Lipper Indexes (individually "Index") presented in the table below. If the Index ceases to be published for a period of more than 90 days, changes in any material respect, or otherwise becomes impracticable to use for purposes of the adjustment, no adjustment will be made until the Board approves a substitute index. The adjustment, determined monthly, will be determined by measuring the percentage difference over a rolling 12-month period between the change in the net asset value of one share of the Fund and the change in the Lipper Index. The Lipper Indexes are as follows:
FUND LIPPER INDEX Balanced Lipper Balanced Funds Index Diversified Equity Income Lipper Equity Income Funds Index Emerging Markets Lipper Emerging Markets Funds Index Growth Lipper Large-Cap Growth Funds Index International Opportunity Lipper International Large-Cap Core Funds Index Large Cap Equity Lipper Large-Cap Core Funds Index Large Cap Value Lipper Large-Cap Value Funds Index Mid Cap Growth Lipper Mid-Cap Growth Funds Index Mid Cap Value Lipper Mid-Cap Value Funds Index New Dimensions Lipper Large-Cap Growth Funds Index (through Oct. 31, 2005), Lipper Large-Cap Core Funds Index (effective Nov. 1, 2005) Select Value Lipper Multi-Cap Value Funds Index Small Cap Advantage Lipper Small-Cap Core Funds Index Small Cap Value Lipper Small-Cap Value Funds Index Strategy Aggressive Lipper Mid-Cap Growth Funds Index
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 48 The performance difference is then used to determine the adjustment rate. The adjustment rate for Diversified Equity Income, Emerging Markets, Growth, International Opportunity, Large Cap Equity, Large Cap Value, Mid Cap Growth, Mid Cap Value, New Dimensions, Select Value, Small Cap Advantage, Small Cap Value and Strategy Aggressive, computed to five decimal places, is determined in accordance with the following table:
PERFORMANCE DIFFERENCE ADJUSTMENT RATE 0.00%-0.50% 0 0.50%-1.00% 6 basis points times the performance difference over 0.50% (maximum of 3 basis points if a 1% performance difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the performance difference over 1.00% (maximum 6 basis points if a 2% performance difference) 2.00%-4.00% 6 basis points, plus 2 basis points times the performance difference over 2.00% (maximum 10 basis points if a 4% performance difference) 4.00%-6.00% 10 basis points, plus 1 basis point times the performance difference over 4.00% (maximum 12 basis points if a 6% performance difference) 6.00% or more 12 basis points
For example, if the performance difference is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] X 0.0002 [2 basis points] X 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the Fund is 0.0012 per year. Where the Fund's share performance exceeds that of the Index, the fee paid to the investment manager will increase. Where the performance of the Index exceeds the performance of the Fund's shares, the fee paid to the investment manager will decrease. The adjustment rate for Balanced, computed to five decimal places, is determined in accordance with the following table:
PERFORMANCE DIFFERENCE ADJUSTMENT RATE 0.00%-0.50% 0 0.50%-1.00% 6 basis points times the Performance Difference over 0.50% (maximum of 3 basis points if a 1% Performance Difference) 1.00%-2.00% 3 basis points, plus 3 basis points times the Performance Difference over 1.00% (maximum 6 basis points if a 2% Performance Difference) 2.00%-3.00% 6 basis points, plus 2 basis points times the Performance Difference over 2.00% (maximum of 8 basis points if a 3% Performance Difference) 3.00% or more 8 basis points
For example, if the performance difference is 2.38%, the adjustment rate is 0.000676 (0.0006 [6 basis points] plus 0.0038 [the 0.38% performance difference over 2.00%] X 0.0002 [2 basis points] X 100 (0.000076)). Rounded to five decimal places, the adjustment rate is 0.00068. The maximum adjustment rate for the Fund is 0.00080 per year. Where the Fund's share performance exceeds that of the Index, the fee paid to the investment manager will increase. Where the performance of the Index exceeds the performance of the Fund's shares, the fee paid to the investment manager will decrease. The 12-month comparison period rolls over with each succeeding month, so that it always equals 12 months, ending with the month for which the performance adjustment is being computed. For the most recent fiscal period, the adjustment changed the fee as follows:
ADJUSTMENT INCREASED/(DECREASED) FUND FEE BY Balanced $ 702,269 Diversified Equity Income 957,131 Emerging Markets (52,859) Growth (179,212) International Opportunity (444,320) Large Cap Equity (592,373) Large Cap Value 196 Mid Cap Growth (181,465) New Dimensions (1,900,920) Select Value (1,689) Small Cap Advantage 19,577 Small Cap Value (117,658) Strategy Aggressive (516,976)
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 49 The management fee is paid monthly. Under the agreement, advisory expenses paid for the following fiscal periods were as follows:
FUND 2005 2004 2003 Balanced $16,475,472 $14,949,024 $14,961,945 Cash Management 3,618,791 3,943,361 5,189,115 Core Bond 290,514 108,039(a) -- Diversified Bond 10,446,764 10,267,470 11,121,622 Diversified Equity Income 7,790,892 3,909,591 1,495,598 Emerging Markets 1,128,628 333,875 134,837 Global Bond 4,107,042 3,087,011 2,370,419 Global Inflation Protected Securities 167,833(b) -- -- Growth 2,023,076 1,444,157 1,068,315 High Yield Bond 7,533,530 6,361,088 4,158,089 Income Opportunities 165,239 24,242(c) -- International Opportunity 8,953,186 6,271,576 6,108,448 Large Cap Equity 15,079,399 13,899,157 12,597,101 Large Cap Value 70,240 17,499(a) -- Mid Cap Growth 1,435,137 1,207,591 789,579 Mid Cap Value 10,481(d) -- -- New Dimensions 14,503,077 17,068,182 17,629,745 S&P 500 Index 973,909 691,747 361,397 Select Value 123,757 26,064(a) -- Short Duration U.S. Government 3,045,061 2,917,663 2,508,938 Small Cap Advantage 1,757,829 1,319,284 560,022 Small Cap Value 3,087,940 1,775,982 876,649 Strategy Aggressive 4,288,049 4,741,305 5,526,254
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. Under the current Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses which include custodian fees and expenses, audit expenses, cost of items sent to contract owners, postage, fees and expenses paid to board members who are not officers or employees of the investment manager, fees and expenses of attorneys, costs of fidelity and surety bonds, SEC registration fees, expenses of preparing prospectuses and of printing and distributing prospectuses to existing contract owners, losses due to theft or other wrong doing or due to liabilities not covered by bond or agreement, expenses incurred in connection with lending securities and expenses properly payable by the Fund, approved by the board. All other expenses are borne by the investment manager. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 50 Under the agreement, nonadvisory expenses, net of earnings credits waivers and expenses reimbursed by the investment manager and its affiliates, paid for the following fiscal years were as follows:
FUND 2005 2004 2003 Balanced $879,722 $621,427 $755,600 Cash Management 239,685 153,930 296,307 Core Bond 64,359 27,209(a) -- Diversified Bond 654,797 486,884 596,353 Diversified Equity Income 669,524 394,376 192,223 Emerging Markets 207,894 83,718 44,996 Global Bond 312,839 217,046 188,858 Global Inflation Protected Securities 26,773(b) -- -- Growth 154,684 307,329 268,161 High Yield Bond 422,329 266,908 250,031 Income Opportunities 35,712 6,812(c) -- International Opportunity 689,296 418,998 353,295 Large Cap Equity 834,053 471,564 545,654 Large Cap Value 21,370 7,089(a) -- Mid Cap Growth 130,183 212,938 204,710 Mid Cap Value 2,241(d) -- -- New Dimensions 879,217 699,540 902,794 S&P 500 Index 8,545 (3,134) (4,001) Select Value 25,807 5,496(a) -- Short Duration U.S. Government 207,177 151,503 155,494 Small Cap Advantage 190,155 107,639 131,572 Small Cap Value 302,252 232,430 318,514 Strategy Aggressive 263,154 220,604 285,548
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 51 SUBADVISORY AGREEMENT EMERGING MARKETS AND INTERNATIONAL OPPORTUNITY The assets of the Fund are managed by a Subadviser that has been selected by the investment manager, subject to the review and approval of the board. The investment manager has recommended the Subadviser for the Fund to the board based upon its assessment of the skills of the Subadviser in managing other assets with goals and investment strategies substantially similar to those of the Fund. Short-term investment performance is not the only factor in selecting or terminating a Subadviser, and the investment manager does not expect to make frequent changes of Subadvisers. The Subadviser has discretion, subject to oversight by the board and the investment manager, to purchase and sell portfolio assets, consistent with the Fund's investment objectives, policies, and restrictions. Generally, the services that the Subadviser provides to the Fund are limited to asset management and related recordkeeping services. The investment manager has entered into an advisory agreement with each Subadviser known as a Subadvisory Agreement. A Subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the investment manager or its affiliates. THREADNEEDLE INTERNATIONAL LIMITED: Threadneedle International Limited (Threadneedle), a direct wholly owned subsidiary of Ameriprise Financial, 60 St. Mary Axe, London EC3A 8JQ, England, subadvises the assets in Emerging Markets and International Opportunity. Threadneedle, subject to supervision and approval of the investment manager, provides day-to-day management of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. Under the Subadvisory Agreement, the fee, based on average daily net assets that is subject to the Subadviser's investment discretion is equal to:
ASSETS (BILLIONS) EMERGING MARKETS INTERNATIONAL OPPORTUNITY First $0.15 0.45% 0.35% Next 0.50 0.40 0.30 Next 0.50 0.35 0.25 Over 1.15 0.30 0.20
The total amount paid by the investment manager to Threadneedle for each Fund for the fiscal year 2005 and fiscal period 2004 was as follows:
FUND 2005 2004 Emerging Markets $ 429,646 $ 32,134 International Opportunity 3,057,193 477,868
The Subadvisory Agreement with Threadneedle provides for a performance incentive adjustment ("PIA") to Threadneedle's monthly subadvisory fee. The adjustment for Threadneedle is based on the performance of one share of the Fund and the change in the Lipper peer group index that appears in the prospectus for the Fund (Index). The performance of the Fund and the Index will be calculated using the same method as described above for the performance incentive adjustment paid to the investment manager under the terms of the Investment Management Services Agreement. The amount of the adjustment to the fees payable to Threadneedle, whether positive or negative, shall be equal to one-half (1/2) of the PIA made to the investment management fee that the investment manager is currently entitled to under the terms of the Advisory Agreement. The PIA is effective Dec. 1, 2004. FORMER SUBADVISER FOR EMERGING MARKETS AND INTERNATIONAL OPPORTUNITY: American Express Asset Management International Inc. (AEAMI) (now known as RiverSource Investments, LLC) subadvised the assets in Emerging Markets and International Opportunity under a Subadvisory Agreement with the investment manager from Fund inception through July 9, 2004. Under the Subadvisory Agreement, AEAMI received an annual fee of 0.35% of average daily net assets. The total amount paid by the investment manager to AEAMI for each Fund for the following fiscal years was as follows:
FUND 2004 2003 Emerging Markets $ 70,099 $ 41,689 International Opportunity 2,372,049 2,564,968
SMALL CAP ADVANTAGE The assets of Small Cap Advantage are managed by a Subadviser that has been selected by the investment manager, subject to the review and approval of the board. The investment manager has recommended the Subadviser for the Fund to the board based upon its assessment of the skills of the Subadviser in managing other assets with goals and investment strategies substantially similar to those of the Fund. Short-term investment performance is not the only factor in selecting or terminating a Subadviser, and the investment manager does not expect to make frequent changes of Subadvisers. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 52 The Subadviser has discretion, subject to oversight by the board and the investment manager, to purchase and sell portfolio assets, consistent with the Fund's investment objectives, policies, and restrictions. Generally, the services that the Subadviser provides to the Fund are limited to asset management and related recordkeeping services. The investment manager has entered into an advisory agreement with the Subadviser known as a Subadvisory Agreement. A Subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the investment manager or its affiliates. KENWOOD CAPITAL MANAGEMENT LLC (KENWOOD), an indirect partially owned subsidiary of the investment manager located at Metropolitan Center, Suite 2300, 333 South 7th Street, Minneapolis, MN 55402, subadvises the assets of Small Cap Advantage. Kenwood, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of the Fund's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. Under the Subadvisory Agreement, the fee, based on average daily net assets that are subject to Kenwood investment discretion is equal to 0.35%. Under the agreement, the total amount paid for Small Cap Advantage was $772,535 for fiscal year 2005, $541,441 for fiscal year 2004 and $242,909 for fiscal year 2003. SELECT VALUE The assets of Select Value are managed by a Subadviser that has been selected by the investment manager, subject to the review and approval of the board. The investment manager has recommended the Subadviser for the Fund to the board based upon its assessment of the skills of the Subadviser in managing other assets with goals and investment strategies substantially similar to those of Select Value. Short-term investment performance is not the only factor in selecting or terminating a Subadviser, and the investment manager does not expect to make frequent changes of Subadvisers. The Subadviser has discretion, subject to oversight by the board and the investment manager, to purchase and sell portfolio assets, consistent with Select Value's investment objectives, policies, and restrictions. Generally, the services that the Subadviser provides to Select Value are limited to asset management and related recordkeeping services. The investment manager has entered into an advisory agreement with the Subadviser known as a Subadvisory Agreement. A Subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the investment manager or its affiliates. GABELLI: GAMCO Asset Management, Inc., which does business under the name Gabelli Asset Management Company, located at One Corporate Center, Rye, NY 10580, subadvises the Fund's assets. The Subadviser, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of Partners Select Value's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. Under the Subadvisory Agreement, the fee, based on the combined average daily net assets of RiverSource Select Value Fund and RiverSource VP - Select Value Fund that are subject to the Subadviser's investment discretion, is equal to 0.40% on the first $500 million, reducing to 0.30% as assets increase. The total amount paid for RiverSource VP - Select Value Fund was $59,064 for fiscal year 2005, and $13,489 for fiscal period 2004. Gabelli began subadvising RiverSource VP - Select Value Fund in January 2004. SMALL CAP VALUE The assets of Small Cap Value are managed by five Subadvisers that have been selected by the investment manager, subject to the review and approval of the board. The investment manager has recommended the Subadvisers for Small Cap Value to the board based upon its assessment of the skills of the Subadvisers in managing other assets with goals and investment strategies substantially similar to those of Small Cap Value. Short-term investment performance is not the only factor in selecting or terminating a Subadviser, and the investment manager does not expect to make frequent changes of Subadvisers. The investment manager allocates the assets of Small Cap Value among the Subadvisers. Each Subadviser has discretion, subject to oversight by the board and the investment manager, to purchase and sell portfolio assets, consistent with Small Cap Value's investment objectives, policies, and restrictions. Generally, the services that the Subadviser provides to Small Cap Value are limited to asset management and related recordkeeping services. The investment manager has entered into an advisory agreement with each Subadviser known as a Subadvisory Agreement. A Subadviser may also serve as a discretionary or non-discretionary investment adviser to management or advisory accounts that are unrelated in any manner to the investment manager or its affiliates. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 53 GSAM: Goldman Sachs Asset Management, L.P. (GSAM), located at 32 Old Slip, 17th Floor, New York, New York, subadvises a portion of Small Cap Value's assets. GSAM, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of a portion of Small Cap Value's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. GSAM is a division of the Goldman Sachs Group, Inc., a publicly traded financial services company, located at 85 Broad Street, New York, New York. Under the Subadvisory Agreement, the fee, based on the combined average daily net assets of RiverSource Small Cap Value Fund and RiverSource VP - Small Cap Value Fund that are subject to the Subadviser's investment discretion, is equal to 0.60% on the first $100 million, reducing to 0.55% as assets increase. The total amount paid for RiverSource VP - Small Cap Value was $334,797 for fiscal year 2005, $318,678 for fiscal year 2004 and $10,731 for fiscal period 2003. The Subadviser began subadvising RiverSource VP - Small Cap Value Fund on Aug. 11, 2003. ROYCE: Royce & Associates, LLC (Royce), located at 1414 Avenue of the Americas, New York, New York, subadvises a portion of Small Cap Value's assets. Royce, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of a portion of Small Cap Value's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. Royce is a direct wholly-owned subsidiary of Legg Mason, Inc. located at 100 Light Street, Baltimore, Maryland. Under the Subadvisory Agreement, the fee, based on the combined average daily net assets of RiverSource Small Cap Value Fund and RiverSource VP - Small Cap Value Fund that are subject to the Subadviser's investment discretion, is equal to .80% on the first $50 million, reducing to ..60% as assets increase. The total amount paid for RiverSource VP - Small Cap Value was $518,048 for fiscal year 2005, $470,848 for fiscal year 2004 and $324,032 for fiscal year 2003. FRANKLIN: Franklin Portfolio Associates LLC (Franklin Portfolio Associates), located at One Boston Place, 29th Floor, Boston, Massachusetts, subadvises a portion of Partners Small Cap Value's assets. Franklin, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of a portion of Small Cap Value's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. Franklin Portfolio Associates is an indirect wholly-owned subsidiary of Mellon Financial Corporation, located at One Mellon Center, Pittsburgh, Pennsylvania. Under the Subadvisory Agreement, the fee, based on the combined average daily net assets of RiverSource Small Cap Value Fund and RiverSource VP - Small Cap Value Fund that are subject to the Subadviser's investment discretion, is equal to .60% on the first $100 million reducing to .55% as assets increase. The total amount paid for RiverSource VP - Small Cap Value Fund was $350,034 for fiscal year 2005 and $62,780 for fiscal period 2004. Franklin Portfolio Associates began subadvising RiverSource VP - Small Cap Value Fund on March 15, 2004. BHMS: Barrow, Hanley, Mewhinney & Strauss, Inc. (BHMS), located at 2200 Ross Avenue, 31st Floor, Dallas, Texas, subadvises Small Cap Value's assets. BHMS, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of a portion of Small Cap Value's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. BMHS is an independent-operated subsidiary of Old Mutual Asset Management (US) group of companies. Under the Subadvisory Agreement, the fee, based on the combined average daily net assets of RiverSource Small Cap Value Fund and RiverSource VP - Small Cap Value Fund that are subject to the Subadviser's investment discretion, is equal to 1.00% on the first $10 million reducing to .30% as assets increase. The total amount paid for RiverSource VP - Small Cap Value Fund was $297,471 for fiscal year 2005 and $58,516 for fiscal period 2004. BHMS began subadvising RiverSource VP - Small Cap Value Fund on March 15, 2004. DONALD SMITH: Donald Smith & Co., Inc. (Donald Smith), located at East 80 Route 4, Suite 360, Paramus, New Jersey, subadvises a portion of Small Cap Value's assets. Donald Smith, subject to the supervision and approval of the investment manager, provides investment advisory assistance and day-to-day management of a portion of Small Cap Value's portfolio, as well as investment research and statistical information, under a Subadvisory Agreement with the investment manager. Under the Subadvisory Agreement, the fee, based on the combined average daily net assets of RiverSource Small Cap Value Fund and RiverSource VP - Small Cap Value Fund that are subject to the Subadviser's investment discretion, is equal to .60% on the first $175 million reducing to .55% as assets increase. The total amount paid RiverSource VP - Small Cap Value Fund was $337,518 for fiscal year 2005 and $66,278 for fiscal period 2004. Donald Smith began subadvising RiverSource VP - Small Cap Value Fund on March 15, 2004. FORMER SUBADVISERS FOR RIVERSOURCE VP - SMALL CAP VALUE FUND: National City Investment Manager (National City) subadvised a portion of RiverSource VP - Small Cap Value Fund's assets from Aug. 1, 2002 to Aug. 10, 2003. The total amount paid to National City was $78,050 for fiscal period 2003 (from Oct. 1, 2002 to Aug. 10, 2003). Third Avenue Management LLC (Third Avenue) subadvised a portion of RiverSource VP - Small Cap Value Fund's assets from RiverSource VP - Small Cap Value Fund's inception to March 2004. The total amount paid for RiverSource VP - Small Cap Value Fund to Third Avenue was $116,248 for fiscal period 2004 and $125,228 for fiscal year 2003. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 54 PORTFOLIO MANAGERS. The following table provides information about the funds' portfolio managers as of Aug. 31, 2005.
OTHER ACCOUNTS MANAGED ----------------------------------------------- APPROXIMATE POTENTIAL NUMBER AND TOTAL NET ASSETS OWNERSHIP OF CONFLICTS STRUCTURE OF FUND PORTFOLIO MANAGER TYPE OF ACCOUNT (EXCLUDING THE FUND) FUND SHARES OF INTEREST COMPENSATION ----------------------------------------------------------------------------------------------------------------------------------- Balanced Tom Murphy 8 Registered Investment $6.22 billion None (1) (1) Companies ("RICs")(a) $1.29 billion 4 Pooled Investment $19.82 billion Vehicles ("PIVs") 23 other accounts(b),(c) Jamie Jackson 12 RICs(a) $8.50 billion None 6 PIVs $3.21 billion 31 other accounts(b),(c) $5.59 billion Scott Kirby 11 RICs(a) $8.44 billion None 6 PIVs $2.38 billion 45 other accounts(b),(c) $23.27 billion Bob Ewing 6 RICs(d) $5.46 billion None (10) (2) 2 PIVs $0.25 billion 1 other account $0.01 billion Core Bond Tom Murphy 8 RICs(e) $7.00 billion None (1) (1) 4 PIVs $1.29 billion 23 other accounts(b),(c) $19.82 billion Jamie Jackson 12 RICs(e) $9.28 billion None 6 PIVs $3.21 billion 31 other accounts(b),(c) $5.59 billion Scott Kirby 11 RICs(e) $9.22 billion None 6 PIVs $2.38 billion 45 other accounts(b),(c) $23.27 billion Diversified Bond Tom Murphy 8 RICs(e) $5.23 billion None (1) (1) 4 PIVs $1.29 billion 23 other accounts(b),(c) $19.82 billion Jamie Jackson 12 RICs(e) $7.51 billion None 6 PIVs $3.21 billion 31 other accounts(b),(c) $5.59 billion Scott Kirby 11 RICs(e) $7.45 billion None 6 PIVs $2.38 billion 45 other accounts(b),(c) $23.27 billion Jennifer Ponce 5 RICs $6.48 billion None de Leon 1 PIV $0.03 billion 10 other accounts $3.25 billion Nicolas Pifer 4 RICs $3.67 billion None 4 PIVs $0.47 billion 15 other accounts(b),(f) $4.22 billion Diversified Warren Spitz 4 RICs(d) $8.26 billion None (1) (3) Equity Income 1 PIV $0.16 billion 1 other account $0.01 billion Laton Spahr Steve Schroll
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 55
OTHER ACCOUNTS MANAGED ----------------------------------------------- APPROXIMATE POTENTIAL NUMBER AND TOTAL NET ASSETS OWNERSHIP OF CONFLICTS STRUCTURE OF FUND PORTFOLIO MANAGER TYPE OF ACCOUNT (EXCLUDING THE FUND) FUND SHARES OF INTEREST COMPENSATION ----------------------------------------------------------------------------------------------------------------------------------- Emerging Markets Julian Thompson 1 RIC(d) $0.59 billion None (11) (4) 1 PIV $0.02 billion 2 other accounts $0.26 billion Jules Mort 1 RIC(d) $0.4 billion 2 PIVs $1.28 billion Global Bond Nicolas Pifer 4 RICs $4.92 billion None (1) (1) 4 PIVs $0.47 billion 15 other accounts(b),(f) $4.22 billion Global Inflation Jamie Jackson 12 RICs(e) $9.22 billion None (1) (1) Protected 6 PIVs $3.21 billion Securities 31 other account(b),(c) $5.59 billion Growth Nick Thakore 4 RICs(d) $7.63 billion None (10) (2) 2 PIVs $0.25 billion 0 other accounts High Yield Bond Scott Schroepfer 1 RIC $2.35 billion None (1) (1) Jennifer Ponce de Leon 5 RICs $7.06 billion 1 PIV $0.03 billion 10 other accounts $3.25 billion Income Brian Lavin 1 RIC $0.36 billion None (1) (1) Opportunities Jennifer Ponce de Leon 5 RICs $8.26 billion 1 PIV $0.03 billion 10 other accounts $3.25 billion International Alex Lyle 2 RICs(d) $0.69 billion None (11) (4) Opportunity 27 PIVs $1.7 billion 2 other accounts $0.28 billion Dominic Rossi 2 RICs(d) $1.1 billion 1 other account $0.55 billion Large Cap Equity Nick Thakore 4 RICs(d) $5.12 billion None (10) (2) 2 PIVs $0.25 billion 0 other accounts Bob Ewing 6 RICs(d) $4.54 billion None 2 PIVs $0.25 billion 1 other account $0.01 billion Large Cap Value Bob Ewing 6 RICs(d) $6.91. billion None (10) (2) 2 PIVs $0.25 billion 1 other account $0.01 billion Mid Cap Growth Duncan Evered 1 RIC(d) $2.00 billion None (1) (5) 2 PIVs $0.23 billion 13 other accounts $1.87 billion
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 56
OTHER ACCOUNTS MANAGED ----------------------------------------------- APPROXIMATE POTENTIAL NUMBER AND TOTAL NET ASSETS OWNERSHIP OF CONFLICTS STRUCTURE OF FUND PORTFOLIO MANAGER TYPE OF ACCOUNT (EXCLUDING THE FUND) FUND SHARES OF INTEREST COMPENSATION ----------------------------------------------------------------------------------------------------------------------------------- Mid Cap Value Warren Spitz 4 RICs(d) $8.95 billion None (1) (3) 1 PIV $0.16 billion 1 other account $0.01 billion Laton Spahr Steve Schroll New Dimensions Gordon Fines 1 RIC(d) $5.33 billion None (1) (5) 1 PIV $0.1 billion 7 other accounts $1.68 billion Michael Nance 1 RIC(d) $5.66 billion None 1 PIV $0.05 billion 12 other accounts(b) $0.2 billion Trisha Schuster 1 RIC(d) $5.33 billion None (1), (2) (6) S&P 500 Index David Factor, CFA 2 RICs $1.52 billion None (1) (7) 2 PIVs $2.4 billion Select Value GAMCO: Mario 24 RICs(h) $13.9 billion* None (5) (8) Gabelli 18 PIVs(h) $1.1 billion* 1,882 other accounts(h) $10.0 billion* Short Duration Scott Kirby 11 RICs(e) $8.79 billion None (1) (1) U.S. Government 6 PIVs $2.38 billion 45 other accounts(b),(c) $23.3 billion Jamie Jackson 12 RICs(e) $8.85 billion None 6 PIVs $3.21 billion 31 other accounts(b),(c) $5.59 billion Small Cap RiverSource 4 RICs(d) $2.03 billion None (1) (1), (9) Advantage Investments: 6 PIV $0.16 billion Dimitris Bertsimas 8 other accounts(b) $0.08 billion RiverSource 2 RICs(d) $0.91 billion $10,001- Investments: 6 PIV 0.16 billion $50,000 Jonathan Calvert Kenwood: 1 RIC(d) $0.77 billion None (1), (3) (10) Jake Hurwitz 1 PIV $0.05 billion 19 other accounts(g) $0.6 billion Kenwood: None Kent Kelley
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 57
OTHER ACCOUNTS MANAGED ----------------------------------------------- APPROXIMATE POTENTIAL NUMBER AND TOTAL NET ASSETS OWNERSHIP OF CONFLICTS STRUCTURE OF FUND PORTFOLIO MANAGER TYPE OF ACCOUNT (EXCLUDING THE FUND) FUND SHARES OF INTEREST COMPENSATION ----------------------------------------------------------------------------------------------------------------------------------- Small Cap Value Royce: 6 RICs $8.6 billion None (6) (11) Jay S. Kaplan Goldman: 22 RICs $12.5 billion None (4) (12) Eileen Rominger 2 PIVs $0.1 billion 307 other accounts $6.0 billion Goldman: Dolores Bamford Goldman: David Berdon Goldman: Lisa Parisi Goldman: 6 RICs $1.09 billion None (4) (12) J. Kelly Flynn 2 PIVs $0.1 billion 7 other accounts $0.7 billion Goldman: Chip Otness Donald Smith: 2 RICs $1.29 billion None (7) (13) Donald G. Smith 1 PIV $0.184 billion 28 other accounts $2.063 billion Donald Smith: Richard L. Greenberg Franklin Portfolio 6 RICs (with 19 total $16.1 billion None (8) (14) Associates: portfolios) $0.7 billion John S. Cone 6 PIVs $15.6 billion 86 other accounts Franklin Portfolio Associates: Michael F. Dunn Franklin Portfolio Associates: Oliver E. Buckley Franklin Portfolio Associates: Kristin J. Crawford Franklin Portfolio Associates: Langton Garvin BHMS: 3 RICs $0.6 billion None (9) (15) James S. McClure 17 other accounts $0.6 billion BHMS: John P. Harloe
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 58
OTHER ACCOUNTS MANAGED ----------------------------------------------- APPROXIMATE POTENTIAL NUMBER AND TOTAL NET ASSETS OWNERSHIP OF CONFLICTS STRUCTURE OF FUND PORTFOLIO MANAGER TYPE OF ACCOUNT (EXCLUDING THE FUND) FUND SHARES OF INTEREST COMPENSATION ----------------------------------------------------------------------------------------------------------------------------------- Strategy Paul Rokosz 1 RIC(d) $0.55 billion None (1) (5) Aggressive 1 PIV $0.10 billion 9 other accounts $1.7 billion
* Represents the portion of assets for which the portfolio manager has primary responsibility in the accounts indicated. The accounts indicated may contain additional assets under the primary responsibility of other portfolio managers. (a) The advisory fee paid to RiverSource Investments on 2 of the RICs with approximately $0.62 billion in aggregate net assets is based in part on performance. (b) Reflects each wrap program strategy as a single client, rather than counting each participant in the program as a separate client. (c) The advisory fee paid to RiverSource Investments on 1 of the other accounts with approximately $0.098 billion in aggregate net assets is based in part on performance. (d) The advisory fee paid is based in part on the performance of the fund or account. (e) The advisory fee paid to RiverSource Investments on 3 of the RICs with approximately $1.45 billion in aggregate net assets is based in part on performance. (f) The advisory fee paid to RiverSource Investments on 1 of the other accounts with approximately $0.14 billion in aggregate net assets is based in part on performance. (g) The advisory fee paid to RiverSource Investments on 1 of the other accounts with approximately $0.06 billion in aggregate net assets is based in part on performance. (h) The advisory fee paid for 6 RICs with approximately $4.8 billion in total net assets, for 17 PIVs with approximately $716.7 million in total net assets, and for 5 other accounts with approximately $1.4 billion in total net assets is based on performance. POTENTIAL CONFLICTS OF INTEREST (1) RiverSource Investments portfolio managers may manage one or more mutual fund as well as other types of accounts, including proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicles whose fees may be materially greater than the management fees paid by the fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution for all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. (2) The portfolio manager's responsibilities also include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that the portfolio manager manages versus communicating his or her analyses to other portfolio managers concerning securities that he or she follows as an analyst. (3) Kenwood is an affiliate of Ameriprise Financial. The potential conflicts, responsibilities, policies and procedures described in paragraph (1) also apply to Kenwood. (4) GSAM's portfolio managers are often responsible for managing one or more funds as well as other accounts, including proprietary accounts, separate accounts and other pooled investment vehicles, such as unregistered hedge funds. A portfolio manager may manage a separate account or other pooled investment vehicle which may have materially higher fee arrangements than the fund and may also have a performance-based fee. The side-by-side management of these funds may raise potential conflicts of interest relating to cross trading, the allocation of investment opportunities and the aggregation and allocation of trades. GSAM has a fiduciary responsibility to manage all client accounts in a fair and equitable manner. It seeks to provide best execution of all securities transactions and aggregate and then allocate securities to client accounts in a fair and timely manner. To this end, GSAM has developed policies and procedures designed to mitigate and manage the potential conflicts of interest that may arise from side-by-side management. In addition, GSAM has adopted policies limiting the circumstances under which cross-trades may be effected between a fund and another client account. GSAM conducts periodic reviews of trades for consistency with these policies. Due to GSAM's internal policies, GSAM portfolio managers are generally prohibited from purchasing shares of sub-advised funds for which they have primary responsibility. (5) Actual or apparent conflicts of interest may arise when the portfolio manager also has day-to-day management responsibilities with respect to one or more other accounts. These potential conflicts include: ALLOCATION OF LIMITED TIME AND ATTENTION. Because the portfolio manager manages many accounts, he may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as if he were to devote substantially more attention to the management of only a few accounts. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 59 ALLOCATION OF LIMITED INVESTMENT OPPORTUNITIES. If the portfolio manager identifies an investment opportunity that may be suitable for multiple accounts, the Fund may not be able to take full advantage of that opportunity because the opportunity may need to be allocated among all or many of these accounts or other accounts managed primarily by other portfolio managers of the GAMCO Asset Management, Inc. (GAMCO) and its affiliates. GAMCO does business under the name Gabelli Asset Management Company. PURSUIT OF DIFFERING STRATEGIES. At times, the portfolio manager may determine that an investment opportunity may be appropriate for only some of the accounts for which he exercises investment responsibility, or may decide that certain of these accounts should take differing positions with respect to a particular security. In these cases, the portfolio manager may execute differing or opposite transactions for one or more accounts, which may affect the market price of the security or the execution of the transactions, or both, to the detriment of one or more of his accounts. SELECTION OF BROKER/DEALERS. Because of the portfolio manager's position with Gabelli & Company, Inc., an affiliate of GAMCO that is a registered broker-dealer, and his indirect majority ownership interest in Gabelli & Company, Inc., he may have an incentive to use Gabelli & Company, Inc. to execute portfolio transactions for the Fund even if using Gabelli & Company, Inc. is not in the best interest of the fund. VARIATION IN COMPENSATION. A conflict of interest may arise where the financial or other benefits available to the portfolio manager differ among the accounts that he manages. If the structure of GAMCO's management fee or the portfolio manager's compensation differs among accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the portfolio manager may be motivated to favor certain funds or accounts over others. The portfolio manager also may be motivated to favor funds or accounts in which he has an investment interest, or in which GAMCO or its affiliates have investment interests. In Mr. Gabelli's case, GAMCO's compensation (and expenses) for the Fund are marginally greater as a percentage of assets than for certain other accounts and are less than for certain other accounts managed by Mr. Gabelli, while his personal compensation structure varies with near-term performance to a greater degree in certain performance fee based accounts than with nonperformance based accounts. In addition, he has investment interests in several of the funds managed by GAMCO and its affiliates. GAMCO and the Fund have adopted compliance policies and procedures that are designed to address the various conflicts of interest that may arise for GAMCO and its staff members. However, there is no guarantee that such policies and procedures will be able to detect and address every situation in which an actual or potential conflict may arise. (6) The fact that Mr. Kaplan has day-to-day management responsibility for more than one client account may create actual, potential or only apparent conflicts of interest. For example, Mr. Kaplan may have an opportunity to purchase securities of limited availability. In this circumstance, Mr. Kaplan is expected to review each account's investment guidelines, restrictions, tax considerations, cash balances, liquidity needs and other factors to determine the suitability of the investment for each account and to ensure that his managed accounts are treated equitably. Mr. Kaplan may also decide to purchase or sell the same security for multiple managed accounts at approximately the same time. To address any conflicts that this situation may create, Mr. Kaplan will generally combine managed account orders (i.e., enter a "bunched" order) in an effort to obtain best execution or a more favorable commission rate. In addition, if orders to buy or sell a security for multiple accounts managed by Mr. Kaplan on the same day are executed at different prices or commission rates, the transactions will generally be allocated by Royce to each of such managed accounts at the weighted average execution price and commission. In circumstances where a bunched order is not completely filled, each account will normally receive a pro-rata portion of the securities based upon the account's level of participation in the order. Royce may under certain circumstances allocate securities in a manner other than pro-rata if it determines that the allocation is fair and equitable under the circumstances and does not discriminate against any account. (7) Donald Smith & Co., Inc. is very sensitive to conflicts of interest that could possibly arise in its capacity of serving as an investment adviser. It remains committed to resolving any and all conflicts in the best interest of its clients. Donald Smith & Co., Inc. is an independent investment advisor with no parent or subsidiary organizations. Additionally, it has no affiliated organizations, brokerage, nor any investment banking activities. Clients include mutual funds, public and corporate pension plans, endowments and foundations, and other separate accounts. Donald Smith & Co., Inc. has put in place systems, policies and procedures, which have been designed to maintain fairness in portfolio management across all clients. Potential conflicts between funds or with other types of accounts are managed via allocation policies and procedures, internal review processes, and direct oversight by Donald G. Smith, President. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 60 (8) Portfolio Managers at Franklin Portfolio Associates (FPA) may manage one or more mutual funds as well as other types of accounts, including proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicle whose fees may be materially greater than the management fees paid by Small Cap Value Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. FPA has a fiduciary responsibility to all of the clients for which it manages accounts. FPA seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. FPA has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. (9) BHMS's portfolio managers manage one or more mutual funds as well as other types of accounts, such as separate accounts for institutions and individuals. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. BHMS has a fiduciary responsibility to all of the clients for which it manages accounts. BHMS seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. BHMS has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. All clients are managed identically whether BHMS receives an asset based fee, a performance based fee or a combination of the two. All client accounts are treated equally as all purchases and sales of securities are aggregated. (10) RiverSource Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including hedge funds, proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicle whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. In addition, RiverSource Investments monitors a variety of areas (e.g., allocation of investment opportunities) and compliance with the firm's Code of Ethics, and places additional investment restrictions on portfolio managers who manage hedge funds and certain other accounts. RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. (11) Threadneedle Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including proprietary accounts, separate accounts for institutions, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage a separate account or other pooled investment vehicle whose fees may be materially greater than the management fees paid by the Fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, and the aggregation and allocation of trades. In addition, the portfolio manager's responsibilities at Threadneedle Investments include working as a securities analyst. This dual role may give rise to conflicts with respect to making investment decisions for accounts that he/she manages versus communicating his/her analyses to other portfolio managers concerning securities that he/she follows as an analyst. Threadneedle Investments has a fiduciary responsibility to all of the clients for which it manages accounts. Threadneedle Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and timely manner. Threadneedle Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 61 STRUCTURE OF COMPENSATION (1) The portfolio manager's compensation as a RiverSource Investments employee consists of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. An annual bonus is paid from a team bonus pool that is based on both mutual fund and institutional portfolio performance. Funding for the bonus pool is determined by the aggregate market competitive bonus targets for the team of which the portfolio manager is a member and by the short-term (typically one year) and long-term (typically three year) performance of the accounts compared to applicable benchmarks. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of the portfolio manager's bonus based on his/her performance as an employee. RiverSource Investments' portfolio managers are provided with a benefits package including life insurance, health insurance and participation in the company's 401(k) plan comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments' portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (2) The portfolio manager's compensation as a RiverSource Investments employee consists of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual bonus is paid from a team bonus pool that is based on mutual fund, institutional portfolio and hedge fund performance. In addition, where portfolio managers invest in a hedge fund managed by RiverSource Investments, they receive a cash reimbursement for the fees charged on their hedge fund investments. With respect to mutual funds and institutional portfolios, funding for the bonus pool is determined by a percentage of the aggregate assets under management in these accounts managed by the portfolio managers, including the Fund, and by the short-term (typically one year) and long-term (typically three year) performance of those accounts in relation to the relevant peer groups. With respect to hedge funds, funding for the bonus pool is a percentage of performance fees earned on the hedge funds managed by the portfolio managers. The percentage of the hedge fund performance fees used to fund the bonus pool is determined annually based on the performance of the mutual funds managed by the portfolio managers. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager's bonus based on his performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in company 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (3) The portfolio manager's compensation as a RiverSource Investments employee consists of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual bonus is paid from a team bonus pool that is based on both mutual fund and institutional portfolio performance. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the Fund, and by the short term (typically one-year) and long-term (typically three year) performance of those accounts in relation to the relevant peer groups. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager's bonus based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in the company's 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments' portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (4) The portfolio manager's compensation as a Threadneedle Investments employee consists of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual bonus is paid from a team bonus pool that is based on both mutual fund and institutional portfolio performance. Funding for the bonus pool is determined by the aggregate market competitive bonus targets for the teams of which the portfolio manager is a member and by the short-term (typically one year) and long-term (typically three year) performance of the accounts compared to applicable benchmarks. Senior management of Threadneedle Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager's bonus based on his/her performance as an employee. Threadneedle Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company pension plan, comparable to that received by other Threadneedle Investments employees. Depending upon their job level, Threadneedle Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all Threadneedle Investments employees at the same job level. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 62 (5) The portfolio manager's compensation as a RiverSource Investments employee consists of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual bonus is paid from a team bonus pool that is based on both mutual fund and institutional portfolio performance. With respect to mutual funds, funding for the bonus pool is determined by a percentage of the aggregate assets under management in mutual funds managed by the portfolio managers, including the Fund, and by the short-term (typically one year) and long-term (typically three year) performance of those accounts in relation to the relevant peer groups and with respect to other accounts, by a percentage of management fees. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager's bonus based on his performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in company 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (6) The portfolio manager's compensation as a RiverSource Investments employee consists of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual bonus is paid from a team bonus pool that is based on both mutual fund and institutional portfolio performance. With respect to mutual funds, funding for the bonus pool is determined by a percentage of the aggregate assets under management in mutual funds managed by the portfolio managers, including the Fund, plus a percentage of the assets of the funds they support as research analysts and by the short-term (typically one year) and long-term (typically three year) performance of those accounts in relation to the relevant peer groups and with respect to other accounts, by a percentage of management fees. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager's bonus based on his performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in company 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (7) The compensation of RiverSource Investments employees consists of (i) a base salary, and (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program. The portfolio manager's annual bonus is based on (i) the fund's assets, (ii) the fund's short-term and long-term tracking error compared to the benchmark index and (iii) the tracking error of two other index funds managed by the portfolio manager compared to the relevant index. Effective Jan. 1, 2005, the portfolio manager's annual bonus is based on the foregoing factors as well as the performance of other accounts that he manages. RiverSource Investments' portfolio managers are provided benefits packages including life insurance, health insurance and participation in the company's 401(k) plan comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments' portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (8) Mr. Gabelli receives incentive-based variable compensation based on a percentage of net revenues received by GAMCO for managing Select Value Fund. Net revenues are determined by deducting from gross investment management fees paid by the Fund the firm's expenses (other than Mr. Gabelli's compensation) allocable to the Fund. Additionally, he receives similar incentive-based variable compensation for managing other accounts within the firm. This method of compensation is based on the premise that superior long-term performance in managing a portfolio should be rewarded with higher compensation as a result of growth of assets through appreciation and net investment activity. One of the other registered investment companies managed by Mr. Gabelli has a performance (fulcrum) fee arrangement for which his compensation is adjusted up or down based on the performance of the investment company relative to an index. Five closed-end registered investment companies managed by Mr. Gabelli have arrangements whereby GAMCO will receive only its investment advisory fee attributable to the liquidation value of outstanding preferred stock (and Mr. Gabelli would only receive his percentage of such advisory fee) if certain performance levels are met. Mr. Gabelli manages other accounts with performance fees. Compensation for managing these accounts has two components. One component of the fee is based on a percentage of net revenues received by GAMCO for managing the account. The second component is based on absolute performance of the account, with respect to which a percentage of such performance fee is paid to Mr. Gabelli. As an executive officer of the GAMCO parent company, Gabelli Asset Management Inc., Mr. Gabelli also receives ten percent of the net operating profits of the parent company. Mr. Gabelli receives no base salary, no annual bonus and no stock options. (9) Funding for bonuses is also based on certain activities of the team in developing technology tools that can be used in RiverSource Investments' asset management business. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 63 (10) Messrs. Hurwitz and Kelley are both equity owners of Kenwood. Their compensation consists of a salary, plus a pro rata share of the annual net earnings of Kenwood, some of which derives from fees paid by the fund. Messrs. Hurwitz and Kelley are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other employees of Kenwood. Messrs. Hurwitz and Kelley are also eligible for certain benefits that are available to all equity owners of Kenwood. (11) Mr. Kaplan receives from Royce a base salary, a performance bonus, a "Partners Pool" participation based primarily on registered investment company and other client account revenues generated by Royce and a benefits package. Mr. Kaplan's compensation is reviewed and may be modified from time to time as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses. BASE SALARY - Mr. Kaplan is paid a base salary. In setting the base salary, Royce seeks to be competitive in light of Mr. Kaplan's experience and responsibilities. PERFORMANCE BONUS - Mr. Kaplan receives a quarterly performance bonus that is revenue-based, and therefore in part is based on the value of the accounts' net assets, determined with reference to each of the registered investment company accounts he manages. For Mr. Kaplan, the revenue-based performance bonus applicable to the registered investment company accounts he manages is subject to upward or downward adjustment or elimination based on a combination of 3-year and 5-year risk-adjusted pre-tax returns of such accounts relative to all small-cap objective funds with three years of history tracked by Morningstar and the 5-year absolute returns of such accounts relative to 5-year U.S. Treasury Notes. Payment of the performance bonus may be deferred as described below, and any amounts deferred are forfeitable, if a portfolio manager is terminated by Royce with or without cause or resigns. The amount of the deferred performance bonus will appreciate or depreciate during the deferral period, based on the total return performance of one or more Royce registered investment company accounts selected by the portfolio manager at the beginning of the deferral period. The amount deferred will depend on the portfolio manager's total direct, indirect beneficial, and deferred unvested bonus investments in the Royce registered investment company account for which he is receiving portfolio management compensation. PARTNERS POOL - Each portfolio manager, as well as other senior firm employees, participates in a quarterly pool relating to Royce's net operating revenues adjusted for some imputed expenses. A portion of this participation may be deferred for three years. The deferred portion is also forfeitable if the portfolio manager is terminated with or without cause or resigns, and appreciates or depreciates during the deferral period based on the total return of a basket of registered investment company accounts managed by Royce. BENEFIT PACKAGE - Each portfolio manager also receives benefits standard for all Royce employees, including health care and other insurance benefits, and participation in Royce's 401(k) Plan and Money Purchase Pension Plan. From time to time, on a purely discretionary basis, portfolio managers may also receive options to acquire stock in Royce's parent company, Legg Mason, Inc. Those options typically represent a small portion of a portfolio manager's overall compensation. (12) GSAM and the GSAM Value Team's (the Value Team) compensation package for its Portfolio Managers is comprised of a base salary and a performance bonus. The performance bonus is a function of each Portfolio Manager's individual performance and his or her contribution to overall team performance. Portfolio Managers are rewarded for their ability to outperform a benchmark while managing risk appropriately. Compensation is also influenced by the Value Team's total revenues for the past year, which in part is derived from advisory fees and for certain accounts, performance based fees. Anticipated compensation levels among competitor firms may also be considered, but is not a principal factor. The performance bonus is significantly influenced by a 3-year period of investment performance. The following criteria are considered: - Individual performance (relative, absolute) - Team Performance (relative, absolute) - Consistent performance that aligns with clients' objectives - Achievement of top rankings (relative and competitive) The investment performance mentioned above is considered only on a pre-tax basis. As it relates to relative performance, the benchmark for this Fund is the Russell 2000 Value Index. As mentioned above, performance is measured on a 3-year basis. OTHER COMPENSATION. GSAM offers a number of additional benefits/deferred compensation programs for all Portfolio Managers including (i) a 401(k) program that enables employees to direct a percentage of their pretax salary and bonus income into a tax-qualified retirement plan; (ii) a profit sharing program to which Goldman Sachs & Co. makes a pretax contribution; and (iii) investment opportunity programs in which certain professionals are eligible to participate subject to certain net worth requirements. Portfolio Managers may also receive grants of restricted stock units and/or stock options as part of their compensation. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 64 Certain GSAM Portfolio Managers may also participate in the firm's Partner Compensation Plan, which covers many of the firm's senior executives. In general, under the Partner Compensation Plan, participants receive a base salary and a bonus (which may be paid in cash or in the form of an equity-based award) that is linked to Goldman Sachs' overall financial performance. (13) All employees at Donald Smith & Co., Inc. are compensated on incentive plans. The compensation for portfolio managers, analysts and traders at Donald Smith consists of a base salary, a partnership interest in the firm's profits, and possibly an additional, discretionary bonus. This discretionary bonus can exceed 100% of the base salary if performance for clients exceeds established benchmarks. The current benchmark utilized is the Russell 2000 Value Index. Additional distribution of firm ownership is a strong motivation for continued employment at Donald Smith & Co., Inc. Administrative personnel are also given a bonus as a function of their contribution and the profitability of the firm. (14) FPA's portfolio managers are encouraged and expected to work as a team. Compensation is commensurate with their performance and that of the firm. The percentage of compensation derived from base salary, bonus and other incentives varies widely across the firm and is dependent on the area of responsibility and seniority of the employee. FPA feels that the salary component of its compensation structure is competitive with other investment managers. All of our investment professionals participate in a deferred compensation arrangement; they receive a share of the firm's profits which are allocated to an account, payable at a future point in time, provided they remain with the firm. (15) In addition to base salary, all of BHMS's portfolio managers and analysts share in a bonus pool that is distributed semi-annually. The amount of bonus compensation is based on quantitative and qualitative factors. Analysts and portfolio managers are rated on the value that they add to the team-oriented investment process. Compensation is not tied to a published or private benchmark. It is important to understand that contributions to the overall investment process may include not recommending securities in an analyst's sector if there are no compelling opportunities in the industries covered by that analyst. In addition, many BHMS employees, including all portfolio managers and analysts, have equity ownership in the firm through "phantom stock" in BHMS, and participate in a long-term incentive plan with Old Mutual Asset Management (US), an affiliate of BHMS. Also, all partners of the firm receive, on a quarterly basis, a share of the firm's profits, which are, to a great extent, related to the performance of the entire investment team. ADMINISTRATIVE SERVICES AGREEMENT The Funds have an Administrative Services Agreement with Ameriprise Financial. Under this agreement, the Funds pay Ameriprise Financial for providing administration and accounting services. The fees are calculated as follows:
FUNDS ASSETS ANNUAL RATE AT EACH ASSET LEVEL --------------------------------------------------------------------------------------------------------------- Emerging Markets $0 - 500,000,000 0.080% Global Bond 500,000,001 - 1,000,000,000 0.075 International Opportunity 1,000,000,001 - 3,000,000,000 0.070 Small Cap Advantage 3,000,000,001 - 12,000,000,000 0.060 Small Cap Equity 12,000,000,001+ 0.050 Small Cap Value Core Bond $0 - 500,000,000 0.070% Diversified Bond 500,000,001 - 1,000,000,000 0.065 Global Inflation Protected 1,000,000,001 - 3,000,000,000 0.060 High Yield Bond 3,000,000,001 - 12,000,000,000 0.050 Income Opportunities 12,000,000,001+ 0.040 Short Duration U.S. Government Balanced $0 - 500,000,000 0.060% Cash Management 500,000,001 - 1,000,000,000 0.055 Diversified Equity Income 1,000,000,001 - 3,000,000,000 0.050 Growth 3,000,000,001 - 12,000,000,000 0.040 Large Cap Equity 12,000,000,001+ 0.030 Large Cap Value Mid Cap Growth Mid Cap Value New Dimensions S&P 500 Index Select Value Strategy Aggressive Value
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 65 On the last day of the most recent fiscal period, the daily rates applied to the Funds' net assets on an annual basis were:
FEES PAID DURING FUND DAILY RATES PRIOR FISCAL YEAR Balanced 0.032% $ 892,514 Cash Management 0.030 228,193 Core Bond 0.050 19,968 Diversified Bond 0.048 863,405 Diversified Equity Income 0.034 468,417 Emerging Markets 0.100 98,265 Global Bond 0.057 289,959 Global Inflation Protected Securities 0.050(a) 16,066 Growth 0.050 149,053 High Yield Bond 0.049 625,083 Income Opportunities 0.050 15,279 International Opportunity 0.051 593,033 Large Cap Equity 0.046 1,227,017 Large Cap Value 0.050 5,559 Mid Cap Growth 0.060 151,155 Mid Cap Value 0.050(b) 718 New Dimensions 0.047 1,284,313 S&P 500 Index 0.080 272,087 Select Value 0.060 9,292 Short Duration U.S. Government 0.050 258,743 Small Cap Advantage 0.060 132,967 Small Cap Value 0.078 251,446 Strategy Aggressive 0.055 431,432
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding business day. Third parties with which Ameriprise Financial contracts to provide services for the Fund or its shareholders may pay a fee to Ameriprise Financial to help defray the cost of providing administrative and accounting services. The amount of any such fee is negotiated separately with each service provider and does not constitute compensation for investment advisory, distribution, or other services. Payment of any such fee neither increases nor reduces fees or expenses paid by shareholders of the Fund. PLAN AND AGREEMENT OF DISTRIBUTION To help defray the cost of distribution and servicing, the Fund and IDS Life Insurance Company (IDS Life) entered into a Plan and Agreement of Distribution (Plan) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, of the type known as a reimbursement plan, IDS Life is paid a fee up to actual expenses incurred at an annual rate of up to 0.125% of the Fund's average daily net assets. Expenses covered under this Plan include sales commissions; business, employee and financial advisor expenses charged to distribution of shares; and overhead appropriately allocated to the sale of shares. These expenses also include costs of providing personal service to contract owners. A substantial portion of the costs are not specifically identified to any one of the RiverSource Variable Portfolio Funds. The Plan must be approved annually by the board, including a majority of the disinterested board members, if it is to continue for more than a year. At least quarterly, the board must review written reports concerning the amounts expended under the Plan and the purposes for which such expenditures were made. The Plan and any agreement related to it may be terminated at any time by vote of a majority of board members who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or in any agreement related to the Plan, or by vote of a majority of the outstanding voting securities of the Fund or by IDS Life. The Plan (or any agreement related to it) will terminate in the event of its assignment, as that term is defined in the 1940 Act. The Plan may not be amended to increase the amount to be spent for distribution without shareholder approval, and all material amendments to the Plan must be approved by a majority of the board members, including a majority of the board members who are not interested persons of the Fund and who do not have a financial interest in the operation of the Plan or any agreement related to it. The selection and RIVERSOURCE VARIABLE PORTFOLIO FUNDS 66 nomination of disinterested board members is the responsibility of the other disinterested board members. No board member who is not an interested person has any direct or indirect financial interest in the operation of the Plan or any related agreement. Fees paid for the following fiscal periods were as follows:
FEES PAID DURING FUND PRIOR FISCAL YEAR Balanced $3,258,265 Cash Management 886,958 Core Bond 57,634 Diversified Bond 2,163,215 Diversified Equity Income 1,559,298 Emerging Markets 126,227 Global Bond 617,003 Global Inflation Protected Securities 42,814(a) Growth 365,846 High Yield Bond 1,525,551 Income Opportunities 32,273 International Opportunity 1,392,429 Large Cap Equity 3,171,288 Large Cap Value 13,898 Mid Cap Growth 310,975 Mid Cap Value 1,795(b) New Dimensions 3,323,835 S&P 500 Index 419,788 Select Value 19,359 Short Duration U.S. Government 623,988 Small Cap Advantage 275,040 Small Cap Value 394,484 Strategy Aggressive 946,936
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. The fee is not allocated to any one service (such as advertising, payments to underwriters or other uses). However, a significant portion of the fee is generally used for sales and promotional expenses. CUSTODIAN AGREEMENT The Fund's securities and cash are held by Ameriprise Trust Company, 200 Ameriprise Financial Center, Minneapolis, MN 55474, through a custodian agreement. The custodian is permitted to deposit some or all of its securities in central depository systems as allowed by federal law. For its services, the Fund pays the custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. The custodian may enter into a sub-custodian agreement with the Bank of New York, 90 Washington Street, New York, NY 10286. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of Bank of New York or in other financial institutions as permitted by law and by the Fund's sub-custodian agreement. ORGANIZATIONAL INFORMATION The Fund is an open-end management investment company. The Fund headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-3268. SHARES The Fund is owned by the subaccounts, its shareholders. The shares of the Fund represent an interest in that fund's assets only (and profits or losses), and, in the event of liquidation, each share of the Fund would have the same rights to dividends and assets as every other share of that Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 67 VOTING RIGHTS For a discussion of the rights of contract owners concerning the voting of shares held by the subaccounts, please see your annuity or life insurance contract prospectus. All shares have voting rights over the Fund's management and fundamental policies. Each share is entitled to vote based on the total dollar interest in the Fund. All shares have cumulative voting rights with respect to the election of board members. This means that shareholders have as many votes as the dollar amount owned, including the fractional amount, multiplied by the number of members to be elected. FUND HISTORY TABLE FOR FUNDS MANAGED BY RIVERSOURCE INVESTMENTS*
DATE OF FORM OF STATE OF FISCAL ORGANIZATION ORGANIZATION ORGANIZATION YEAR END DIVERSIFIED AXP VARIABLE PORTFOLIO - INCOME SERIES, INC. 4/27/81, 6/13/86(1) Corporation NV/MN 8/31 RiverSource Variable Portfolio - Core Bond Fund Yes RiverSource Variable Portfolio - Diversified Bond Fund(2) Yes RiverSource Variable Portfolio - Global Bond Fund No RiverSource Variable Portfolio - Global Inflation Protected Securities Fund No RiverSource Variable Portfolio - High Yield Bond Fund(2) Yes RiverSource Variable Portfolio - Income Opportunities Fund Yes RiverSource Variable Portfolio - Short Duration U.S. Government Fund(2) Yes AXP VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. 4/27/81, 6/13/86(1) Corporation NV/MN 8/31 RiverSource Variable Portfolio - Emerging Markets Fund Yes RiverSource Variable Portfolio - Growth Fund Yes RiverSource Variable Portfolio - International Opportunity Fund Yes RiverSource Variable Portfolio - Large Cap Equity Fund Yes RiverSource Variable Portfolio - Large Cap Value Fund Yes RiverSource Variable Portfolio - Mid Cap Growth Yes RiverSource Variable Portfolio - Mid Cap Value Fund Yes RiverSource Variable Portfolio - New Dimensions Fund Yes RiverSource Variable Portfolio - S&P 500 Index Fund Yes RiverSource Variable Portfolio - Small Cap Advantage Fund Yes RiverSource Variable Portfolio - Strategy Aggressive Fund Yes AXP VARIABLE PORTFOLIO - MANAGED SERIES, INC. 3/5/85 Corporation MN 8/31 RiverSource Variable Portfolio - Balanced Fund Yes RiverSource Variable Portfolio - Diversified Equity Income Fund Yes AXP VARIABLE PORTFOLIO - MONEY MARKET SERIES, INC. 4/27/81, 6/13/86(1) Corporation NV/MN 8/31 RiverSource Variable Portfolio - Cash Management Fund Yes AXP VARIABLE PORTFOLIO - PARTNERS SERIES, INC. 5/9/01 Corporation MN 8/31 RiverSource Variable Portfolio - Select Value Fund Yes RiverSource Variable Portfolio - Small Cap Value Fund Yes AXP VARIABLE PORTFOLIO - SELECT SERIES, INC. 3/18/04 Corporation MN 12/31 RiverSource Variable Portfolio - Core Equity Fund Yes
* Effective Oct. 1, 2005 American Express Funds changed its name to RiverSource funds and the names Threadneedle and Partners were removed from fund names. (1) Date merged into a Minnesota corporation. (2) Effective June 27, 2003, VP - Bond Fund changed its name to VP - Diversified Bond Fund, VP - Extra Income Fund changed its name to VP - High Yield Bond Fund and VP - Federal Income Fund changed its name to VP - Short Duration U.S. Government Fund. (3) Effective July 9, 2004, VP - Capital Resource Fund changed its name to VP - Large Cap Equity Fund, VP - Emerging Markets Fund changed its name to VP - Threadneedle Emerging Markets Fund and VP - International Fund changed its name to VP - Threadneedle International Fund. (4) Effective Oct. 1, 2005, VP - Equity Select Fund changed its name to VP - Mid Cap Growth Fund, VP - Threadneedle International Fund changed its name to VP - International Opportunity Fund, and VP Managed Fund changed its name to VP - Balanced Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 68 BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees the fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the fund's Board members. Each member oversees 14 Master Trust portfolios and 90 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who must retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, ADDRESS, POSITION HELD WITH FUND PRINCIPAL OCCUPATION OTHER COMMITTEE AGE AND LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, Board Services Joint Audit, Contracts, 901 S. Marquette Ave. since 1999 Corporation (provides Executive, Investment Minneapolis, MN 55402 administrative services Review, Board Age 70 to boards); former Effectiveness Governor of Minnesota Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Scottish Power PLC, Vulcan Joint Audit, Executive, 901 S. Marquette Ave. since 2002 Fluor Corporation Materials Company, Inc. Investment Review Minneapolis, MN 55402 (engineering and (construction Age 67 construction) since 1998 materials/chemicals) Livio D. DeSimone Board member Retired Chair of the Cargill, Incorporated Joint Audit, Executive, 30 Seventh Street East since 2001 Board and Chief Executive (commodity merchants and Investment Review Suite 3050 Officer, Minnesota Mining processors), General St. Paul, MN 55101-4901 and Manufacturing (3M) Mills, Inc. (consumer Age 71 foods), Vulcan Materials Company (construction materials/chemicals), Milliken & Company (textiles and chemicals), and Nexia Biotechnologies, Inc. Patricia M. Flynn Board member Trustee Professor of Investment Review, 901 S. Marquette Ave. since 2004 Economics and Management, Joint Audit Minneapolis, MN 55402 Bentley College since Age 54 2002; former Dean, McCallum Graduate School of Business, Bentley College from 1999 to 2002 Anne P. Jones Board member Attorney and Consultant Joint Audit, 901 S. Marquette Ave. since 1985 Board Effectiveness, Minneapolis, MN 55402 Executive, Age 70 Investment Review Stephen R. Lewis, Jr. Board member Retired President and Valmont Industries, Inc. Contracts, 901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation Investment Review, Minneapolis, MN 55402 Carleton College systems) Executive, Age 66 Board Effectiveness Catherine James Paglia Board member Director, Enterprise Strategic Distribution, Investment Review, 901 S. Marquette Ave. since 2004 Asset Management, Inc. Inc. (transportation, Contracts Minneapolis, MN 55402 (private real estate and distribution and logistics Age 52 asset management company) consultants) since 1999 Alan K. Simpson Board member Former three-term United Investment Review, 1201 Sunshine Ave. since 1997 States Senator for Wyoming Board Effectiveness Cody, WY 82414 Age 73 Alison Taunton-Rigby Board member Founder and Chief Hybridon, Inc. Investment Review, 901 S. Marquette Ave. since 2002 Executive Officer, (biotechnology) Contracts Minneapolis, MN 55402 RiboNovix, Inc. since Age 61 2004; President, Forester Biotech since 2000; prior to that, President and CEO, Aquila Biopharmaceuticals, Inc.
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 69 BOARD MEMBER AFFILIATED WITH AMERIPRISE FINANCIAL, INC. (FORMERLY AEFC)
NAME, ADDRESS, POSITION HELD WITH FUND PRINCIPAL OCCUPATION OTHER COMMITTEE AGE AND LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member since 2001, President - U.S. Asset 53600 Ameriprise Vice President since Management and Chief Financial Center 2002 Investment Officer of Minneapolis, MN 55474 Ameriprise Financial, Age 44 Inc. and President, Chairman of the Board and Chief Investment Officer of RiverSource Investments, LLC since 2005; Senior Vice President - Chief Investment Officer of Ameriprise Financial, Inc. and RiverSource Investments, LLC since 2001. Former Chief Investment Officer and Managing Director, Zurich Scudder Investments
* Interested person by reason of being an officer, director and/or employee of Ameriprise Financial, Inc. (formerly known as American Express Financial Corporation) or of RiverSource Investments, LLC, its wholly owned subsidiary. The board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: OTHER OFFICERS
NAME, ADDRESS, POSITION HELD WITH FUND PRINCIPAL OCCUPATION OTHER COMMITTEE AGE AND LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS ---------------------------------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President - 105 AXP Financial Center Investment Accounting, Minneapolis, MN 55474 Ameriprise Financial, Age 50 since 2002; Vice President - Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, 1996-2000 Paula R. Meyer President since 2002 Senior Vice President and 596 AXP Financial Center General Manager - Mutual Minneapolis, MN 55474 Funds, Ameriprise Age 51 Financial, since 2002; Vice President and Managing Director - Ameriprise Financial funds, Ameriprise Financial, 2000-2002; Vice President, Ameriprise Financial, 1998-2000 Leslie L. Ogg Vice President, General President of Board 901 S. Marquette Ave. Counsel, and Secretary Services Corporation Minneapolis, MN 55402 since 1978 Age 66 Beth E. Weimer Chief Compliance Officer Vice President and Chief 172 AXP Financial Center since 2004 Compliance Officer, Minneapolis, MN 55474 Ameriprise Financial, Age 52 since 2001 and Chief Compliance Officer - Asset Management and Insurance, RiverSource Investments, LLC since 2005; Vice President and Chief Compliance Officer, Ameriprise Financial Services (formerly American Express Financial Advisors), 2001-2005; Partner, Arthur Andersen Regulatory Risk Services, 1998-2001
RIVERSOURCE VARIABLE PORTFOLIO FUNDS 70 RESPONSIBILITIES OF BOARD WITH RESPECT TO FUND'S MANAGEMENT The board initially approves an Investment Management Services Agreement and other contracts with the investment manager, one of its subsidiaries, and other service providers. Once the contracts are approved, the board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the board evaluates the services received under the contracts by receiving reports covering investment performance, shareholder services, marketing, and the investment manager's profitability in order to determine whether to continue existing contracts or negotiate new contracts. SEVERAL COMMITTEES FACILITATE ITS WORK Executive Committee -- Acts for the board between meetings of the board. The committee held one meeting during the last fiscal year. Joint Audit Committee -- Meets with the independent public accountant, internal auditors and corporate officers to review financial statements, reports, and compliance matters. Reports significant issues to the board and makes recommendations to the independent directors regarding the selection of the independent public accountant. The committee held four meetings during the last fiscal year. Investment Review Committee -- Considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the board. The committee held four meetings during the last fiscal year. Board Effectiveness Committee -- Recommends to the board the size, structure and composition for the board; the compensation to be paid to members of the board; and a process for evaluating the board's performance. The committee also reviews candidates for board membership including candidates recommended by shareholders. To be considered, recommendations must include a curriculum vita and be mailed to the Chairman of the Board, RiverSource Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. The committee held five meetings during the last fiscal year. Contracts Committee -- Receives and analyzes reports covering the level and quality of services provided under contracts with the Fund and advises the board regarding actions taken on these contracts during the annual review process. The committee held six meetings during the last fiscal year. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 71 BOARD MEMBER HOLDINGS The following tables show the Board members' ownership of the funds. ALL FUNDS. This table shows the dollar range of equity securities beneficially owned on Dec. 31, 2004 of all funds overseen by the Board member. BOARD MEMBER HOLDINGS -- ALL FUNDS* BASED ON NET ASSET VALUES AS OF DEC. 31, 2004
AGGREGATE DOLLAR RANGE OF EQUITY SECURITIES OF ALL BOARD MEMBER FUNDS OVERSEEN BY BOARD MEMBER Arne H. Carlson Over $100,000 Philip J. Carroll, Jr.** None Livio D. DeSimone** Over $100,000 Patricia M. Flynn $10,001-$50,000 Anne P. Jones Over $100,000 Stephen R. Lewis, Jr.** $10,001-$50,000 Catherine James Paglia None Alan K. Simpson $50,000-$100,000 Alison Taunton-Rigby Over $100,000 William F. Truscott Over $100,000
* All fund shares are held by variable accounts or subaccounts and are not available for purchase by individuals. Consequently no Board member owns any shares of any fund. ** Three independent directors have deferred compensation invested in share equivalents. Deferred compensation invested in share equivalents: A. Carroll RiverSource Global Technology $10,001-$50,000 B. DeSimone RiverSource High Yield Bond $50,001-$100,000 RiverSource Small Cap Value $50,001-$100,000 RiverSource Small Cap Advantage $50,001-$100,000 C. Lewis RiverSource International Opportunity $10,001-$50,000 RiverSource Diversified Equity Income $50,001-$100,000 RiverSource Emerging Markets $10,001-$50,000
COMPENSATION OF BOARD MEMBERS TOTAL COMPENSATION. The following table shows the total compensation paid to independent Board members from all the funds in the last fiscal year. BOARD MEMBER COMPENSATION -- ALL FUNDS
TOTAL CASH COMPENSATION FROM RIVERSOURCE FUNDS AND PREFERRED TRUST MASTER BOARD MEMBERS* TRUST GROUP PAID TO BOARD MEMBER Philip J. Carroll, Jr. $ 0 Livio D. DeSimone 0 Patricia M. Flynn 76,275 Anne P. Jones 180,858 Stephen R. Lewis, Jr. 141,421 Catherine James Paglia 138,900 Alan K. Simpson 133,808 Alison Taunton-Rigby 161,808
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 72 COMPENSATION FROM EACH FUND. The following table shows the compensation to the independent Board members from each fund during its last fiscal period. BOARD MEMBER* COMPENSATION -- INDIVIDUAL FUNDS
AGGREGATE COMPENSATION FROM FUND ------------------------------------------------------------------------------------ TAUNTON- FUND CARROLL DESIMONE FLYNN JONES LEWIS PAGLIA SIMPSON RIGBY Balanced -- total $2,738 $2,838 $2,283 $3,088 $3,239 $2,467 $2,583 $2,883 Amount deferred 2,738 2,838 975 0 1,163 0 0 0 Cash Management -- total 1,471 1,571 1,317 1,821 1,972 1,400 1,317 1,617 Amount deferred 1,471 1,571 542 0 706 0 0 0 Core Bond -- total 1,104 1,204 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 1,104 1,204 408 0 573 0 0 0 Diversified Bond -- total 2,096 2,196 1,775 2,446 2,597 1,917 1,942 2,442 Amount deferred 2,096 2,195 742 0 931 0 0 0 Diversified Equity Income -- total 1,538 1,638 1,383 1,888 2,039 1,467 1,383 1,683 Amount deferred 1,538 1,638 575 0 731 0 0 0 Emerging Markets -- total 1,104 1,204 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 1,104 1,204 408 0 573 0 0 0 Global Bond -- total 1,271 1,371 1,167 1,621 1,772 1,233 1,117 1,417 Amount deferred 1,271 1,371 475 0 634 0 0 0 Global Inflation Protected Securities -- total 269 269 217 319 319 217 217 217 Amount deferred 269 269 108 0 80 0 0 0 Growth -- total 1,204 1,304 1,100 1,554 1,705 1,167 1,050 1,350 Amount deferred 1,204 1,304 442 0 609 0 0 0 High Yield Bond -- total 1,771 1,871 1,542 2,121 2,272 1,650 1,617 1,917 Amount deferred 1,771 1,871 642 0 814 0 0 0 Income Opportunities -- total 436 436 383 486 537 433 383 433 Amount deferred 436 436 192 0 134 0 0 0 International Opportunity -- total 1,638 1,738 1,458 1,988 2,139 1,550 1,483 1,783 Amount deferred 1,638 1,738 608 0 767 0 0 0 Large Cap Equity -- total 2,596 2,696 2,200 2,946 3,097 2,367 2,442 2,742 Amount deferred 2,596 2,696 942 0 1,114 0 0 0 Mid Cap Growth -- total 1,104 1,204 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 1,104 1,204 408 0 573 0 0 0 New Dimensions -- total 2,971 3,071 2,392 3,321 3,472 2,617 2,817 3,117 Amount deferred 2,971 3,071 1,008 0 1,243 0 0 0 S&P 500 Index -- total $1,171 $1,271 $1,092 $1,521 $1,672 $1,150 $1,017 $1,317 Amount deferred 1,171 1,271 442 0 598 0 0 0 Short Duration U.S. Government -- total 1,304 1,404 1,175 1,654 1,805 1,250 1,150 1,450 Amount deferred 1,304 1,404 475 0 645 0 0 0 Small Cap Advantage -- total 1,104 1,204 1,025 1,454 1,605 1,083 950 1,250 Amount deferred 1,104 1,204 408 0 573 0 0 0 Small Cap Value -- total 1,171 1,271 1,092 1,521 1,672 1,150 1,017 1,317 Amount deferred 1,171 1,271 442 0 598 0 0 0 Strategy Aggressive -- total 1,538 1,638 1,333 1,888 2,039 1,433 1,383 1,683 Amount deferred 1,538 1,638 542 1,888 728 0 0 0
* Arne H. Carlson, Chair of the Board, is compensated by Board Services Corporation. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 73 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES IDS Life and its subsidiaries are the record holders of all outstanding shares of the Fund. All of such shares were purchased and are held by IDS Life and its subsidiaries pursuant to instructions from owners of variable annuity and variable life insurance contracts issued by IDS Life and its subsidiaries. Accordingly, IDS Life disclaimed beneficial ownership of all shares of the Fund. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements contained in the Annual Report were audited by the independent registered public accounting firm, KPMG LLP, 4200 Wells Fargo Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The independent registered public accounting firm also provides other accounting and tax-related services as requested by the Fund. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 74 APPENDIX A DESCRIPTION OF MONEY MARKET SECURITIES The types of instruments that form the major part of the Fund's investments are described below. CERTIFICATES OF DEPOSIT -- A certificate of deposit is a negotiable receipt issued by a bank or savings and loan association in exchange for the deposit of funds. The issuer agrees to pay the amount deposited, plus interest, on the date specified on the certificate. TIME DEPOSIT -- A time deposit is a non-negotiable deposit in a bank for a fixed period of time. BANKERS' ACCEPTANCES -- A bankers' acceptance arises from a short-term credit arrangement designed to enable businesses to obtain funds to finance commercial transactions. It is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. COMMERCIAL PAPER -- Commercial paper is generally defined as unsecured short-term notes issued in bearer form by large well-known corporations and finance companies. Maturities on commercial paper range from one day to nine months. LETTERS OF CREDIT -- A letter of credit is a short-term note issued in bearer form with a bank letter of credit which provides that the bank pay to the bearer the amount of the note upon presentation. U.S. TREASURY BILLS -- Treasury bills are issued with maturities of any period up to one year. Three-month and six-month bills are currently offered by the Treasury on 13-week and 26-week cycles respectively and are auctioned each week by the Treasury. Treasury bills are issued in book entry form and are sold only on a discount basis, i.e., the difference between the purchase price and the maturity value constitutes interest income for the investor. If they are sold before maturity, a portion of the income received may be a short-term capital gain. U.S. GOVERNMENT AGENCY SECURITIES -- Federal agency securities are debt obligations which principally result from lending programs of the U.S. government. Housing and agriculture have traditionally been the principal beneficiaries of Federal credit programs, and agencies involved in providing credit to agriculture and housing account for the bulk of the outstanding agency securities. REPURCHASE AGREEMENTS -- A repurchase agreement involves the acquisition of securities by the Fund, with the concurrent agreement by a bank (or securities dealer if permitted by law or regulation), to reacquire the securities at the Fund's cost, plus interest, within a specified time. The Fund thereby receives a fixed rate of return on this investment, one that is insulated from market and rate fluctuations during the holding period. In these transactions, the securities acquired by the Fund have a total value equal to or in excess of the value of the repurchase agreement and are held by the Fund's custodian until required. FLOATING RATE INSTRUMENTS -- These instruments pay interest at a rate tied to an external interest rate. The rate changes whenever there is a change in the external interest rate. If AEFC becomes aware that a security owned by the Fund is downgraded below the second highest rating, AEFC will either sell the security or recommend to the Fund's board why it should not be sold. SHORT-TERM RATINGS STANDARD & POOR'S COMMERCIAL PAPER RATINGS A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 75 STANDARD & POOR'S MUNI BOND AND NOTE RATINGS An S&P municipal bond or note rating reflects the liquidity factors and market-access risks unique to these instruments. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Municipal bond rating symbols and definitions are as follows: Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. MOODY'S COMMERCIAL PAPER RATINGS Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. MOODY'S SHORT-TERM MUNI BONDS AND NOTES RATINGS Short-term municipal bonds and notes are ratings that reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 76 FITCH'S SHORT-TERM RATINGS Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are as follows: F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings. F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade. F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions. D: Default. Issues assigned this rating are in actual or imminent payment default. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 77 APPENDIX B DESCRIPTION OF RATINGS STANDARD & POOR'S LONG-TERM DEBT RATINGS A Standard & Poor's corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of such information or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: - Likelihood of default capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. - Nature of and provisions of the obligation. - Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. INVESTMENT GRADE Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. Debt rated A has a strong capacity to pay interest and repay principal, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories. SPECULATIVE GRADE Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category also is used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating. Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category also is used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating. Debt rated CC typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. Debt rated C typically is applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. The rating CI is reserved for income bonds on which no interest is being paid. Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 78 MOODY'S LONG-TERM DEBT RATINGS Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa -- Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risk appear somewhat larger than in Aaa securities. A -- Bonds that are rated A possess many favorable investment attributes and are to be considered as upper-medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment some time in the future. Baa -- Bonds that are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba -- Bonds that are rated Ba are judged to have speculative elements -- their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B -- Bonds that are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or maintenance of other terms of the contract over any long period of time may be small. Caa -- Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca -- Bonds that are rated Ca represent obligations that are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C -- Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. FITCH'S LONG-TERM DEBT RATINGS Fitch's bond ratings provide a guide to investors in determining the credit risk associated with a particular security. The ratings represent Fitch's assessment of the issuer's ability to meet the obligations of a specific debt issue in a timely manner. The rating takes into consideration special features of the issue, its relationship to other obligations of the issuer, the current and prospective financial condition and operating performance of the issuer and any guarantor, as well as the economic and political environment that might affect the issuer's future financial strength and credit quality. Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated. Fitch ratings are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments made in respect of any security. Fitch ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of such information. Ratings may be changed, suspended, or withdrawn as a result of changes in, or the unavailability of, information or for other reasons. INVESTMENT GRADE AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+. A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 79 BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds and, therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings. SPECULATIVE GRADE BB: Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified, which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue. CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery. SHORT-TERM RATINGS STANDARD & POOR'S COMMERCIAL PAPER RATINGS A Standard & Poor's commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1. A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with doubtful capacity for payment. D Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. STANDARD & POOR'S MUNI BOND AND NOTE RATINGS An S&P municipal bond or note rating reflects the liquidity factors and market-access risks unique to these instruments. Notes maturing in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. Note rating symbols and definitions are as follows: SP-1 Strong capacity to pay principal and interest. Issues determined to possess very strong characteristics are given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. SP-3 Speculative capacity to pay principal and interest. Municipal bond rating symbols and definitions are as follows: Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 80 Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal and interest. Standard & Poor's rating SP-3 indicates speculative capacity to pay principal and interest. MOODY'S SHORT-TERM RATINGS Moody's short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations. These obligations have an original maturity not exceeding one year, unless explicitly noted. Moody's employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers: Issuers rated Prime-l (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-l repayment ability will often be evidenced by many of the following characteristics: (i) leading market positions in well-established industries, (ii) high rates of return on funds employed, (iii) conservative capitalization structure with moderate reliance on debt and ample asset protection, (iv) broad margins in earnings coverage of fixed financial charges and high internal cash generation, and (v) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. MOODY'S SHORT-TERM MUNI BONDS AND NOTES Short-term municipal bonds and notes are rated by Moody's. The ratings reflect the liquidity concerns and market access risks unique to notes. Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample although not so large as in the preceding group. Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established. Moody's MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. FITCH'S SHORT-TERM RATINGS Fitch's short-term ratings apply to debt obligations that are payable on demand or have original maturities of generally up to three years, including commercial paper, certificates of deposit, medium-term notes, and municipal and investment notes. The short-term rating places greater emphasis than a long-term rating on the existence of liquidity necessary to meet the issuer's obligations in a timely manner. Fitch short-term ratings are as follows: F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment. F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+. F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned F-1+ and F-1 ratings. F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could cause these securities to be rated below investment grade. F-S: Weak Credit Quality. Issues assigned this rating have characteristics suggesting a minimal degree of assurance for timely payment and are vulnerable to near-term adverse changes in financial and economic conditions. D: Default. Issues assigned this rating are in actual or imminent payment default. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 81 APPENDIX C ADDITIONAL INFORMATION ABOUT THE INDEX Variable Portfolio - S&P 500 Index Fund is not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the shareholders of Variable Portfolio - S&P 500 Index Fund or any member of the public regarding the advisability of investing in securities generally or in Variable Portfolio - S&P 500 Index Fund particularly or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to Variable Portfolio - S&P 500 Index Fund is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index, which are determined, composed and calculated by S&P without regard to Variable Portfolio - S&P 500 Index Fund. S&P has no obligation to take the needs of Variable Portfolio - S&P 500 Index Fund or its shareholders into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of Variable Portfolio - S&P 500 Index Fund or the timing of the issuance or sale of Variable Portfolio - S&P 500 Index Fund or in the determination or calculation of the equation by which Variable Portfolio - S&P 500 Index Fund's shares are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of Variable Portfolio - S&P 500 Index Fund shares. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN (THE S&P INDEX) AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, ITS SHAREHOLDERS OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. RIVERSOURCE VARIABLE PORTFOLIO FUNDS 82 S-6466-20 Y (10/05) Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP(R) VARIABLE PORTFOLIO-- INCOME SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- INVESTMENT SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- MANAGED SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- MONEY MARKET SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- PARTNERS SERIES, INC. We have audited the accompanying statements of assets and liabilities, including the schedules of investments in securities, of RiverSource VP - Core Bond Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - Income Opportunities Fund and RiverSource VP - Short Duration U.S. Government Fund (funds within AXP Variable Portfolio - Income Series, Inc.), RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity Fund, RiverSource VP - Large Cap Value Fund, RiverSource VP - Mid Cap Growth Fund, RiverSource VP - Mid Cap Value Fund, RiverSource VP - New Dimensions Fund, RiverSource VP - S&P 500 Index Fund, RiverSource VP - Small Cap Advantage Fund and RiverSource VP - Strategy Aggressive Fund (funds within AXP Variable Portfolio - Investment Series, Inc.), RiverSource VP - Balanced Fund and RiverSource VP - Diversified Equity Income Fund (funds within AXP Variable Portfolio - Managed Series, Inc.), RiverSource VP - Cash Management Fund (fund within AXP Variable Portfolio - Money Market Series, Inc.), and RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund (funds within AXP Variable Portfolio - Partners Series, Inc.) as of August 31, 2005, and the related statements of operations, statements of changes in net assets and the financial highlights for the periods presented. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of RiverSource VP - Core Bond Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - Income Opportunities Fund, RiverSource VP - Short Duration U.S. Government Fund, RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity Fund, RiverSource VP - Large Cap Value Fund, RiverSource VP - Mid Cap Growth Fund, RiverSource VP - Mid Cap Value Fund, RiverSource VP - New Dimensions Fund, RiverSource VP - S&P 500 Index Fund, RiverSource VP - Small Cap Advantage Fund, RiverSource VP - Strategy Aggressive Fund, RiverSource VP - Balanced Fund, RiverSource VP - Diversified Equity Income Fund, RiverSource VP - Cash Management Fund, RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund as of August 31, 2005, and the results of their operations, the changes in their net assets, and the financial highlights for each of the periods presented, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota October 20, 2005 -------------------------------------------------------------------------------- 78 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Financial Statements
Statements of assets and liabilities RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Aug. 31, 2005 Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $2,287,314,133, $694,123,658 and $62,004,968) $2,506,748,863 $694,123,658 $62,314,846 Cash in bank on demand deposit 433,360 99,820 12,158 Receivable for investment securities sold 86,064,523 -- 3,731,755 Dividends and accrued interest receivable 9,681,913 659,696 319,972 Unrealized appreciation on swap transactions, at value (Note 9) 333,825 -- 17,496 -------------- ------------ ----------- Total assets 2,603,262,484 694,883,174 66,396,227 -------------- ------------ ----------- Liabilities Dividends payable to shareholders (Note 1) 14,740,923 1,764,743 155,948 Payable for investment securities purchased 48,948,982 4,999,830 3,780,135 Payable for securities purchased on a forward-commitment basis (Note 1) 28,439,783 -- 3,907,593 Accrued investment management services fee 1,354,823 315,355 32,511 Accrued distribution fee 279,350 77,293 6,451 Accrued administrative services fee 71,692 18,550 2,580 Payable upon return of securities loaned (Note 6) 31,055,150 -- -- Other accrued expenses 351,114 102,276 25,077 Forward sale commitments, at value (proceeds receivable $40,276,090 for RiverSource VP - Balanced Fund and $538,148 for RiverSource VP - Core Bond Fund) (Note 1) 40,694,342 -- 546,141 -------------- ------------ ----------- Total liabilities 165,936,159 7,278,047 8,456,436 -------------- ------------ ----------- Net assets applicable to outstanding capital stock $2,437,326,325 $687,605,127 $57,939,791 ============== ============ =========== Represented by Capital stock -- $.01 par value ($.001 for RiverSource VP - Balanced Fund) (Note 1) $ 160,604 $ 6,878,507 $ 57,634 Additional paid-in capital 2,233,207,371 680,728,417 57,492,637 Undistributed (excess of distributions over) net investment income (303,746) -- 11,000 Accumulated net realized gain (loss) (Note 10) (14,590,924) (1,797) 80,353 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 7 and 9) 218,853,020 -- 298,167 -------------- ------------ ----------- Total -- representing net assets applicable to outstanding capital stock $2,437,326,325 $687,605,127 $57,939,791 ============== ============ =========== Shares outstanding 160,604,257 687,850,731 5,763,369 -------------- ------------ ----------- Net asset value per share of outstanding capital stock $ 15.18 $ 1.00 $ 10.05 -------------- ------------ ----------- * Including securities on loan, at value (Note 6) $ 30,653,472 $ -- $ -- -------------- ------------ -----------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 79 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $1,950,772,404, $1,477,324,953 and $171,984,013) $1,962,030,067 $1,726,073,222 $190,043,792 Cash in bank on demand deposit 150,458 66,674 51,846 Foreign currency holdings for RiverSource VP - Emerging Markets Fund (identified cost $2,372,944) (Note 1) -- -- 2,374,728 Receivable for investment securities sold 128,129,938 275,496 318,999 Dividends and accrued interest receivable 11,581,951 3,378,809 218,605 Unrealized appreciation on swap transactions, at value (Note 9) 644,215 -- -- -------------- -------------- ------------ Total assets 2,102,536,629 1,729,794,201 193,007,970 -------------- -------------- ------------ Liabilities Dividends payable to shareholders (Note 1) 5,605,902 6,524,927 232,237 Payable for investment securities purchased 95,428,529 11,028,826 533,394 Payable for securities purchased on a forward-commitment basis (Note 1) 83,374,383 -- -- Accrued investment management services fee 981,458 802,163 193,282 Accrued distribution fee 203,340 184,392 20,650 Accrued administrative services fee 77,723 51,035 16,520 Payable upon return of securities loaned (Note 6) 30,678,750 31,891,100 -- Other accrued expenses 251,309 230,561 51,003 Forward sale commitments, at value (proceeds receivable $61,051,441 for RiverSource VP - Diversified Bond Fund) (Note 1) 61,665,312 -- -- -------------- -------------- ------------ Total liabilities 278,266,706 50,713,004 1,047,086 -------------- -------------- ------------ Net assets applicable to outstanding capital stock $1,824,269,923 $1,679,081,197 $191,960,884 ============== ============== ============ Represented by Capital stock -- $.01 par value (Note 1) $ 1,711,534 $ 1,214,311 $ 146,043 Additional paid-in capital 1,954,526,477 1,361,550,437 161,218,809 Undistributed (excess of distributions over) net investment income (137,182) (460,246) 86,481 Accumulated net realized gain (loss) (Note 10) (142,509,882) 68,022,719 12,429,849 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 7 and 9) 10,678,976 248,753,976 18,079,702 -------------- -------------- ------------ Total -- representing net assets applicable to outstanding capital stock $1,824,269,923 $1,679,081,197 $191,960,884 ============== ============== ============ Shares outstanding 171,153,440 121,431,081 14,604,276 -------------- -------------- ------------ Net asset value per share of outstanding capital stock $ 10.66 $ 13.83 $ 13.14 -------------- -------------- ------------ * Including securities on loan, at value (Note 6) $ 30,193,200 $ 31,393,856 $ -- -------------- -------------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 80 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Aug. 31, 2005 Fund Fund Assets Investments in securities, at value (Note 1) (identified cost $548,217,601 $115,188,941 and $371,796,816) $565,867,366 $116,041,776 $ 393,243,032 Cash in bank on demand deposit 76,636 737,173 129,785 Foreign currency holdings for RiverSource VP - Global Bond Fund (identified cost $5,149,539) (Note 1) 5,189,374 -- -- Receivable for investment securities sold 5,671,977 -- 3,841,419 Dividends and accrued interest receivable 6,455,613 585,987 298,073 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 103,303 -- -- Unrealized appreciation on swap transactions, at value (Note 9) 198,029 -- -- ------------ ------------ ------------- Total assets 583,562,298 117,364,936 397,512,309 ------------ ------------ ------------- Liabilities Dividends payable to shareholders (Note 1) 1,123,713 230,081 167,211 Payable for investment securities purchased 5,967,951 666,996 5,103,997 Payable for securities purchased on a forward-commitment basis (Note 1) 537,876 -- -- Unrealized depreciation on foreign currency contracts held, at value (Note 5) 27,554 -- -- Accrued investment management services fee 422,769 45,582 213,758 Accrued distribution fee 63,673 11,628 42,412 Accrued administrative services fee 28,859 4,651 16,965 Other accrued expenses 97,587 9,035 66,841 ------------ ------------ ------------- Total liabilities 8,269,982 967,973 5,611,184 ------------ ------------ ------------- Net assets applicable to outstanding capital stock $575,292,316 $116,396,963 $ 391,901,125 ============ ============ ============= Represented by Capital stock -- $.01 par value (Note 1) $ 522,087 $ 114,182 $ 592,479 Additional paid-in capital 555,177,749 115,428,587 490,171,675 Undistributed (excess of distributions over) net investment income (544,665) 782 -- Accumulated net realized gain (loss) (Note 10) 2,339,456 429 (120,309,207) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 5, 7 and 9) 17,797,689 852,983 21,446,178 ------------ ------------ ------------- Total -- representing net assets applicable to outstanding capital stock $575,292,316 $116,396,963 $ 391,901,125 ============ ============ ============= Shares outstanding 52,208,744 11,418,190 59,247,936 ------------ ------------ ------------- Net asset value per share of outstanding capital stock $ 11.02 $ 10.19 $ 6.61 ------------ ------------ -------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 81 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1) (identified cost $1,211,616,181, $43,303,619 and $995,394,748) $1,219,217,603 $43,835,776 $1,186,728,982 Cash in bank on demand deposit 83,598 26,090 58,032 Foreign currency holdings for RiverSource VP - International Opportunity Fund (identified cost $1,102,402) (Note 1) -- -- 1,098,229 Receivable for investment securities sold 21,225,859 741,225 -- Dividends and accrued interest receivable 20,880,198 795,551 2,244,850 Other receivable 629,139 -- -- -------------- ----------- -------------- Total assets 1,262,036,397 45,398,642 1,190,130,093 -------------- ----------- -------------- Liabilities Dividends payable to shareholders (Note 1) 7,013,491 210,093 3,215,736 Payable for investment securities purchased 3,266,939 150,071 1,303,405 Payable for securities purchased on a forward-commitment basis (Note 1) 4,219,341 418,950 -- Accrued investment management services fee 694,748 24,832 899,137 Accrued distribution fee 140,741 4,850 133,524 Accrued administrative services fee 55,187 1,940 54,029 Other accrued expenses 170,585 25,029 185,841 -------------- ----------- -------------- Total liabilities 15,561,032 835,765 5,791,672 -------------- ----------- -------------- Net assets applicable to outstanding capital stock $1,246,475,365 $44,562,877 $1,184,338,421 -------------- ----------- -------------- Represented by Capital stock -- $.01 par value (Note 1) $ 1,843,853 $ 42,882 $ 1,181,418 Additional paid-in capital 1,454,691,006 43,749,315 1,683,356,219 Undistributed (excess of distributions over) net investment income 4,068,451 8,000 (612,581) Accumulated net realized gain (loss) (Note 10) (222,358,506) 230,523 (690,998,245) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 8,230,561 532,157 191,411,610 -------------- ----------- -------------- Total -- representing net assets applicable to outstanding capital stock $1,246,475,365 $44,562,877 $1,184,338,421 ============== =========== ============== Shares outstanding 184,385,297 4,288,162 118,141,847 -------------- ----------- -------------- Net asset value per share of outstanding capital stock $ 6.76 $ 10.39 $ 10.02 -------------- ----------- --------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 82 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP -RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $2,453,308,825, $13,478,870 and $204,206,933) $2,603,198,595 $14,126,334 $255,619,816 Cash in bank on demand deposit -- 760,759 99,982 Receivable for investment securities sold 14,018,617 26,814 1,194,644 Dividends and accrued interest receivable 4,065,474 32,625 149,793 -------------- ----------- ------------ Total assets 2,621,282,686 14,946,532 257,064,235 -------------- ----------- ------------ Liabilities Disbursements in excess of cash on demand deposit 642,259 -- -- Dividends payable to shareholders (Note 1) 5,955,728 48,953 -- Payable for investment securities purchased 16,397,501 30,939 1,595,133 Accrued investment management services fee 1,412,824 8,290 150,466 Accrued distribution fee 285,862 1,645 28,952 Accrued administrative services fee 105,038 658 13,869 Payable upon return of securities loaned (Note 6) 85,758,400 -- -- Other accrued expenses 347,384 35,427 71,249 -------------- ----------- ------------ Total liabilities 110,904,996 125,912 1,859,669 -------------- ----------- ------------ Net assets applicable to outstanding capital stock $2,510,377,690 $14,820,620 $255,204,566 ============== =========== ============ Represented by Capital stock -- $.01 par value (Note 1) $ 1,168,709 $ 13,482 $ 205,276 Additional paid-in capital 2,789,070,553 13,867,930 190,702,436 Excess of distributions over net investment income (114,369) (2,179) -- Accumulated net realized gain (loss) (Note 10) (429,636,794) 293,923 12,883,971 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 149,889,591 647,464 51,412,883 -------------- ----------- ------------ Total -- representing net assets applicable to outstanding capital stock $2,510,377,690 $14,820,620 $255,204,566 ============== =========== ============ Shares outstanding 116,870,943 1,348,162 20,527,588 -------------- ----------- ------------ Net asset value per share of outstanding capital stock $ 21.48 $ 10.99 $ 12.43 -------------- ----------- ------------ * Including securities on loan, at value (Note 6) $ 83,948,719 $ -- $ -- -------------- ----------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 83 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP -RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $6,474,960, $2,085,102,846 and $334,351,254) $6,941,643 $2,243,508,518 $367,947,017 Cash in bank on demand deposit 389,685 103,595 94,589 Expense reimbursement receivable from Ameriprise Financial (formerly AEFC) -- -- 4,950 Foreign currency holdings for RiverSource VP - New Dimensions Fund (identified cost $132) (Note 1) -- 142 -- Receivable for investment securities sold 16,135 21,513,093 231,343 Dividends and accrued interest receivable 8,977 3,333,683 752,065 ---------- -------------- ------------ Total assets 7,356,440 2,268,459,031 369,029,964 ---------- -------------- ------------ Liabilities Dividends payable to shareholders (Note 1) 7,912 3,103,263 1,340,385 Payable for investment securities purchased 225,459 30,965,874 99,260 Accrued investment management services fee 4,141 1,265,405 96,852 Accrued distribution fee 709 255,150 41,747 Accrued administrative services fee 284 95,210 26,718 Payable upon return of securities loaned (Note 6) -- 32,850,000 -- Other accrued expenses 2,100 328,430 74,379 ---------- -------------- ------------ Total liabilities 240,605 68,863,332 1,679,341 ---------- -------------- ------------ Net assets applicable to outstanding capital stock $7,115,835 $2,199,595,699 $367,350,623 ========== ============== ============ Represented by Capital stock -- $.01 par value (Note 1) $ 6,230 $ 1,425,895 $ 442,410 Additional paid-in capital 6,607,405 2,301,634,730 334,632,659 Undistributed (excess of distributions over) net investment income 260 1 (18,268) Accumulated net realized gain (loss) (Note 10) 35,256 (261,870,632) (1,282,406) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 7) 466,684 158,405,705 33,576,228 ---------- -------------- ------------ Total -- representing net assets applicable to outstanding capital stock $7,115,835 $2,199,595,699 $367,350,623 ========== ============== ============ Shares outstanding 623,021 142,589,501 44,241,047 ---------- -------------- ------------ Net asset value per share of outstanding capital stock $ 11.42 $ 15.43 $ 8.30 ---------- -------------- ------------ * Including securities on loan, at value (Note 6) $ -- $ 32,556,000 $ -- ---------- -------------- ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 84 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP -RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $22,067,355, $498,733,654 and $208,843,721) $23,555,304 $496,354,284 $237,102,466 Cash in bank on demand deposit 47,344 71,335 84,288 Expense reimbursement receivable from Ameriprise Financial 2,775 -- -- Receivable for investment securities sold 55,054 32,736,866 1,793,235 Dividends and accrued interest receivable 23,896 2,678,264 105,891 ----------- ------------ ------------ Total assets 23,684,373 531,840,749 239,085,880 ----------- ------------ ------------ Liabilities Dividends payable to shareholders (Note 1) 15,876 1,160,748 -- Payable for investment securities purchased 149,956 17,455,717 1,090,709 Payable for securities purchased on a forward-commitment basis (Note 1) -- 13,921,642 -- Accrued investment management services fee 16,597 267,593 354,745 Accrued distribution fee 2,561 54,835 26,535 Accrued administrative services fee 1,229 21,934 12,737 Payable upon return of securities loaned (Note 6) -- -- 2,103,400 Other accrued expenses 24,917 87,565 52,198 Forward sale commitments, at value (proceeds receivable $14,247,473 for RiverSource VP - Short Duration U.S. Government Fund Fund) (Note 1) -- 14,387,125 -- ----------- ------------ ------------ Total liabilities 211,136 47,357,159 3,640,324 ----------- ------------ ------------ Net assets applicable to outstanding capital stock $23,473,237 $484,483,590 $235,445,556 =========== ============ ============ Represented by Capital stock -- $.01 par value (Note 1) $ 20,507 $ 474,580 $ 155,837 Additional paid-in capital 21,670,639 494,132,687 178,093,107 Undistributed (excess of distributions over) net investment income (2,727) 38,457 53,169 Accumulated net realized gain (loss) (Note 10) 296,869 (7,670,015) 28,884,698 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 7) 1,487,949 (2,492,119) 28,258,745 ----------- ------------ ------------ Total -- representing net assets applicable to outstanding capital stock $23,473,237 $484,483,590 $235,445,556 =========== ============ ============ Shares outstanding 2,050,743 47,457,973 15,583,696 ----------- ------------ ------------ Net asset value per share of outstanding capital stock $ 11.45 $ 10.21 $ 15.11 ----------- ------------ ------------ * Including securities on loan, at value (Note 6) $ -- $ -- $ 2,072,775 ----------- ------------ ------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 85 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Small Cap Strategy Value Aggressive Aug. 31, 2005 Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $375,928,159, $529,347,835) $412,104,129 $ 707,657,563 Cash in bank on demand deposit 280,059 29,118 Receivable for investment securities sold 3,877,227 243,370 Dividends and accrued interest receivable 193,481 302,168 ------------ --------------- Total assets 416,454,896 708,232,219 ------------ --------------- Liabilities Payable for investment securities purchased 3,806,618 3,354,433 Accrued investment management services fee 369,697 396,923 Accrued distribution fee 45,647 77,974 Accrued administrative services fee 28,519 34,580 Payable upon return of securities loaned (Note 6) -- 17,617,900 Other accrued expenses 94,949 105,209 ------------ --------------- Total liabilities 4,345,430 21,587,019 ------------ --------------- Net assets applicable to outstanding capital stock $412,109,466 $ 686,645,200 ============ =============== Represented by Capital stock -- $.01 par value (Note 1) $ 285,038 $ 830,200 Additional paid-in capital 344,795,055 1,845,692,516 Undistributed (excess of distributions over) net investment income 169,285 (1) Accumulated net realized gain (loss) (Note 10) 30,684,118 (1,338,187,243) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 36,175,970 178,309,728 ------------ --------------- Total -- representing net assets applicable to outstanding capital stock $412,109,466 $ 686,645,200 ============ =============== Shares outstanding 28,503,827 83,019,997 ------------ --------------- Net asset value per share of outstanding capital stock $ 14.46 $ 8.27 ------------ --------------- * Including securities on loan, at value (Note 6) $ -- $ 17,417,130 ------------ ---------------
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 86 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Year ended Aug. 31, 2005 Fund Fund Investment income Income: Dividends $ 40,162,482 $ -- $ -- Interest 42,352,858 18,339,546 1,862,263 Fee income from securities lending (Note 6) 263,715 -- -- Less foreign taxes withheld (322,914) -- -- ------------ ----------- ---------- Total income 82,456,141 18,339,546 1,862,263 ------------ ----------- ---------- Expenses (Note 2): Investment management services fee 16,475,472 3,618,791 290,514 Distribution fee 3,258,265 886,958 57,634 Administrative services fees and expenses 892,514 228,193 19,968 Custodian fees 326,925 52,955 57,746 Compensation of board members 22,118 12,485 9,676 Printing and postage 458,928 146,240 11,055 Audit fees 26,500 20,000 19,500 Other 48,114 9,579 557 ------------ ----------- ---------- Total expenses 21,508,836 4,975,201 466,650 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- -- (28,302) ------------ ----------- ---------- 21,508,836 4,975,201 438,348 Earnings credits on cash balances (Note 2) (2,863) (1,574) (5,873) ------------ ----------- ---------- Total net expenses 21,505,973 4,973,627 432,475 ------------ ----------- ---------- Investment income (loss) -- net 60,950,168 13,365,919 1,429,788 ------------ ----------- ---------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 161,598,063 1,275 265,895 Foreign currency transactions (70,034) -- (185) Futures contracts 614,455 -- 41,238 Swap transactions (182,999) -- (8,907) ------------ ----------- ---------- Net realized gain (loss) on investments 161,959,485 1,275 298,041 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 20,254,609 -- (8,029) ------------ ----------- ---------- Net gain (loss) on investments and foreign currencies 182,214,094 1,275 290,012 ------------ ----------- ---------- Net increase (decrease) in net assets resulting from operations $243,164,262 $13,367,194 $1,719,800 ============ =========== ==========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 87 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ -- $ 30,534,184 $ 2,303,176 Interest 77,211,100 835,666 133,915 Fee income from securities lending (Note 6) 154,464 152,678 -- Less foreign taxes withheld -- (255,472) (287,245) ----------- ------------ ----------- Total income 77,365,564 31,267,056 2,149,846 ----------- ------------ ----------- Expenses (Note 2): Investment management services fee 10,446,764 7,790,892 1,128,628 Distribution fee 2,163,215 1,559,298 126,227 Administrative services fees and expenses 863,405 468,417 98,265 Custodian fees 214,024 355,460 146,667 Compensation of board members 22,793 13,018 9,676 Printing and postage 355,670 265,560 22,521 Audit fees 26,500 22,000 20,000 Other 39,660 14,296 13,013 ----------- ------------ ----------- Total expenses 14,132,031 10,488,941 1,564,997 Earnings credits on cash balances (Note 2) (3,850) (810) (3,983) ----------- ------------ ----------- Total net expenses 14,128,181 10,488,131 1,561,014 ----------- ------------ ----------- Investment income (loss) -- net 63,237,383 20,778,925 588,832 ----------- ------------ ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 15,413,826 74,284,659 13,698,293 Foreign currency transactions (127,527) (8,928) (162,228) Futures contracts (788,826) -- -- Swap transactions (345,127) -- -- ----------- ------------ ----------- Net realized gain (loss) on investments 14,152,346 74,275,731 13,536,065 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,469,293) 176,095,823 16,517,176 ----------- ------------ ----------- Net gain (loss) on investments and foreign currencies 9,683,053 250,371,554 30,053,241 ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations $72,920,436 $271,150,479 $30,642,073 =========== ============ ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 88 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Year ended Aug. 31, 2005 Fund Fund(a) Investment income Income: Dividends $ -- $ -- $ 3,592,538 Interest 18,298,742 1,423,510 389,124 Fee income from securities lending (Note 6) 24,785 -- 28,779 Less foreign taxes withheld (20,582) -- (90,673) ----------- ---------- ----------- Total income 18,302,945 1,423,510 3,919,768 ----------- ---------- ----------- Expenses (Note 2): Investment management services fee 4,107,042 167,833 2,023,076 Distribution fee 617,003 42,814 365,846 Administrative services fees and expenses 289,959 16,066 149,053 Custodian fees 179,440 34,503 63,060 Compensation of board members 10,968 2,044 10,435 Printing and postage 94,060 15,100 61,070 Audit fees 23,500 19,500 20,500 Other 6,218 100 2,931 ----------- ---------- ----------- Total expenses 5,328,190 297,960 2,695,971 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- (40,988) -- ----------- ---------- ----------- 5,328,190 256,972 2,695,971 Earnings credits on cash balances (Note 2) (1,347) (3,486) (3,312) ----------- ---------- ----------- Total net expenses 5,326,843 253,486 2,692,659 ----------- ---------- ----------- Investment income (loss) -- net 12,976,102 1,170,024 1,227,109 ----------- ---------- ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 13,010,235 8,849 26,303,633 Foreign currency transactions 1,643,879 869 (3,840) Futures contracts (122,299) -- -- Options contracts written (Note 8) -- -- (561,055) Swap transactions (100,114) -- -- ----------- ---------- ----------- Net realized gain (loss) on investments 14,431,701 9,718 25,738,738 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 955,738 853,992 17,284,007 ----------- ---------- ----------- Net gain (loss) on investments and foreign currencies 15,387,439 863,710 43,022,745 ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations $28,363,541 $2,033,734 $44,249,854 =========== ========== ===========
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. See accompanying notes to financial statements. -------------------------------------------------------------------------------- 89 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ -- $ -- $ 27,087,608 Interest 90,518,441 1,719,885 412,485 Fee income from securities lending (Note 6) -- -- 642,537 Less foreign taxes withheld (3,183) (413) (3,203,422) ------------ ---------- ------------ Total income 90,515,258 1,719,472 24,939,208 ------------ ---------- ------------ Expenses (Note 2): Investment management services fee 7,533,530 165,239 8,953,186 Distribution fee 1,525,551 32,273 1,392,429 Administrative services fees and expenses 625,083 15,279 593,033 Custodian fees 93,250 23,697 398,819 Compensation of board members 14,760 3,528 13,776 Printing and postage 273,668 3,586 242,031 Audit fees 26,500 19,500 26,000 Other 16,064 2,216 19,794 ------------ ---------- ------------ Total expenses 10,108,406 265,318 11,639,068 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- (9,563) -- ------------ ---------- ------------ 10,108,406 255,755 11,639,068 Earnings credits on cash balances (Note 2) (1,913) (7,252) (2,124) ------------ ---------- ------------ Total net expenses 10,106,493 248,503 11,636,944 ------------ ---------- ------------ Investment income (loss) -- net 80,408,765 1,470,969 13,302,264 ------------ ---------- ------------ Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 33,067,201 305,821 106,699,807 Foreign currency transactions -- -- (646,434) ------------ ---------- ------------ Net realized gain (loss) on investments 33,067,201 305,821 106,053,373 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (6,289,026) 147,007 107,127,444 ------------ ---------- ------------ Net gain (loss) on investments and foreign currencies 26,778,175 452,828 213,180,817 ------------ ---------- ------------ Net increase (decrease) in net assets resulting from operations $107,186,940 $1,923,797 $226,483,081 ============ ========== ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 90 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ 47,068,166 $ 260,163 $ 1,083,028 Interest 1,821,970 5,537 149,402 Fee income from securities lending (Note 6) 609,965 -- -- Less foreign taxes withheld (493,543) (2,691) -- ------------ ---------- ----------- Total income 49,006,558 263,009 1,232,430 ------------ ---------- ----------- Expenses (Note 2): Investment management services fee 15,079,399 70,240 1,435,137 Distribution fee 3,171,288 13,898 310,975 Administrative services fees and expenses 1,227,017 5,559 151,155 Custodian fees 236,000 123,705 48,280 Compensation of board members 21,085 -- 9,676 Printing and postage 500,900 50,845 55,300 Audit fees 27,000 19,000 19,000 Other 50,238 -- 1,870 ------------ ---------- ----------- Total expenses 20,312,927 283,247 2,031,393 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- (166,423) -- ------------ ---------- ----------- 20,312,927 116,824 2,031,393 Earnings credits on cash balances (Note 2) (1,170) (5,757) (3,943) ------------ ---------- ----------- Total net expenses 20,311,757 111,067 2,027,450 ------------ ---------- ----------- Investment income (loss) -- net 28,694,801 151,942 (795,020) ------------ ---------- ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 211,305,211 357,850 19,871,209 Foreign currency transactions (68,721) -- (907) ------------ ---------- ----------- Net realized gain (loss) on investments 211,236,490 357,850 19,870,302 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 57,887,507 625,405 31,461,353 ------------ ---------- ----------- Net gain (loss) on investments and foreign currencies 269,123,997 983,255 51,331,655 ------------ ---------- ----------- Net increase (decrease) in net assets resulting from operations $297,818,798 $1,135,197 $50,536,635 ============ ========== ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 91 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Year ended Aug. 31, 2005 Fund(a) Fund Fund Investment income Income: Dividends $ 23,968 $ 44,123,215 $ 6,974,503 Interest 156 2,908,412 217,686 Fee income from securities lending (Note 6) -- 87,797 -- Less foreign taxes withheld (35) (123,320) -- -------- ------------ ----------- Total income 24,089 46,996,104 7,192,189 -------- ------------ ----------- Expenses (Note 2): Investment management services fee 10,481 14,503,077 973,909 Distribution fee 1,795 3,323,835 419,788 Administrative services fees and expenses 718 1,284,313 272,087 Custodian fees 7,610 193,090 90,195 Compensation of board members -- 23,776 10,210 Printing and postage 3,030 587,200 65,977 Licensing fees -- -- 31,832 Audit fees 19,000 26,500 20,000 Other -- 49,637 3,921 -------- ------------ ----------- Total expenses 42,634 19,991,428 1,887,919 Expenses waived/reimbursed by Ameriprise Financial (Note 2) (27,089) -- (224,165) -------- ------------ ----------- 15,545 19,991,428 1,663,754 Earnings credits on cash balances (Note 2) (300) (986) (6,515) -------- ------------ ----------- Total net expenses 15,245 19,990,442 1,657,239 -------- ------------ ----------- Investment income (loss) -- net 8,844 27,005,662 5,534,950 -------- ------------ ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 34,458 141,472,104 363,278 Foreign currency transactions (10) (75,535) -- Futures contracts -- 31,708 904,140 Options contracts written (Note 8) -- (770,318) -- -------- ------------ ----------- Net realized gain (loss) on investments 34,448 140,657,959 1,267,418 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 437,214 27,273,899 29,628,952 -------- ------------ ----------- Net gain (loss) on investments and foreign currencies 471,662 167,931,858 30,896,370 -------- ------------ ----------- Net increase (decrease) in net assets resulting from operations $480,506 $194,937,520 $36,431,320 ======== ============ ===========
(a) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. See accompanying notes to financial statements. -------------------------------------------------------------------------------- 92 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ 179,403 $ -- $ 1,559,010 Interest 69,992 17,469,695 154,639 Fee income from securities lending (Note 6) -- -- 34,245 Less foreign taxes withheld (1,738) -- (3,428) ---------- ----------- ----------- Total income 247,657 17,469,695 1,744,466 ---------- ----------- ----------- Expenses (Note 2): Investment management services fee 123,757 3,045,061 1,757,829 Distribution fee 19,359 623,988 275,040 Administrative services fees and expenses 9,292 258,743 132,967 Custodian fees 7,635 69,184 118,470 Compensation of board members -- 11,193 9,676 Printing and postage 1,947 100,751 41,262 Audit fees 19,000 21,500 20,000 Other -- 5,978 893 ---------- ----------- ----------- Total expenses 180,990 4,136,398 2,356,137 Expenses waived/reimbursed by Ameriprise Financial (Note 2) (2,775) -- -- ---------- ----------- ----------- 178,215 4,136,398 2,356,137 Earnings credits on cash balances (Note 2) -- (1,429) (146) ---------- ----------- ----------- Total net expenses 178,215 4,134,969 2,355,991 ---------- ----------- ----------- Investment income (loss) -- net 69,442 13,334,726 (611,525) ---------- ----------- ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 328,478 (2,981,388) 29,970,230 Futures contracts -- (221,881) 50,601 Options contracts written (Note 8) -- 41,887 -- ---------- ----------- ----------- Net realized gain (loss) on investments 328,478 (3,161,382) 30,020,831 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,579,596 (3,182,742) 17,135,003 ---------- ----------- ----------- Net gain (loss) on investments and foreign currencies 1,908,074 (6,344,124) 47,155,834 ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations $1,977,516 $ 6,990,602 $46,544,309 ========== =========== ===========
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 93 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Small Cap Strategy Value Aggressive Year ended Aug. 31, 2005 Fund Fund Investment income Income: Dividends $ 3,186,761 $ 2,621,092 Interest 1,246,576 716,232 Fee income from securities lending (Note 6) -- 78,917 Less foreign taxes withheld (11,630) -- ----------- ------------ Total income 4,421,707 3,416,241 ----------- ------------ Expenses (Note 2): Investment management services fee 3,087,940 4,288,049 Distribution fee 394,484 946,936 Administrative services fees and expenses 251,446 431,432 Custodian fees 205,993 61,900 Compensation of board members 10,210 12,935 Printing and postage 62,715 152,510 Audit fees 20,500 23,500 Other 2,834 13,438 ----------- ------------ Total expenses 4,036,122 5,930,700 Earnings credits on cash balances (Note 2) -- (1,129) ----------- ------------ Total net expenses 4,036,122 5,929,571 ----------- ------------ Investment income (loss) -- net 385,585 (2,513,330) ----------- ------------ Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 31,279,697 65,875,966 Foreign currency transactions (148) (2,849) ----------- ------------ Net realized gain (loss) on investments 31,279,549 65,873,117 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 22,038,842 86,549,108 ----------- ------------ Net gain (loss) on investments and foreign currencies 53,318,391 152,422,225 ----------- ------------ Net increase (decrease) in net assets resulting from operations $53,703,976 $149,908,895 =========== ============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 94 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Balanced Fund Cash Management Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 60,950,168 $ 53,859,632 $ 13,365,919 $ 3,650,350 Net realized gain (loss) on investments 161,959,485 93,004,681 1,275 19 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 20,254,609 121,962,828 -- -- -------------- -------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 243,164,262 268,827,141 13,367,194 3,650,369 -------------- -------------- ------------- ------------- Distributions to shareholders from: Net investment income (61,685,753) (53,848,054) (13,366,319) (3,649,950) -------------- -------------- ------------- ------------- Capital share transactions (Note 4) Proceeds from sales 33,994,949 31,554,087 278,245,964 407,746,489 Fund merger (Note 11) -- 377,379,266 -- 46,089,994 Reinvestment of distributions at net asset value 61,564,207 52,211,162 12,094,809 3,353,286 Payments for redemptions (503,321,951) (428,968,239) (375,917,897) (552,023,361) -------------- -------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions (407,762,795) 32,176,276 (85,577,124) (94,833,592) -------------- -------------- ------------- ------------- Total increase (decrease) in net assets (226,284,286) 247,155,363 (85,576,249) (94,833,173) Net assets at beginning of year 2,663,610,611 2,416,455,248 773,181,376 868,014,549 -------------- -------------- ------------- ------------- Net assets at end of year $2,437,326,325 $2,663,610,611 $ 687,605,127 $ 773,181,376 ============== ============== ============= ============= Undistributed (excess of distributions over) net investment income $ (303,746) $ (634,659) $ -- $ 400 -------------- -------------- ------------- -------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Core Bond Fund Diversified Bond Fund Year ended Aug. 31, 2005 2004(a) 2005 2004 Operations and distributions Investment income (loss) -- net $ 1,429,788 $ 401,727 $ 63,237,383 $ 61,331,133 Net realized gain (loss) on investments 298,041 (189,295) 14,152,346 (12,291,058) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (8,029) 374,009 (4,469,293) 47,889,837 ----------- ----------- -------------- -------------- Net increase (decrease) in net assets resulting from operations 1,719,800 586,441 72,920,436 96,929,912 ----------- ----------- -------------- -------------- Distributions to shareholders from: Net investment income (1,450,986) (404,035) (66,121,267) (60,644,287) ----------- ----------- -------------- -------------- Capital share transactions (Note 4) Proceeds from sales 26,946,369 11,561,509 266,496,135 122,995,561 Fund merger (Note 11) -- -- -- 82,520,680 Reinvestment of distributions at net asset value 1,374,055 330,063 65,971,457 59,930,752 Payments for redemptions (6,193,096) (1,480,349) (211,228,785) (370,385,419) ----------- ----------- -------------- -------------- Increase (decrease) in net assets from capital share transactions 22,127,328 10,411,223 121,238,807 (104,938,426) ----------- ----------- -------------- -------------- Total increase (decrease) in net assets 22,396,142 10,593,629 128,037,976 (68,652,801) Net assets at beginning of year (Note 1) 35,543,649 24,950,020(b) 1,696,231,947 1,764,884,748 ----------- ----------- -------------- -------------- Net assets at end of year $57,939,791 $35,543,649 $1,824,269,923 $1,696,231,947 =========== =========== ============== ============== Undistributed (excess of distributions over) net investment income $ 11,000 $ (312) $ (137,182) $ 230,380 ----------- ----------- -------------- --------------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $25,000,000 was contributed on Jan. 7, 2004. The Fund had a decrease in net assets resulting from operations of $49,980 during the period from Jan. 7, 2004 to Feb. 4, 2004 (date the Fund became available). See accompanying notes to financial statements. -------------------------------------------------------------------------------- 95 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - Diversified RiverSource VP - Equity Income Fund Emerging Markets Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 20,778,925 $ 10,967,407 $ 588,832 $ 195,481 Net realized gain (loss) on investments 74,275,731 18,962,648 13,536,065 2,910,195 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 176,095,823 45,647,551 16,517,176 (611,215) -------------- ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations 271,150,479 75,577,606 30,642,073 2,494,461 -------------- ------------ ------------ ----------- Distributions to shareholders from: Net investment income (19,986,713) (10,327,123) (502,237) (313,397) Net realized gain -- -- (2,148,317) -- -------------- ------------ ------------ ----------- Total distributions (19,986,713) (10,327,123) (2,650,554) (313,397) -------------- ------------ ------------ ----------- Capital share transactions (Note 4) Proceeds from sales 586,505,709 406,109,798 121,975,171 31,500,657 Fund merger (Note 11) -- 12,770,996 -- -- Reinvestment of distributions at net asset value 17,749,939 7,522,149 2,508,714 235,868 Payments for redemptions (19,307,264) (18,803,894) (6,438,923) (4,264,788) -------------- ------------ ------------ ----------- Increase (decrease) in net assets from capital share transactions 584,948,384 407,599,049 118,044,962 27,471,737 -------------- ------------ ------------ ----------- Total increase (decrease) in net assets 836,112,150 472,849,532 146,036,481 29,652,801 Net assets at beginning of year 842,969,047 370,119,515 45,924,403 16,271,602 -------------- ------------ ------------ ----------- Net assets at end of year $1,679,081,197 $842,969,047 $191,960,884 $45,924,403 ============== ============ ============ =========== Undistributed (excess of distributions over) net investment income $ (460,246) $ 694,393 $ 86,481 $ 56,017 -------------- ------------ ------------ -----------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Global Inflation Global Bond Fund Protected Securities Fund Year ended Aug. 31, 2005 2004 2005(a) Operations and distributions Investment income (loss) -- net $ 12,976,102 $ 10,211,630 $ 1,170,024 Net realized gain (loss) on investments 14,431,701 14,624,481 9,718 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 955,738 9,351,111 853,992 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 28,363,541 34,187,222 2,033,734 ------------ ------------ ------------ Distributions to shareholders from: Net investment income (23,132,048) (21,683,991) (1,175,862) Net realized gain -- -- (3,185) ------------ ------------ ------------ Total distributions (23,132,048) (21,683,991) (1,179,047) ------------ ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 160,817,306 94,154,709 115,848,581 Reinvestment of distributions at net asset value 23,811,853 20,466,297 948,966 Payments for redemptions (23,514,676) (30,570,369) (6,253,997) ------------ ------------ ------------ Increase (decrease) in net assets from capital share transactions 161,114,483 84,050,637 110,543,550 ------------ ------------ ------------ Total increase (decrease) in net assets 166,345,976 96,553,868 111,398,237 Net assets at beginning of year (Note 1) 408,946,340 312,392,472 4,998,726(b) ------------ ------------ ------------ Net assets at end of year $575,292,316 $408,946,340 $116,396,963 ============ ============ ============ Undistributed (excess of distributions over) net investment income $ (544,665) $ (632,421) $ 782 ------------ ------------ ------------
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (b) Initial capital of $5,000,000 was contributed on Sept. 8, 2004. The Fund had a decrease in net assets resulting from operations of $1,274 during the period from Sept. 8, 2004 to Sept. 13, 2004 (date the Fund became available). See accompanying notes to financial statements. -------------------------------------------------------------------------------- 96 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Growth Fund High Yield Bond Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 1,227,109 $ 712,105 $ 80,408,765 $ 75,141,855 Net realized gain (loss) on investments 25,738,738 22,550,457 33,067,201 46,539,857 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 17,284,007 (12,844,248) (6,289,026) 6,392,162 ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from operations 44,249,854 10,418,314 107,186,940 128,073,874 ------------ ------------ -------------- -------------- Distributions to shareholders from: Net investment income (1,085,812) (689,607) (80,490,774) (73,307,082) ------------ ------------ -------------- -------------- Capital share transactions (Note 4) Proceeds from sales 109,153,959 50,659,678 146,257,335 277,494,372 Reinvestment of distributions at net asset value 1,123,472 484,737 80,093,618 71,998,362 Payments for redemptions (22,493,936) (23,073,984) (135,588,640) (117,945,342) ------------ ------------ -------------- -------------- Increase (decrease) in net assets from capital share transactions 87,783,495 28,070,431 90,762,313 231,547,392 ------------ ------------ -------------- -------------- Total increase (decrease) in net assets 130,947,537 37,799,138 117,458,479 286,314,184 Net assets at beginning of year 260,953,588 223,154,450 1,129,016,886 842,702,702 ------------ ------------ -------------- -------------- Net assets at end of year $391,901,125 $260,953,588 $1,246,475,365 $1,129,016,886 ============ ============ ============== ============== Undistributed (excess of distributions over) net investment income $ -- $ (137,458) $ 4,068,451 $ 4,150,460 ------------ ------------ -------------- --------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Income Opportunities Fund International Opportunity Fund Year ended Aug. 31, 2005 2004(a) 2005 2004 Operations and distributions Investment income (loss) -- net $ 1,470,969 $ 228,967 $ 13,302,264 $ 8,270,928 Net realized gain (loss) on investments 305,821 47,176 106,053,373 73,662,728 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 147,007 493,990 107,127,444 26,990,475 ----------- ----------- -------------- ------------- Net increase (decrease) in net assets resulting from operations 1,923,797 770,133 226,483,081 108,924,131 ----------- ----------- -------------- ------------- Distributions to shareholders from: Net investment income (1,466,967) (229,533) (14,185,535) (8,834,774) Net realized gain (121,799) -- -- -- ----------- ----------- -------------- ------------- Total distributions (1,588,766) (229,533) (14,185,535) (8,834,774) ----------- ----------- -------------- ------------- Capital share transactions (Note 4) Proceeds from sales 36,842,482 41,340 93,707,558 87,427,540 Fund merger (Note 11) -- -- -- 185,670,291 Reinvestment of distributions at net asset value 1,456,121 152,695 13,916,731 8,514,464 Payments for redemptions (9,664,775) (30,162) (109,415,941) (146,172,823) ----------- ----------- -------------- ------------- Increase (decrease) in net assets from capital share transactions 28,633,828 163,873 (1,791,652) 135,439,472 ----------- ----------- -------------- ------------- Total increase (decrease) in net assets 28,968,859 704,473 210,505,894 235,528,829 Net assets at beginning of year (Note 1) 15,594,018 14,889,545(b) 973,832,527 738,303,698 ----------- ----------- -------------- ------------- Net assets at end of year $44,562,877 $15,594,018 $1,184,338,421 $ 973,832,527 =========== =========== ============== ============= Undistributed (excess of distributions over) net investment income $ 8,000 $ 3,998 $ (612,581) $ 658,503 ----------- ----------- -------------- -------------
(a) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $15,000,000 was contributed on May 26, 2004. The Fund had a decrease in net assets resulting from operations of $110,455 during the period from May 26, 2004 to June 1, 2004 (date the Fund became available). See accompanying notes to financial statements. -------------------------------------------------------------------------------- 97 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Large Cap Equity Fund Large Cap Value Fund Year ended Aug. 31, 2005 2004 2005 2004(a) Operations and distributions Investment income (loss) -- net $ 28,694,801 $ 15,369,716 $ 151,942 $ 28,905 Net realized gain (loss) on investments 211,236,490 162,346,824 357,850 (11,792) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 57,887,507 (33,295,604) 625,405 33,353 -------------- -------------- ----------- ---------- Net increase (decrease) in net assets resulting from operations 297,818,798 144,420,936 1,135,197 50,466 -------------- -------------- ----------- ---------- Distributions to shareholders from: Net investment income (28,626,032) (15,364,313) (151,392) (30,866) Net realized gain -- -- (61,040) -- -------------- -------------- ----------- ---------- Total distributions (28,626,032) (15,364,313) (212,432) (30,866) -------------- -------------- ----------- ---------- Capital share transactions (Note 4) Proceeds from sales 200,687,349 65,446,592 7,390,064 4,344,307 Fund merger (Note 11) -- 678,508,195 -- -- Reinvestment of distributions at net asset value 27,520,509 13,165,107 180,662 13,683 Payments for redemptions (521,735,962) (332,967,741) (955,062) (91,005) -------------- -------------- ----------- ---------- Increase (decrease) in net assets from capital share transactions (293,528,104) 424,152,153 6,615,664 4,266,985 -------------- -------------- ----------- ---------- Total increase (decrease) in net assets (24,335,338) 553,208,776 7,538,429 4,286,585 Net assets at beginning of year (Note 1) 2,534,713,028 1,981,504,252 7,282,191 2,995,606(b) -------------- -------------- ----------- ---------- Net assets at end of year $2,510,377,690 $2,534,713,028 $14,820,620 $7,282,191 ============== ============== =========== ========== Excess of distributions over net investment income $ (114,369) $ (49) $ (2,179) $ (550) -------------- -------------- ----------- ----------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $3,000,000 was contributed on Jan. 7, 2004. The Fund had a decrease in net assets resulting from operations of $4,394 during the period from Jan. 7, 2004 to Feb. 4, 2004 (date the Fund became available).
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Mid Cap Growth Fund Mid Cap Value Fund Year ended Aug. 31, 2005 2004 2005(a) Operations and distributions Investment income (loss) -- net $ (795,020) $ (1,049,687) $ 8,844 Net realized gain (loss) on investments 19,870,302 (5,223,928) 34,448 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 31,461,353 3,899,551 437,214 ------------ ------------ ---------- Net increase (decrease) in net assets resulting from operations 50,536,635 (2,374,064) 480,506 ------------ ------------ ---------- Distributions to shareholders from: Net investment income -- -- (9,698) ------------ ------------ ---------- Capital share transactions (Note 4) Proceeds from sales 20,390,489 66,699,751 4,671,932 Reinvestment of distributions at net asset value -- -- 1,787 Payments for redemptions (40,608,349) (9,789,197) (58,967) ------------ ------------ ---------- Increase (decrease) in net assets from capital share transactions (20,217,860) 56,910,554 4,614,752 ------------ ------------ ---------- Total increase (decrease) in net assets 30,318,775 54,536,490 5,085,560 Net assets at beginning of year (Note 1) 224,885,791 170,349,301 2,030,275(b) ------------ ------------ ---------- Net assets at end of year $255,204,566 $224,885,791 $7,115,835 ============ ============ ========== Undistributed net investment income $ -- $ -- $ 260 ------------ ------------ ----------
(a) For the period from May 2, 2005 (date the Fund became available ) to Aug. 31, 2005. (b) Initial capital of $1,999,940 was contributed on April 28, 2005. The Fund had a increase in net assets resulting from operations of $30,335 during the period from April 28, 2005 to May 2, 2005 (date the Fund became available). See accompanying notes to financial statements. -------------------------------------------------------------------------------- 98 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - New Dimensions Fund S&P 500 Index Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 27,005,662 $ 21,349,393 $ 5,534,950 $ 2,899,942 Net realized gain (loss) on investments 140,657,959 113,281,860 1,267,418 307,230 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 27,273,899 (56,933,106) 29,628,952 16,624,060 -------------- -------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations 194,937,520 77,698,147 36,431,320 19,831,232 -------------- -------------- ------------ ------------ Distributions to shareholders from: Net investment income (26,931,431) (21,246,034) (5,503,403) (2,885,111) -------------- -------------- ------------ ------------ Total distributions (26,931,431) (21,246,034) (5,503,403) (2,885,111) -------------- -------------- ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 17,563,427 136,096,503 69,811,420 106,203,535 Reinvestment of distributions at net asset value 29,634,120 20,376,110 5,036,258 2,508,534 Payments for redemptions (947,752,244) (395,590,246) (21,521,879) (13,865,522) -------------- -------------- ------------ ------------ Increase (decrease) in net assets from capital share transactions (900,554,697) (239,117,633) 53,325,799 94,846,547 -------------- -------------- ------------ ------------ Total increase (decrease) in net assets (732,548,608) (182,665,520) 84,253,716 111,792,668 Net assets at beginning of year 2,932,144,307 3,114,809,827 283,096,907 171,304,239 -------------- -------------- ------------ ------------ Net assets at end of year $2,199,595,699 $2,932,144,307 $367,350,623 $283,096,907 ============== ============== ============ ============ Undistributed (excess of distributions over) net investment income $ 1 $ 1,305 $ (18,268) $ (18,476) -------------- -------------- ------------ ------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Short Duration Select Value Fund U.S. Government Fund Year ended Aug. 31, 2005 2004(a) 2005 2004 Operations and distributions Investment income (loss) -- net $ 69,442 $ 16,415 $ 13,334,726 $ 11,305,758 Net realized gain (loss) on investments 328,478 17,217 (3,161,382) (4,325,495) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,579,596 (86,117) (3,182,742) 1,235,800 ----------- ---------- ------------ ------------ Net increase (decrease) in net assets resulting from operations 1,977,516 (52,485) 6,990,602 8,216,063 ----------- ---------- ------------ ------------ Distributions to shareholders from: Net investment income (66,667) (15,818) (13,288,036) (11,328,609) Net realized gain (54,328) -- (148,999) (2,271,221) ----------- ---------- ------------ ------------ Total distributions (120,995) (15,818) (13,437,035) (13,599,830) ----------- ---------- ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 13,500,858 5,846,593 53,612,824 88,108,864 Fund merger (Note 11) -- -- -- 24,690,160 Reinvestment of distributions at net asset value 117,486 3,451 13,354,736 13,262,385 Payments for redemptions (605,448) (170,754) (82,040,384) (93,603,954) ----------- ---------- ------------ ------------ Increase (decrease) in net assets from capital share transactions 13,012,896 5,679,290 (15,072,824) 32,457,455 ----------- ---------- ------------ ------------ Total increase (decrease) in net assets 14,869,417 5,610,987 (21,519,257) 27,073,688 Net assets at beginning of year (Note 1) 8,603,820 2,992,833(b) 506,002,847 478,929,159 ----------- ---------- ------------ ------------ Net assets at end of year $23,473,237 $8,603,820 $484,483,590 $506,002,847 =========== ========== ============ ============ Undistributed (excess of distributions over) net investment income $ (2,727) $ -- $ 38,457 $ (22,848) ----------- ---------- ------------ ------------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $3,000,000 was contributed on Jan. 7, 2004. The Fund had a decrease in net assets resulting from operations of $7,167 during the period from Jan. 7, 2004 to Feb. 4, 2004 (date the Fund became available). See accompanying notes to financial statements. -------------------------------------------------------------------------------- 99 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Small Cap Advantage Fund Small Cap Value Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ (611,525) $ (657,062) $ 385,585 $ (372,960) Net realized gain (loss) on investments 30,020,831 19,228,857 31,279,549 23,789,033 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 17,135,003 (6,776,507) 22,038,842 815,713 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 46,544,309 11,795,288 53,703,976 24,231,786 ------------ ------------ ------------ ------------ Distributions to shareholders from: Net investment income -- -- (148,562) -- Net realized gain (9,460,720) -- (22,655,414) (2,498,969) ------------ ------------ ------------ ------------ Total distributions (9,460,720) -- (22,803,976) (2,498,969) ------------ ------------ ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 24,255,001 76,014,037 137,742,641 81,763,916 Reinvestment of distributions at net asset value 9,460,720 -- 22,803,976 2,498,969 Payments for redemptions (19,393,071) (5,345,989) (8,205,722) (10,954,929) ------------ ------------ ------------ ------------ Increase (decrease) in net assets from capital share transactions 14,322,650 70,668,048 152,340,895 73,307,956 ------------ ------------ ------------ ------------ Total increase (decrease) in net assets 51,406,239 82,463,336 183,240,895 95,040,773 Net assets at beginning of year 184,039,317 101,575,981 228,868,571 133,827,798 ------------ ------------ ------------ ------------ Net assets at end of year $235,445,556 $184,039,317 $412,109,466 $228,868,571 ============ ============ ============ ============ Undistributed (excess of distributions over) net investment income $ 53,169 $ 51,407 $ 169,285 $ (13,343) ------------ ------------ ------------ ------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - Strategy Aggressive Fund Year ended Aug. 31, 2005 2004 Operations Investment income (loss) -- net $ (2,513,330) $ (3,987,624) Net realized gain (loss) on investments 65,873,117 (54,072,544) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 86,549,108 39,937,743 ------------- ------------- Net increase (decrease) in net assets resulting from operations 149,908,895 (18,122,425) ------------- ------------- Capital share transactions (Note 4) Proceeds from sales 2,881,464 18,672,159 Payments for redemptions (249,498,256) (185,879,018) ------------- ------------- Increase (decrease) in net assets from capital share transactions (246,616,792) (167,206,859) ------------- ------------- Total increase (decrease) in net assets (96,707,897) (185,329,284) Net assets at beginning of year 783,353,097 968,682,381 ------------- ------------- Net assets at end of year $ 686,645,200 $ 783,353,097 ============= =============
See accompanying notes to financial statements. -------------------------------------------------------------------------------- 100 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Notes to Financial Statements RiverSource Variable Portfolio Funds 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Each Fund is registered under the Investment Company Act of 1940 (as amended) (the 1940 Act) as a diversified, (non-diversified for RiverSource VP - Global Bond Fund and RiverSource VP - Global Inflation Protected Securities Fund) open-end management investment company. Each Fund has 10 billion authorized shares of capital stock. The following Funds became available on Feb. 4, 2004. On Jan. 7, 2004, IDS Life Insurance Company (IDS Life) purchased the following shares of capital stock at $10 per share, which represented the initial capital in each Fund:
Fund Number of shares RiverSource VP - Core Bond Fund 2,500,000 RiverSource VP - Large Cap Value Fund 300,000 RiverSource VP - Select Value Fund 300,000
RiverSource VP - Income Opportunities Fund became available on June 1, 2004. On May 26, 2004, IDS Life purchased 1,500,000 shares of capital stock at $10 per share, which represented the initial capital in the Fund. RiverSource VP - Global Inflation Protected Securities Fund became available on Sept. 13, 2004. On Sept. 8, 2004, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) purchased 500,000 shares of capital stock at $10 per share, which represented the initial capital in the Fund. RiverSource VP - Mid Cap Value Fund became available on May 2, 2005. On April 28, 2005, Ameriprise Financial purchased 199,994 shares of capital stock at $10 per share, which represented the initial capital in the Fund. The primary investments of each Fund are as follows: RiverSource VP - Balanced Fund (formerly AXP VP - Managed Fund) invests primarily in a combination of common and preferred stocks, bonds and other debt securities. RiverSource VP - Cash Management Fund (formerly AXP VP - Cash Management Fund) invests primarily in money market instruments, such as marketable debt obligations issued by corporations or the U.S. government or its agencies, bank certificates of deposit, bankers' acceptances, letters of credit and commercial paper, including asset-backed commercial paper. RiverSource VP - Core Bond Fund (formerly AXP VP - Core Bond Fund) invests primarily in securities like those included in the Lehman Brothers Aggregate Bond Index (the "Index"), which are investment grade and denominated in U.S. dollars. The Index includes securities issued by the U.S. government, corporate bonds and mortgage- and asset-backed securities. RiverSource VP - Diversified Bond Fund (formerly AXP VP - Diversified Bond Fund) invests primarily in bonds and other debt securities issued by the U.S. government, corporate bonds and mortgage- and asset-backed securities. RiverSource VP - Diversified Equity Income Fund (formerly AXP VP - Diversified Equity Income Fund) invests primarily in dividend-paying common and preferred stocks. RiverSource VP - Emerging Markets Fund (formerly AXP VP - Threadneedle Emerging Markets Fund) invests primarily in equity securities of companies in emerging market countries. RiverSource VP - Global Bond Fund (formerly AXP VP - Global Bond Fund) invests primarily in debt obligations of U.S. and foreign issuers. RiverSource VP - Global Inflation Protected Securities Fund (formerly AXP VP - Inflation Protected Securities Fund) invests primarily in inflation-protected debt securities. These securities include inflation-indexed bonds of varying maturities issued by U.S. and foreign governments, their agencies or instrumentalities, and corporations. RiverSource VP - Growth Fund (formerly AXP VP - Growth Fund) invests primarily in common stocks that appear to offer growth opportunities. RiverSource VP - High Yield Bond Fund (formerly AXP VP - High Yield Bond Fund) invests primarily in high-yielding, high risk corporate bonds (junk bonds) issued by U.S. and foreign companies and governments. RiverSource VP - Income Opportunities Fund (formerly AXP VP - Income Opportunities Fund) invests primarily in income-producing debt securities, with an emphasis on the higher rated segment of the high-yield (junk bond) market. RiverSource VP - International Opportunity Fund (formerly AXP VP - Threadneedle International Fund) invests primarily in equity securities of foreign issuers that offer strong growth potential. RiverSource VP - Large Cap Equity Fund (formerly AXP VP - Large Cap Equity Fund) invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. -------------------------------------------------------------------------------- 101 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Large Cap Value Fund (formerly AXP VP - Large Cap Value Fund) invests primarily in equity securities of companies with a market capitalization greater than $5 billion. RiverSource VP - Mid Cap Growth Fund (formerly AXP VP - Equity Select Fund) invests primarily in common stocks of mid-capitalization companies. RiverSource VP - Mid Cap Value Fund (formerly AXP VP - Mid Cap Value Fund) invests primarily in equity securities of medium-sized companies. RiverSource VP - New Dimensions Fund (formerly AXP VP - New Dimensions Fund) invests primarily in common stocks showing potential for significant growth. RiverSource VP - S&P 500 Index Fund (formerly AXP VP - S&P 500 Index Fund) invests primarily in common stocks included in the Standard & Poor's 500 Composite Stock Price Index (S&P 500). RiverSource VP - Select Value Fund (formerly AXP VP - Partners Select Value Fund) invests primarily in common stocks, preferred stocks and securities convertible into common stocks that are listed on a nationally recognized securities exchange or traded on the NASDAQ National Market System of the National Association of Securities Dealers. RiverSource VP - Short Duration U.S. Government Fund (formerly AXP VP - Short Duration U.S. Government Fund) invests primarily in debt securities issued or guaranteed as to principal and interest by the U.S. government, or its agencies or instrumentalities. RiverSource VP - Small Cap Advantage Fund (formerly AXP VP - Small Cap Advantage Fund) invests primarily in equity securities of small cap companies. RiverSource VP - Small Cap Value Fund (formerly AXP VP - Partners Small Cap Value Fund) invests primarily in equity securities of small capitalization companies. RiverSource VP - Strategy Aggressive Fund (formerly AXP VP - Strategy Aggressive Fund) invests primarily in securities of growth companies. You may not buy (nor will you own) shares of each Fund directly. You invest by buying a variable annuity contract or life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the subaccounts) that invests in each Fund. Each Fund's significant accounting policies are summarized as follows: 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 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 at 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 in all Funds, except RiverSource VP - Cash Management Fund, maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on the current interest rates; those maturing in 60 days or less are valued at amortized cost. Pursuant to Rule 2a-7 of the 1940 Act, all securities in RiverSource VP - Cash Management Fund are valued daily at amortized cost, which approximates market value in order to maintain a constant net asset value of $1 per share. -------------------------------------------------------------------------------- 102 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Illiquid securities At Aug. 31, 2005, investments in securities for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - International Opportunity Fund and RiverSource VP - Small Cap Value Fund included issues that are illiquid which the Funds currently limit to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities at Aug. 31, 2005, was $17, $1, $21,370,705, $497,270 and $20,600, representing 0.00%, 0.00%, 1.71%, 0.04% and 0.005% of net assets for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - International Opportunity Fund and RiverSource VP - Small Cap Value Fund, respectively. 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. Securities purchased on a forward-commitment basis Delivery and payment for securities that have been purchased by the Funds on a forward-commitment basis, including when-issued securities, other forward-commitments and future capital commitments for limited partnership interests, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect each Fund's net assets the same as owned securities. The Funds designate cash or liquid securities at least equal to the amount of its forward-commitments. At Aug. 31, 2005, the outstanding forward-commitments for the Funds are as follows:
When-issued Other Future Fund securities forward-commitments capital commitments RiverSource VP - Balanced Fund $25,011,770 $3,428,013 $-- RiverSource VP - Core Bond Fund 3,907,593 -- -- RiverSource VP - Diversified Bond Fund 75,803,440 7,570,943 -- RiverSource VP - Global Bond Fund 343,375 194,501 -- RiverSource VP - High Yield Bond Fund 4,219,341 -- -- RiverSource VP - Income Opportunities Fund 316,581 102,369 -- RiverSource VP - Short Duration U.S. Government Fund 13,921,642 -- --
Certain Funds may also enter into transactions to sell purchase commitments to third parties at current market values and concurrently acquire other purchase commitments for similar securities at later dates. As an inducement for these Funds to "roll over" their purchase commitments, these Funds receive negotiated amounts in the form of reductions of the purchase price of the commitment. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Funds, except RiverSource VP - Cash Management 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 Funds 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 Funds give up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Funds 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 Funds pay a premium whether or not the option is exercised. The Funds also have 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 Funds 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 Funds, except RiverSource VP - Cash Management Fund, may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Funds also may buy or 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 Funds are 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 Funds each day. The variation margin payments are equal to the daily changes in the contract value and recorded as unrealized gains and losses. The Funds recognize a realized gain or loss when the contract is closed or expires. -------------------------------------------------------------------------------- 103 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL 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. 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 Aug. 31, 2005, foreign currency holdings for RiverSource VP - Emerging Markets Fund consisted of multiple denominations, primarily South African rands and Taiwan dollars, foreign currency holdings for RiverSource VP - Global Bond Fund consisted of multiple denominations, primarily European monetary units, foreign currency holdings for RiverSource VP - International Opportunity Fund consisted of multiple denominations and foreign currency holdings for RiverSource VP - New Dimensions consisted of Taiwan dollars. The Funds, except RiverSource VP - Cash Management Fund and RiverSource VP - Short Duration U.S. Government 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 Funds and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Funds are subject to the credit risk that the other party will not complete its contract obligations. Forward sale commitments Certain Funds may enter into forward sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of forward sale commitments are not received until the contractual settlement date. During the time a forward sale commitment is outstanding, equivalent deliverable securities, or an offsetting forward purchase commitment deliverable on or before the sale commitment date, are used to satisfy the commitment. Unsettled forward sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Valuation of securities" above. The forward sale commitment is "marked-to-market" daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the forward sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss. If the Fund delivers securities under the commitment, the Fund realizes a gain or a loss from the sale of the securities based upon the market price established at the date the commitment was entered into. Forward sale commitments outstanding at period end are listed in the "Notes to investments in securities." Total return swap transactions Certain Funds may enter into swap agreements to earn the total return on a specified security or index of fixed income securities. Under the terms of the swaps, the Funds either receive or pay the total return on a reference security or index applied to a notional principal amount. In return, the Funds agree to pay or receive from the counterparty a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount. The notional amounts of swap contracts are not recorded in the financial statements. Swaps are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Total return swaps are subject to the risk that the counterparty will default on its obligation to pay net amounts due to the Funds. Guarantees and indemnifications Under each Fund's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to each Fund. In addition, certain of each Fund's contracts with its service providers contain general indemnification clauses. Each Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against each Fund cannot be determined and each Fund has no historical basis for predicting the likelihood of any such claims. Federal taxes Each 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 the subaccounts. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. 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, the timing and amount of market discount recognized as ordinary income, foreign tax credits 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. The effect on dividend distributions of certain book-to-tax differences is presented as "excess distributions" in the statement of changes in net assets. 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) are recorded by the Funds. -------------------------------------------------------------------------------- 104 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, accumulated net realized gain (loss) and undistributed net investment income have been increased (decreased), resulting in net reclassification adjustments to paid-in capital by the following:
RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Management Core Bond Diversified Bond Fund Fund Fund Fund Accumulated net realized gain (loss) $ 752,049 $-- $(32,510) $(2,516,322) Undistributed net investment income 1,066,498 -- 32,510 2,516,322 ---------- --- ------- ----------- Additional paid-in capital reduction (increase) $1,818,547 $-- $ -- $ -- ---------- --- ------- ----------- RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Diversified Emerging Global Bond Global Inflation Equity Income Markets Fund Protected Securities Fund Fund Fund Accumulated net realized gain (loss) $ 1,946,851 $ 56,131 $(10,243,702) $(6,104) Undistributed net investment income (1,946,851) (56,131) 10,243,702 6,885 ---------- ------- ---------- ----- Additional paid-in capital reduction (increase) $ -- $ -- $ -- $ 781 ----------- ------- ------------ ------- RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Growth High Yield Income International Fund Bond Opportunities Opportunity Fund Fund Fund Accumulated net realized gain (loss) $ 3,839 $-- $-- $443,454 Undistributed net investment income (3,839) -- -- (387,813) ------- --- --- -------- Additional paid-in capital reduction (increase) $ -- $-- $-- $ 55,641 ------- --- --- -------- RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Mid Cap Equity Value Growth Value Fund Fund Fund Fund Accumulated net realized gain (loss) $ 403,097 $ 2,179 $ 907 $ 808 Undistributed net investment income (183,089) (2,179) 795,020 249 --------- ------- -------- ------ Additional paid-in capital reduction (increase) $ 220,008 $ -- $795,927 $1,057 --------- ------- -------- ------ RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - New S&P 500 Select Short Duration Dimensions Index Value U.S. Government Fund Fund Fund Fund Accumulated net realized gain (loss) $ 75,535 $ 31,339 $ 5,502 $(14,615) Undistributed net investment income (75,535) (31,339) (5,502) 14,615 -------- -------- ------- -------- Additional paid-in capital reduction (increase) $ -- $ -- $ -- $ -- -------- -------- ------- -------- RiverSource VP - RiverSource VP - RiverSource VP - Small Cap Small Cap Strategy Advantage Value Aggressive Fund Fund Fund Accumulated net realized gain (loss) $(613,287) $ 51,627 $(3,450,845) Undistributed net investment income 613,287 (54,395) 4,622,830 --------- -------- ----------- Additional paid-in capital reduction (increase) $ -- $ (2,768) $ 1,171,985 --------- -------- -----------
-------------------------------------------------------------------------------- 105 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows:
Year ended Aug. 31, 2005 2004 RiverSource VP - Balanced Fund Distributions paid from: Ordinary income $61,685,753 $53,848,054 Long-term capital gain -- -- RiverSource VP - Cash Management Fund Distributions paid from: Ordinary income 13,366,319 $3,649,950 Long-term capital gain -- -- RiverSource VP - Core Bond Fund(a) Distributions paid from: Ordinary income 1,450,986 404,035 Long-term capital gain -- -- RiverSource VP - Diversified Bond Fund Distributions paid from: Ordinary income 66,121,267 60,644,287 Long-term capital gain -- -- RiverSource VP - Diversified Equity Income Fund Distributions paid from: Ordinary income 19,986,713 10,327,123 Long-term capital gain -- -- RiverSource VP - Emerging Markets Fund Distributions paid from: Ordinary income 692,060 313,397 Long-term capital gain 1,958,494 -- RiverSource VP - Global Bond Fund Distributions paid from: Ordinary income 23,132,048 21,683,991 Long-term capital gain -- -- RiverSource VP - Global Inflation Protected Securities Fund(b) Distributions paid from: Ordinary income 1,179,047 N/A Long-term capital gain -- N/A RiverSource VP - Growth Fund Distributions paid from: Ordinary income 1,085,812 689,607 Long-term capital gain -- -- RiverSource VP - High Yield Bond Fund Distributions paid from: Ordinary income 80,490,774 73,307,082 Long-term capital gain -- -- RiverSource VP - Income Opportunities Fund(c) Distributions paid from: Ordinary income 1,588,766 229,533 Long-term capital gain -- -- RiverSource VP - International Opportunity Fund Distributions paid from: Ordinary income 14,185,535 8,834,774 Long-term capital gain -- -- RiverSource VP - Large Cap Equity Fund Distributions paid from: Ordinary income 28,626,032 15,364,313 Long-term capital gain -- -- RiverSource VP - Large Cap Value Fund(a) Distributions paid from: Ordinary income 211,363 30,866 Long-term capital gain 1,069 --
-------------------------------------------------------------------------------- 106 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2005 2004 RiverSource VP - Mid Cap Growth Fund Distributions paid from: Ordinary income $ -- $ -- Long-term capital gain -- -- RiverSource VP - Mid Cap Value Fund(d) Distributions paid from: Ordinary income 9,698 N/A Long-term capital gain -- N/A RiverSource VP - New Dimensions Fund Distributions paid from: Ordinary income 26,931,431 21,246,034 Long-term capital gain -- -- RiverSource VP - S&P 500 Index Fund Distributions paid from: Ordinary income 5,503,403 2,885,111 Long-term capital gain -- -- RiverSource VP - Select Value Fund(a) Distributions paid from: Ordinary income 120,939 15,818 Long-term capital gain 56 -- RiverSource VP - Short Duration U.S. Government Fund Distributions paid from: Ordinary income 13,288,036 13,187,954 Long-term capital gain 148,999 411,876 RiverSource VP - Small Cap Advantage Fund Distributions paid from: Ordinary income -- -- Long-term capital gain 9,460,720 -- RiverSource VP - Small Cap Value Fund Distributions paid from: Ordinary income 9,597,221 2,379,486 Long-term capital gain 13,206,755 119,483 RiverSource VP - Strategy Aggressive Fund Distributions paid from: Ordinary income -- -- Long-term capital gain -- --
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. At Aug. 31, 2005, the components of distributable earnings on a tax basis for each Fund are as follows:
Accumulated Unrealized Undistributed long-term appreciation Fund ordinary income gain (loss) (depreciation) RiverSource VP - Balanced Fund $14,357,747 $ 70,774,755 $133,566,771 RiverSource VP - Cash Management Fund 1,764,743 (1,797) -- RiverSource VP - Core Bond Fund 281,081 8,561 255,826 RiverSource VP - Diversified Bond Fund 5,584,010 (136,697,943) 4,751,747 RiverSource VP - Diversified Equity Income Fund 10,977,169 68,007,894 243,856,313 RiverSource VP - Emerging Markets Fund 9,896,782 3,128,668 17,802,819 RiverSource VP - Global Bond Fund 1,278,938 2,322,502 17,114,753 RiverSource VP - Global Inflation Protected Securities Fund 319,838 -- 764,437 RiverSource VP - Growth Fund 167,210 (115,755,420) 16,892,392 RiverSource VP - High Yield Bond Fund 4,690,679 (222,337,062) 14,600,380 RiverSource VP - Income Opportunities Fund 416,821 45,133 518,819 RiverSource VP - International Opportunity Fund 8,050,591 (690,331,815) 185,297,744 RiverSource VP - Large Cap Equity Fund 5,828,494 (416,160,189) 136,425,851 RiverSource VP - Large Cap Value Fund 258,522 172,350 557,289 RiverSource VP - Mid Cap Growth Fund -- 13,515,398 50,781,456 RiverSource VP - Mid Cap Value Fund 42,735 798 466,579
-------------------------------------------------------------------------------- 107 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Accumulated Unrealized Undistributed long-term appreciation Fund ordinary income gain (loss) (depreciation) RiverSource VP - New Dimensions Fund $3,103,264 $ (254,908,325) $151,443,398 RiverSource VP - S&P 500 Index Fund 2,231,600 -- 31,384,339 RiverSource VP - Select Value Fund 218,369 91,649 1,487,949 RiverSource VP - Short Duration U.S. Government Fund 1,273,765 (7,170,145) (3,066,549) RiverSource VP - Small Cap Advantage Fund 7,295,152 22,110,008 27,791,452 RiverSource VP - Small Cap Value Fund 9,563,421 22,259,357 35,206,595 RiverSource VP - Strategy Aggressive Fund -- (1,337,919,255) 178,041,739
Dividends At Aug. 31, 2005, dividends declared for each Fund payable Sept. 1, 2005 are as follows: Fund Amount per share RiverSource VP - Balanced Fund $0.092 RiverSource VP - Cash Management Fund 0.003 RiverSource VP - Core Bond Fund 0.027 RiverSource VP - Diversified Bond Fund 0.033 RiverSource VP - Diversified Equity Income Fund 0.054 RiverSource VP - Emerging Markets Fund 0.016 RiverSource VP - Global Bond Fund 0.022 RiverSource VP - Global Inflation Protected Securities Fund 0.022 RiverSource VP - Growth Fund 0.003 RiverSource VP - High Yield Bond Fund 0.038 RiverSource VP - Income Opportunities Fund 0.051 RiverSource VP - International Opportunity Fund 0.027 RiverSource VP - Large Cap Equity Fund 0.051 RiverSource VP - Large Cap Value Fund 0.036 RiverSource VP - Mid Cap Value Fund 0.013 RiverSource VP - New Dimensions Fund 0.022 RiverSource VP - S&P 500 Index Fund 0.030 RiverSource VP - Select Value Fund 0.008 RiverSource VP - Short Duration U.S. Government Fund 0.024 Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared daily and distributed monthly, when available, for RiverSource VP - Cash Management Fund, RiverSource VP - Core Bond Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - Income Opportunities Fund and RiverSource VP - Short Duration U.S. Government Fund. Dividends from net investment income are declared and distributed quarterly, when available, for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Equity Income Fund, RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity Fund, RiverSource VP - Large Cap Value Fund, RiverSource VP - Mid Cap Growth Fund, RiverSource VP - Mid Cap Value Fund , RiverSource VP - New Dimensions Fund, RiverSource VP - S&P 500 Index Fund, RiverSource VP - Select Value Fund, RiverSource VP - Small Cap Advantage Fund, RiverSource VP - Small Cap Value Fund and RiverSource VP - Strategy Aggressive Fund. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. 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. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. -------------------------------------------------------------------------------- 108 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 2. EXPENSES The Funds have an Investment Management Services Agreement with RiverSource Investments, LLC (the Investment Manager) for managing investments, record keeping and other services that are based solely on the assets of each Fund. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. The management fee is a percentage of each Fund's average daily net assets that declines annually as each Fund's assets increase. The percentage range for each Fund is as follows: Fund Percentage range RiverSource VP - Balanced Fund 0.630% to 0.550% RiverSource VP - Cash Management Fund 0.510% to 0.440% RiverSource VP - Core Bond Fund 0.630% to 0.555% RiverSource VP - Diversified Bond Fund 0.610% to 0.535% RiverSource VP - Diversified Equity Income Fund 0.560% to 0.470% RiverSource VP - Emerging Markets Fund 1.170% to 1.095% RiverSource VP - Global Bond Fund 0.840% to 0.780% RiverSource VP - Global Inflation Protected Securities Fund 0.490% to 0.415% RiverSource VP - Growth Fund 0.630% to 0.570% RiverSource VP - High Yield Bond Fund 0.620% to 0.545% RiverSource VP - Income Opportunities Fund 0.640% to 0.565% RiverSource VP - International Opportunity Fund 0.870% to 0.795% RiverSource VP - Large Cap Equity Fund 0.630% to 0.570% RiverSource VP - Large Cap Value Fund 0.630% to 0.570% RiverSource VP - Mid Cap Growth Fund 0.650% to 0.560% RiverSource VP - Mid Cap Value Fund 0.730% to 0.610% RiverSource VP - New Dimensions Fund 0.630% to 0.570% RiverSource VP - S&P 500 Index Fund 0.290% to 0.260% RiverSource VP - Select Value Fund 0.810% to 0.720% RiverSource VP - Short Duration U.S. Government Fund 0.610% to 0.535% RiverSource VP - Small Cap Advantage Fund 0.790% to 0.650% RiverSource VP - Small Cap Value Fund 1.020% to 0.920% RiverSource VP - Strategy Aggressive Fund 0.650% to 0.575% For the following Funds the fee may be adjusted upward or downward by a performance incentive adjustment of 0.08% for RiverSource VP - Balanced Fund and 0.12% for each remaining Fund. The adjustment is based on a comparison of the performance of each Fund to the stated index up to a maximum percentage of each Fund's average daily net assets after deducting 0.50% from the performance difference. In certain circumstances, the board may approve a change in the index. If the performance difference is less than 0.50%, the adjustment will be zero. The index name and the amount the fee was increased (decreased) for each Fund for the year ended Aug. 31, 2005 are as follows:
Increase Fund Index name (decrease) RiverSource VP - Balanced Fund Lipper Balanced Funds Index $ 702,269 RiverSource VP - Diversified Equity Income Fund Lipper Equity Income Funds Index 957,131 RiverSource VP - Emerging Markets Fund Lipper Emerging Markets Funds Index (52,859) RiverSource VP - Growth Fund Lipper Large-Cap Growth Funds Index 179,212 RiverSource VP - International Opportunity Fund Lipper International Large-Cap Core Funds Index (444,320) RiverSource VP - Large Cap Equity Fund Lipper Large-Cap Core Funds Index (592,373) RiverSource VP - Large Cap Value Fund Lipper Large-Cap Value Funds Index 196 RiverSource VP - Mid Cap Growth Fund Lipper Mid-Cap Growth Funds Index (181,465) RiverSource VP - Mid Cap Value Fund Lipper Mid-Cap Value Funds Index -- RiverSource VP - New Dimensions Fund(a) Lipper Large-Cap Growth Funds Index (1,900,920) RiverSource VP - Select Value Fund Lipper Multi-Cap Value Funds Index (1,689) RiverSource VP - Small Cap Advantage Fund Lipper Small-Cap Core Funds Index 19,577 RiverSource VP - Small Cap Value Fund Lipper Small-Cap Value Funds Index (117,658) RiverSource VP - Strategy Aggressive Fund Lipper Mid-Cap Growth Funds Index (516,976)
(a) Effective Oct. 31, 2005, the performance for RiverSource VP - New Dimensions Fund will be measured against the Lipper Large-Cap Core Funds Index. -------------------------------------------------------------------------------- 109 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, a direct wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of RiverSource VP - Emerging Markets Fund and RiverSource VP - International Opportunity Fund. The Investment Manager has a Subadvisory Agreement with Kenwood Capital Management LLC, an indirect partially owned subsidiary of Ameriprise Financial, to subadvise the assets of RiverSource VP - Small Cap Advantage Fund. The Investment Manager has a Subadvisory Agreement with GAMCO Asset Management, Inc., which does business under the name Gabelli Asset Management Company, to subadvise the assets of RiverSource VP - Select Value Fund. The Investment Manager has Subadvisory Agreements with Royce & Associates, LLC, a direct wholly-owned subsidiary of Legg Mason Inc., Goldman Sachs Asset Management, L.P., Barrow, Hanley, Mewhinney & Strauss, Inc., Donald Smith & Co., Inc. and Franklin Portfolio Associates LLC, each which subadvises a portion of the assets of RiverSource VP - Small Cap Value 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. In addition to paying its own management fee, brokerage commissions, taxes and costs of certain legal services, each Fund will reimburse the Investment Manager an amount equal to the cost of certain expenses incurred and paid by the Investment Manager in connection with each Fund's operations. The Funds also pay custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. The reimbursement paid by RiverSource VP - Cash Management Fund will be limited to 0.25% of the Fund's average daily net assets. The Funds have an agreement with IDS Life for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund pays a fee at an annual rate up to 0.125% of each Fund's average daily net assets. The Funds have an Administrative Services Agreement with Ameriprise Financial. Under the current agreement, each Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of each Fund's average daily net assets that declines annually as each Fund's assets increase. The percentage range for each Fund is as follows: Fund Percentage range RiverSource VP - Balanced Fund 0.040% to 0.020% RiverSource VP - Cash Management Fund 0.030% to 0.020% RiverSource VP - Core Bond Fund 0.050% to 0.025% RiverSource VP - Diversified Bond Fund 0.050% to 0.025% RiverSource VP - Diversified Equity Income Fund 0.040% to 0.020% RiverSource VP - Emerging Markets Fund 0.100% to 0.050% RiverSource VP - Global Bond Fund 0.060% to 0.040% RiverSource VP - Global Inflation Protected Securities Fund 0.050% to 0.025% RiverSource VP - Growth Fund 0.050% to 0.030% RiverSource VP - High Yield Bond Fund 0.050% to 0.025% RiverSource VP - Income Opportunities Fund 0.050% to 0.025% RiverSource VP - International Opportunity Fund 0.060% to 0.035% RiverSource VP - Large Cap Equity Fund 0.050% to 0.030% RiverSource VP - Large Cap Value Fund 0.050% to 0.030% RiverSource VP - Mid Cap Growth Fund 0.060% to 0.030% RiverSource VP - Mid Cap Value Fund 0.050% to 0.020% RiverSource VP - New Dimensions Fund 0.050% to 0.030% RiverSource VP - S&P 500 Index Fund 0.080% to 0.065% RiverSource VP - Select Value Fund 0.060% to 0.035% RiverSource VP - Short Duration U.S. Government Fund 0.050% to 0.025% RiverSource VP - Small Cap Advantage Fund 0.060% to 0.035% RiverSource VP - Small Cap Value Fund 0.080% to 0.055% RiverSource VP - Strategy Aggressive Fund 0.060% to 0.035% -------------------------------------------------------------------------------- 110 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Effective Oct. 1, 2005, the fee percentage of each Fund's average daily net assets declines annually as each Fund's assets increase as follows: Fund Percentage range RiverSource VP - Balanced Fund 0.060% to 0.030% RiverSource VP - Cash Management Fund 0.060% to 0.030% RiverSource VP - Core Bond Fund 0.070% to 0.040% RiverSource VP - Diversified Bond Fund 0.070% to 0.040% RiverSource VP - Diversified Equity Income Fund 0.060% to 0.030% RiverSource VP - Emerging Markets Fund 0.080% to 0.050% RiverSource VP - Global Bond Fund 0.080% to 0.050% RiverSource VP - Global Inflation Protected Securities Fund 0.070% to 0.040% RiverSource VP - Growth Fund 0.060% to 0.030% RiverSource VP - High Yield Bond Fund 0.070% to 0.040% RiverSource VP - Income Opportunities Fund 0.070% to 0.040% RiverSource VP - International Opportunity Fund 0.080% to 0.050% RiverSource VP - Large Cap Equity Fund 0.060% to 0.030% RiverSource VP - Large Cap Value Fund 0.060% to 0.030% RiverSource VP - Mid Cap Growth Fund 0.060% to 0.030% RiverSource VP - Mid Cap Value Fund 0.060% to 0.030% RiverSource VP - New Dimensions Fund 0.060% to 0.030% RiverSource VP - S&P 500 Index Fund 0.060% to 0.030% RiverSource VP - Select Value Fund 0.060% to 0.030% RiverSource VP - Short Duration U.S. Government Fund 0.070% to 0.040% RiverSource VP - Small Cap Advantage Fund 0.080% to 0.050% RiverSource VP - Small Cap Value Fund 0.080% to 0.050% RiverSource VP - Strategy Aggressive Fund 0.060% to 0.030% A minor portion of additional administrative service expenses paid by the Funds are consultants' fees and fund office expenses. Under this agreement, the Funds also pay 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 Funds 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 each Fund or other RiverSource funds. Each Fund's liability for these amounts is adjusted for market value changes and remains in each Fund until distributed in accordance with the Plan. For the year ended Aug. 31, 2005, Ameriprise Financial and its affiliates waived certain fees and expenses to 0.95% for RiverSource VP - Core Bond Fund, 0.75% for RiverSource VP - Global Inflation Protected Securities Fund, 0.99% for RiverSource VP - Income Opportunities Fund, 1.05% for RiverSource VP - Large Cap Value Fund, 1.08% for RiverSource VP - Mid Cap Value Fund, 0.50% for RiverSource VP - S&P 500 Index Fund and 1.15% for RiverSource VP - Select Value Fund. In addition, Ameriprise Financial and its affiliates have agreed to waive certain fees and expenses until Aug. 31, 2006. Under this agreement, through Sept. 30, 2005, net expenses will not exceed the following percentage of the Fund's average daily net assets: Fund Percentage RiverSource VP - Core Bond Fund 0.950% RiverSource VP - Emerging Markets Fund 1.750% RiverSource VP - Global Inflation Protected Securities Fund 0.750% RiverSource VP - Income Opportunities Fund 0.990% RiverSource VP - Large Cap Value Fund 1.050% RiverSource VP - Mid Cap Growth Fund 1.100% RiverSource VP - Mid Cap Value Fund 1.080% RiverSource VP - S&P 500 Index Fund 0.495% RiverSource VP - Select Value Fund 1.150% RiverSource VP - Small Cap Value Fund 1.300% Beginning Oct. 1, 2005, net expenses, before giving effect to any performance incentive adjustment, will not exceed the percentage listed above of each Fund's average daily net assets. -------------------------------------------------------------------------------- 111 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT During the year ended Aug. 31, 2005, the Fund's custodian fees were reduced as a result of earnings credits from overnight cash balances as follows: Fund Reduction RiverSource VP - Balanced Fund $2,863 RiverSource VP - Cash Management Fund 1,574 RiverSource VP - Core Bond Fund 5,873 RiverSource VP - Diversified Bond Fund 3,850 RiverSource VP - Diversified Equity Income Fund 810 RiverSource VP - Emerging Markets Fund 3,983 RiverSource VP - Global Bond Fund 1,347 RiverSource VP - Global Inflation Protected Securities Fund 3,486 RiverSource VP - Growth Fund 3,312 RiverSource VP - High Yield Bond Fund 1,913 RiverSource VP - Income Opportunities Fund 7,252 RiverSource VP - International Opportunity Fund 2,124 RiverSource VP - Large Cap Equity Fund 1,170 RiverSource VP - Large Cap Value Fund 5,757 RiverSource VP - Mid Cap Growth Fund 3,943 RiverSource VP - Mid Cap Value Fund 300 RiverSource VP - New Dimensions Fund 986 RiverSource VP - S&P 500 Index Fund 6,515 RiverSource VP - Short Duration U.S. Government Fund 1,429 RiverSource VP - Small Cap Advantage Fund 146 RiverSource VP - Strategy Aggressive Fund 1,129 3. SECURITIES TRANSACTIONS For the year ended Aug. 31, 2005, cost of purchases and proceeds from sales of securities aggregated $2,966,959,422 and $3,046,173,275, respectively, for RiverSource VP - Cash Management Fund. Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated for each Fund are as follows:
Fund Purchases Proceeds RiverSource VP - Balanced Fund $3,287,041,369 $3,625,995,701 RiverSource VP - Core Bond Fund 162,004,337 142,008,684 RiverSource VP - Diversified Bond Fund 4,944,953,620 4,782,330,255 RiverSource VP - Diversified Equity Income Fund 878,821,385 307,577,543 RiverSource VP - Emerging Markets Fund 225,580,079 115,651,532 RiverSource VP - Global Bond Fund 510,125,049 366,465,035 RiverSource VP - Global Inflation Protected Securities Fund(a) 119,957,877 11,103,118 RiverSource VP - Growth Fund 512,324,387 429,268,589 RiverSource VP - High Yield Bond Fund 1,292,139,337 1,212,002,554 RiverSource VP - Income Opportunities Fund 49,447,324 22,275,322 RiverSource VP - International Opportunity Fund 993,892,595 986,099,808 RiverSource VP - Large Cap Equity Fund 3,247,824,632 3,580,844,130 RiverSource VP - Large Cap Value Fund 11,761,664 5,516,396 RiverSource VP - Mid Cap Growth Fund 81,545,724 102,160,074 RiverSource VP - Mid Cap Value Fund(b) 4,775,207 314,790 RiverSource VP - New Dimensions Fund 2,253,626,466 3,050,217,860 RiverSource VP - S&P 500 Index Fund 71,053,084 14,760,602 RiverSource VP - Select Value Fund 13,012,058 4,020,511 RiverSource VP - Short Duration U.S. Government Fund 818,914,624 852,115,071 RiverSource VP - Small Cap Advantage Fund 246,130,650 239,910,914 RiverSource VP - Small Cap Value Fund 282,021,673 177,907,115 RiverSource VP - Strategy Aggressive Fund 207,961,693 454,608,957
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. -------------------------------------------------------------------------------- 112 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Net realized gains and losses on investment sales are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with Ameriprise Financial for the year ended Aug. 31, 2005 are as follows: Fund Amount paid RiverSource VP - Balanced Fund $ 3,299 RiverSource VP - Diversified Equity Income Fund 1,052 RiverSource VP - Growth Fund 714 RiverSource VP - Large Cap Equity Fund 14,132 RiverSource VP - New Dimensions Fund 11,952 Brokerage commissions paid to brokers affiliated with the subadvisers for RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund were $3,655 and $754, respectively, for the year ended Aug. 31, 2005. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Fund Fund Sold 2,282,339 278,345,632 2,692,666 Issued for reinvested distributions 4,179,520 12,099,139 137,378 Redeemed (33,801,683) (376,052,554) (618,126) ----------- ------------ -------- Net increase (decrease) (27,339,824) (85,607,783) 2,211,918 ----------- ----------- --------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Fund Fund(a) Sold 2,270,005 407,892,748 1,167,565 Fund merger 26,869,054 46,106,543 N/A Issued for reinvested distributions 3,807,992 3,354,489 33,416 Redeemed (30,822,612) (552,221,480) (150,706) ----------- ------------ -------- Net increase (decrease) 2,124,439 (94,867,700) 1,050,275 --------- ----------- --------- (a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Fund Fund Fund Sold 25,108,316 46,061,546 10,263,732 Issued for reinvested distributions 6,211,707 1,430,499 228,513 Redeemed (19,891,051) (1,515,634) (576,416) ----------- ---------- -------- Net increase (decrease) 11,428,972 45,976,411 9,915,829 ---------- ---------- --------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Fund Fund Fund Sold 11,630,729 37,052,964 3,182,131 Fund merger 7,879,202 1,133,932 N/A Issued for reinvested distributions 5,685,611 698,518 25,814 Redeemed (35,168,272) (1,803,706) (448,306) ----------- ---------- -------- Net increase (decrease) (9,972,730) 37,081,708 2,759,639 ---------- ---------- ---------
-------------------------------------------------------------------------------- 113 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Fund Fund(a) Sold 14,405,822 11,437,594 16,903,922 Issued for reinvested distributions 2,128,628 92,952 183,638 Redeemed (2,121,377) (612,356) (3,733,894) ---------- -------- ---------- Net increase (decrease) 14,413,073 10,918,190 13,353,666 ---------- ---------- ---------- (a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Fund Fund Sold 8,683,374 N/A 8,891,498 Issued for reinvested distributions 1,907,183 N/A 83,497 Redeemed (2,842,102) N/A (4,039,515) ---------- ---- ---------- Net increase (decrease) 7,748,455 N/A 4,935,480 --------- ---- --------- Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Fund Fund Fund Sold 21,655,621 3,565,312 10,041,363 Issued for reinvested distributions 11,919,547 140,682 1,545,947 Redeemed (20,228,641) (934,015) (11,718,071) ----------- -------- ----------- Net increase (decrease) 13,346,527 2,771,979 (130,761) ---------- --------- -------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Fund Fund(a) Fund Sold 42,800,480 4,125 11,006,483 Fund merger N/A N/A 21,939,684 Issued for reinvested distributions 11,120,215 15,146 1,079,430 Redeemed (18,357,854) (2,993) (18,496,473) ----------- ------ ----------- Net increase (decrease) 35,562,841 16,278 15,529,124 ---------- ------ ---------- (a) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Fund Fund Fund Sold 9,638,209 691,507 1,840,161 Issued for reinvested distributions 1,352,452 17,147 -- Redeemed (25,298,441) (88,533) (3,566,894) ----------- ------- ---------- Net increase (decrease) (14,307,780) 620,121 (1,726,733) ----------- ------- ----------
-------------------------------------------------------------------------------- 114 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Fund Fund(a) Fund Sold 3,370,740 435,972 6,310,689 Fund merger 34,368,282 N/A N/A Issued for reinvested distributions 678,836 1,370 -- Redeemed (17,070,590) (9,197) (935,350) ----------- ------ -------- Net increase (decrease) 21,347,268 428,145 5,375,339 ---------- ------- --------- (a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Fund(a) Fund Fund Sold 428,140 1,159,438 8,702,124 Issued for reinvested distributions 171 1,951,230 631,315 Redeemed (5,284) (62,428,710) (2,660,665) ------ ----------- ---------- Net increase (decrease) 423,027 (59,318,042) 6,672,774 ------- ----------- --------- (a) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Fund Fund Fund Sold N/A 9,122,276 14,172,187 Issued for reinvested distributions N/A 1,368,805 337,998 Redeemed N/A (26,509,122) (1,851,687) ---- ----------- ---------- Net increase (decrease) N/A (16,018,041) 12,658,498 ---- ----------- ---------- Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Fund Fund Fund Sold 1,230,317 5,228,726 1,725,783 Issued for reinvested distributions 10,913 1,302,984 666,902 Redeemed (55,353) (8,014,535) (1,369,479) ------- ---------- ---------- Net increase (decrease) 1,185,877 (1,482,825) 1,023,206 --------- ---------- --------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Fund(a) Fund Fund Sold 581,840 8,475,468 5,947,797 Fund merger N/A 2,394,508 N/A Issued for reinvested distributions 342 1,274,589 -- Redeemed (17,212) (8,983,052) (419,580) ------- ---------- -------- Net increase (decrease) 564,970 3,161,513 5,528,217 ------- --------- ---------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. -------------------------------------------------------------------------------- 115 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP- Small Cap Strategy Value Aggressive Fund Fund Sold 9,958,388 375,667 Issued for reinvested distributions 1,666,706 -- Redeemed (593,056) (32,505,903) -------- ----------- Net increase (decrease) 11,032,038 (32,130,236) ---------- ----------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - Small Cap Strategy Value Aggressive Fund Fund Sold 6,391,238 2,637,965 Issued for reinvested distributions 201,350 -- Redeemed (868,840) (26,077,460) -------- ----------- Net increase (decrease) 5,723,748 (23,439,495) --------- -----------
5. FORWARD FOREIGN CURRENCY CONTRACTS At Aug. 31, 2005, RiverSource VP - Global Bond Fund has entered into forward foreign currency exchange contracts that obligate the Fund 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:
RiverSource VP - Global Bond Fund Currency to Currency to Unrealized Unrealized Exchange date be delivered be received appreciation depreciation Sept. 14, 2005 14,081,448 1,556,000,000 $ -- $ 4,422 U.S. Dollar Japanese Yen Sept. 15, 2005 9,220,000 11,483,694 103,303 -- European Monetary Unit U.S. Dollar Sept. 29, 2005 34,446,000 1,424,623 -- 23,132 Czech Koruna U.S. Dollar -------- ------- Total $103,303 $27,554 -------- -------
6. LENDING OF PORTFOLIO SECURITIES Presented below is information regarding securities on loan at Aug. 31, 2005.
RiverSource VP - RiverSource VP - RiverSource VP - Balanced Diversified Diversified Fund Bond Equity Income Fund Fund Value of securities on loan to brokers $30,653,472 $30,193,200 $31,393,856 ----------- ----------- ----------- Collateral received for securities loaned: Cash $31,055,150 $30,678,750 $31,891,100 U.S. government securities, at value -- -- -- ----------- ----------- ----------- Total collateral received for securities loaned $31,055,150 $30,678,750 $31,891,100 ----------- ----------- -----------
RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Large Cap New Small Cap Strategy Equity Dimensions Advantage Aggressive Fund Fund Fund Fund Value of securities on loan to brokers $83,948,719 $32,556,000 $2,072,775 $17,417,130 ----------- ----------- ---------- ----------- Collateral received for securities loaned: Cash $85,758,400 $32,850,000 $2,103,400 $17,617,900 U.S. government securities, at value -- -- -- -- ----------- ----------- ---------- ----------- Total collateral received for securities loaned $85,758,400 $32,850,000 $2,103,400 $17,617,900 ----------- ----------- ---------- -----------
-------------------------------------------------------------------------------- 116 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending for the year ended Aug. 31, 2005 is as follows: Fund Amount RiverSource VP - Balanced Fund $263,715 RiverSource VP - Diversified Bond Fund 154,464 RiverSource VP - Diversified Equity Income Fund 152,678 RiverSource VP - Global Bond Fund 24,785 RiverSource VP - Growth Fund 28,779 RiverSource VP - International Opportunity Fund 642,537 RiverSource VP - Large Cap Equity Fund 609,965 RiverSource VP - New Dimensions Fund 87,797 RiverSource VP - Small Cap Advantage Fund 34,245 RiverSource VP - Strategy Aggressive Fund 78,917 The risks to each Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 7. FUTURES CONTRACTS At Aug. 31, 2005, RiverSource VP - Balanced Fund's investments in securities included securities valued at $867,399 that were pledged as collateral to cover initial margin deposits on 122 open purchase interest rate futures contracts and 1,062 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $14,399,813 with a net unrealized gain of $205,387. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $117,663,832 with a net unrealized loss of $701,493. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Core Bond Fund's investments in securities included securities valued at $30,979 that were pledged as collateral to cover initial margin deposits on 10 open purchase interest rate futures contracts and 52 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $1,180,313 with a net unrealized gain of $16,835. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $5,700,547 with a net unrealized loss of $38,021. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Diversified Bond Fund's investments in securities included securities valued at $1,287,026 that were pledged as collateral to cover initial margin deposits on 228 open purchase interest rate futures contracts and 1,510 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $26,911,125 with a net unrealized gain of $383,838. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $168,036,053 with a net unrealized loss of $990,992. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Global Bond Fund's investments in securities included securities valued at $577,933 that were pledged as collateral to cover initial margin deposits on 44 open purchase interest rate futures contracts denominated in euros and 238 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts denominated in euros at Aug. 31, 2005 was $6,727,804 with a net unrealized gain of $71,996. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $26,499,423 with a net unrealized loss of $198,000. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - S&P 500 Index Fund's investments in securities included securities valued at $674,251 that were pledged as collateral to cover initial margin deposits on 83 open purchase stock index futures contracts. The notional market value of the open purchase stock index futures contracts at Aug. 31, 2005 was $5,068,810 with a net unrealized loss of $19,535. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Short Duration U.S. Government Fund's investments in securities included securities valued at $148,084 that were pledged as collateral to cover initial margin deposits on 94 open purchase interest rate futures contracts and 98 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $19,466,813 with a net unrealized gain of $68,655. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $10,624,344 with a net unrealized loss of $41,751. See "Summary of significant accounting policies" and "Notes to investments in securities." -------------------------------------------------------------------------------- 117 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 8. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written by RiverSource VP - Growth Fund during the year ended Aug. 31, 2005 are as follows:
Calls Puts Contracts Premiums Contracts Premiums Balance Aug. 31, 2004 -- $ -- -- $ -- Opened 72 81,501 920 882,640 Closed (72) (81,501) (920) (882,640) --- ------- ---- -------- Balance Aug. 31, 2005 -- $ -- -- $ -- --- -------- ---- ---------
See "Summary of significant accounting policies." Contracts and premiums associated with options contracts written by RiverSource VP - New Dimensions Fund during the year ended Aug. 31, 2005 are as follows: Calls Contracts Premiums Balance Aug. 31, 2004 -- $ -- Opened 19,999 2,726,429 Closed (16,818) (2,045,353) Exercised (1,981) (594,080) Expired (1,200) (86,996) ------- ----------- Balance Aug. 31, 2005 -- $ -- ------- ----------- See "Summary of significant accounting policies." Contracts and premiums associated with options contracts written by RiverSource VP - Short Duration U.S. Government Fund during the year ended Aug. 31, 2005 are as follows: Puts Contracts Premiums Balance Aug. 31, 2004 75 $ 41,887 Expired (75) (41,887) --- -------- Balance Aug. 31, 2005 -- $ -- --- -------- See "Summary of significant accounting policies." -------------------------------------------------------------------------------- 118 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 9. SWAP CONTRACTS RiverSource VP - Balanced Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $3,700,000 $ 80,430 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 3,500,000 75,028 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 3,300,000 71,309 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 3,600,000 107,058 ---------- --------- ------- Total $333,825 --------
RiverSource VP - Core Bond Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $200,000 $ 4,348 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 150,000 3,216 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 150,000 3,241 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 225,000 6,691 -------- ------- ----- Total $17,496 -------
-------------------------------------------------------------------------------- 119 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Diversified Bond Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $7,300,000 $158,687 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 6,600,000 141,482 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 5,600,000 121,009 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 7,500,000 223,037 -------- --------- ------- Total $644,215 --------
RiverSource VP - Global Bond Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $2,200,000 $ 47,823 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 1,000,000 21,437 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 2,725,000 58,884 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 2,350,000 69,885 -------- --------- ------ Total $198,029 --------
-------------------------------------------------------------------------------- 120 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 10. CAPITAL LOSS CARRY-OVER For federal income tax purposes, capital loss carry-overs at Aug. 31, 2005 are as follows: Fund Carry-over RiverSource VP - Balanced Fund(a) $ 71,249,204 RiverSource VP - Cash Management Fund 1,797 RiverSource VP - Diversified Bond Fund 136,697,943 RiverSource VP - Growth Fund 115,755,420 RiverSource VP - High Yield Bond Fund 222,337,062 RiverSource VP - International Opportunity Fund 690,331,815 RiverSource VP - Large Cap Equity Fund 416,160,189 RiverSource VP - New Dimensions Fund 254,908,325 RiverSource VP - Short Duration U.S. Government Fund 7,170,145 RiverSource VP - Strategy Aggressive Fund 1,337,919,255 (a) As a result of the merger on July 9, 2004, the Fund acquired capital loss carry-overs, which are limited by the Internal Revenue Code Section 382, and unrealized capital gains. At the end of the most recent fiscal year, if the capital loss carry-overs are not offset by subsequent capital gains, they will expire as follows:
Fund 2007 2008 2009 RiverSource VP - Balanced Fund $ -- $11,355,730 $ 59,893,474 RiverSource VP - Cash Management Fund -- 1,797 -- RiverSource VP - Diversified Bond Fund 5,732,021 53,324,465 47,894,894 RiverSource VP - Growth Fund -- -- -- RiverSource VP - High Yield Bond Fund -- -- 15,326,726 RiverSource VP - International Opportunity Fund -- 26,384,784 18,436,163 RiverSource VP - Large Cap Equity Fund -- -- 117,244,575 RiverSource VP - New Dimensions Fund -- -- -- RiverSource VP - Short Duration U.S. Government Fund -- -- -- RiverSource VP - Strategy Aggressive Fund -- -- 118,368,309
Fund 2010 2011 2012 2013 2014 RiverSource VP - Balanced Fund $ -- $ -- $ -- $ -- $ -- RiverSource VP - Cash Management Fund -- -- -- -- -- RiverSource VP - Diversified Bond Fund 9,863,475 15,651,825 4,231,263 -- -- RiverSource VP - Growth Fund 36,012,947 79,742,473 -- -- -- RiverSource VP - High Yield Bond Fund 100,694,093 106,316,243 -- -- -- RiverSource VP - International Opportunity Fund 533,046,310 90,583,080 21,881,478 -- -- RiverSource VP - Large Cap Equity Fund 12,004,786 286,910,828 -- -- -- RiverSource VP - New Dimensions Fund 104,527,778 150,380,547 -- -- -- RiverSource VP - Short Duration U.S. Government Fund -- 68,452 -- 4,186,493 2,915,200 RiverSource VP - Strategy Aggressive Fund 869,472,336 310,534,170 39,544,440 -- --
The Funds, in connection with the mergers as described in Note 11, acquired the following capital loss carry-over: Fund Carry-over RiverSource VP - Balanced Fund $ 93,466,496 RiverSource VP - Cash Management Fund -- RiverSource VP - Diversified Bond Fund 1,887,673 RiverSource VP - Diversified Equity Income Fund 203,410 RiverSource VP - International Opportunity Fund 65,239,405 RiverSource VP - Large Cap Equity Fund 219,522,945 RiverSource VP - Short Duration U.S. Government Fund 105,388 In addition to the acquired capital loss carry-overs, the Funds also acquired unrealized capital gains as a result of the mergers. The yearly utilization of the acquired capital losses as well as the utilization of the acquired unrealized losses is limited by the Internal Revenue Code. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-overs have been offset or expire. -------------------------------------------------------------------------------- 121 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 11. FUND MERGERS RiverSource VP - Balanced Fund At the close of business on July 9, 2004, RiverSource VP - Balanced Fund acquired the assets and assumed the identified liabilities of IDS Life Series Managed Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Balanced Fund immediately before the acquisition were $2,327,723,407 and the combined net assets immediately after the acquisition were $2,705,102,673. The merger was accomplished by a tax-free exchange of 28,120,071 shares of IDS Life Series Managed Portfolio valued at $377,379,266. In exchange for the IDS Life Series Managed Portfolio shares and net assets, RiverSource VP - Balanced Fund issued 26,869,054 shares. IDS Life Series Managed Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $377,379,266, which includes $463,274,174 of capital stock, $8,315,086 of unrealized appreciation, ($94,202,895) of accumulated net realized loss and ($7,099) of temporary book-to-tax differences. RiverSource VP - Cash Management Fund At the close of business on July 9, 2004, RiverSource VP - Cash Management Fund acquired the assets and assumed the identified liabilities of IDS Life Series Money Market Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Cash Management Fund immediately before the acquisition were $715,812,600 and the combined net assets immediately after the acquisition were $761,902,594. The merger was accomplished by a tax-free exchange of 46,093,550 shares of IDS Life Series Money Market Portfolio valued at $46,089,994. In exchange for the IDS Life Series Money Market Portfolio shares and net assets, RiverSource VP - Cash Management Fund issued 46,106,543 shares. IDS Life Series Money Market Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $46,089,994, which includes $46,089,994 of capital stock. RiverSource VP - Diversified Bond Fund At the close of business on July 9, 2004, RiverSource VP - Diversified Bond Fund acquired the assets and assumed the identified liabilities of IDS Life Series Income Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Diversified Bond Fund immediately before the acquisition were $1,605,166,947 and the combined net assets immediately after the acquisition were $1,687,687,627. The merger was accomplished by a tax-free exchange of 8,455,589 shares of IDS Life Series Income Portfolio valued at $82,520,680. In exchange for the IDS Life Series Income Portfolio shares and net assets, RiverSource VP - Diversified Bond Fund issued 7,879,202 shares. IDS Life Series Income Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $82,520,680, which includes $84,752,461 of capital stock, ($282,284) of unrealized depreciation and ($1,949,497) of accumulated net realized loss. RiverSource VP - Diversified Equity Income Fund At the close of business on July 9, 2004, RiverSource VP - Diversified Equity Income Fund acquired the assets and assumed the identified liabilities of IDS Life Series Equity Income Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Diversified Equity Income Fund immediately before the acquisition were $784,736,631 and the combined net assets immediately after the acquisition were $797,507,627. The merger was accomplished by a tax-free exchange of 1,171,233 shares of IDS Life Series Equity Income Portfolio valued at $12,770,996. In exchange for the IDS Life Series Equity Income Portfolio shares and net assets, RiverSource VP - Diversified Equity Income Fund issued 1,133,932 shares. -------------------------------------------------------------------------------- 122 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT IDS Life Series Equity Income Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $12,770,996, which includes $11,141,310 of capital stock, $1,942,850 of unrealized appreciation and ($313,164) of accumulated net realized loss. RiverSource VP - International Opportunity Fund At the close of business on July 9, 2004, RiverSource VP - International Opportunity Fund acquired the assets and assumed the identified liabilities of IDS Life Series International Equity Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - International Opportunity Fund immediately before the acquisition were $823,057,521 and the combined net assets immediately after the acquisition were $1,008,727,812. The merger was accomplished by a tax-free exchange of 16,165,428 shares of IDS Life Series International Equity Portfolio valued at $185,670,291. In exchange for the IDS Life Series International Equity Portfolio shares and net assets, RiverSource VP - International Opportunity Fund issued 21,939,684 shares. IDS Life Series International Equity Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $185,670,291, which includes $230,940,962 of capital stock, $20,280,571of unrealized appreciation, ($65,518,971) of accumulated net realized loss and ($32,271) of temporary book-to-tax differences. RiverSource VP - Large Cap Equity Fund At the close of business on July 9, 2004, RiverSource VP - Large Cap Equity Fund acquired the assets and assumed the identified liabilities of AXP VP - Blue Chip Advantage Fund, AXP VP - Stock Fund and IDS Life Series Equity Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Large Cap Equity Fund immediately before the acquisition were $1,956,841,848 and the combined net assets immediately after the acquisition were $2,635,350,043. The merger was accomplished by a tax-free exchange of the following: Shares Value AXP VP - Blue Chip Advantage Fund 9,018,701 $ 70,580,460 AXP VP - Stock Fund 1,802,859 15,558,284 IDS Life Series Equity Portfolio 41,391,258 592,369,451 In exchange for the AXP VP - Blue Chip Advantage Fund, AXP VP - Stock Fund and IDS Life Series Equity Portfolio shares and net assets, RiverSource VP - Large Cap Equity Fund issued 34,368,282 shares. AXP VP - Blue Chip Advantage Fund's, AXP VP - Stock Fund's and IDS Life Series Equity Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows, which include the following amounts of capital stock, unrealized appreciation, accumulated net realized loss and temporary book-to tax differences.
Total Capital Unrealized Accumulated Temporary net assets stock appreciation net realized loss book-to-tax differences AXP VP - Blue Chip Advantage Fund $ 70,580,460 $ 91,818,264 $ 525,481 $ (21,763,285) $ -- AXP VP - Stock Fund 15,558,284 15,459,338 150,180 (51,233) (1) IDS Life Series Equity Portfolio 592,369,451 773,667,893 18,050,167 (199,348,293) (316)
RiverSource VP - Short Duration U.S. Government Fund At the close of business on July 9, 2004, RiverSource VP - Short Duration U.S. Government Fund acquired the assets and assumed the identified liabilities of IDS Life Series Government Securities Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Short Duration U.S. Government Fund immediately before the acquisition were $472,541,031 and the combined net assets immediately after the acquisition were $497,231,191. The merger was accomplished by a tax-free exchange of 2,399,885 shares of IDS Life Series Government Securities Portfolio valued at $24,690,160. In exchange for the IDS Life Series Government Securities Portfolio shares and net assets, RiverSource VP - Short Duration U.S. Government Fund issued 2,394,508 shares. IDS Life Series Government Securities Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $24,690,160, which includes $24,504,312 of capital stock, $292,495 of unrealized appreciation and ($106,647) of accumulated net realized loss. -------------------------------------------------------------------------------- 123 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 12. BANK BORROWINGS Each Fund has a revolving credit agreement with a syndicate of banks headed by The Bank of New York, whereby each Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. Each Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables each 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 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. Each Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, each Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. Each Fund had no borrowings outstanding during the year ended Aug. 31, 2005. Effective Sept. 20, 2005, each Fund entered into a new revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A., whereby each Fund is permitted to have bank borrowings for temporary or emergency purposes, including funding shareholder redemptions. 13. SUBSEQUENT EVENT Shareholders will be asked to approve a merger of RiverSource VP -New Dimensions Fund into RiverSource VP - Large Cap Equity Fund and RiverSource VP - Strategy Aggressive Fund into RiverSource VP - Mid Cap Growth Fund at a shareholder meeting on Feb. 15, 2006. This approval is not guaranteed. 14. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating each Fund's results.
RiverSource VP - Balanced Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $14.17 $13.00 $12.32 $15.30 $20.81 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .35 .31 .31 .33 .44 Net gains (losses) (both realized and unrealized) 1.02 1.17 .82 (1.88) (4.32) ------ ------ ------ ------ ------ Total from investment operations 1.37 1.48 1.13 (1.55) (3.88) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.36) (.31) (.31) (.34) (.39) Distributions from realized gains -- -- (.14) (1.09) (1.24) ------ ------ ------ ------ ------ Total distributions (.36) (.31) (.45) (1.43) (1.63) ------ ------ ------ ------ ------ Net asset value, end of period $15.18 $14.17 $13.00 $12.32 $15.30 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $2,437 $2,664 $2,416 $2,709 $3,759 Ratio of expenses to average daily net assets(b) .82% .78% .80% .77% .76% Ratio of net investment income (loss) to average daily net assets 2.34% 2.16% 2.48% 2.31% 2.46% Portfolio turnover rate (excluding short-term securities) 131% 133% 119% 103% 63% Total return(c) 9.68% 11.39% 9.40% (10.91%) (19.37%)
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 124 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Cash Management Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- Income from investment operations: Net investment income (loss) .02 -- .01 .02 .05 ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.02) -- (.01) (.02) (.05) ----- ----- ----- ----- ----- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $688 $773 $868 $1,123 $1,063 Ratio of expenses to average daily net assets(b) .70% .69% .70% .69% .68% Ratio of net investment income (loss) to average daily net assets 1.88% .47% .72% 1.61% 4.76% Total return(c) 1.92% .48% .72% 1.59% 4.94%
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Core Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $10.01 $ 9.98 ------ ------ Income from investment operations: Net investment income (loss) .31 .14 Net gains (losses) (both realized and unrealized) .04 .03 ------ ------ Total from investment operations .35 .17 ------ ------ Less distributions: Dividends from net investment income (.31) (.14) ------ ------ Net asset value, end of period $10.05 $10.01 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $58 $36 Ratio of expenses to average daily net assets(c),(d) .95% .95%(e) Ratio of net investment income (loss) to average daily net assets 3.10% 2.33%(e) Portfolio turnover rate (excluding short-term securities) 339% 221% Total return(f) 3.64% 1.67%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.01% and 1.13% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. -------------------------------------------------------------------------------- 125 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Diversified Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.62 $10.40 $10.38 $10.61 $10.29 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .39 .38 .44 .56 .70 Net gains (losses) (both realized and unrealized) .06 .22 .02 (.23) .30 ------ ------ ------ ------ ------ Total from investment operations .45 .60 .46 .33 1.00 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.41) (.38) (.44) (.56) (.68) ------ ------ ------ ------ ------ Net asset value, end of period $10.66 $10.62 $10.40 $10.38 $10.61 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,824 $1,696 $1,765 $1,814 $1,626 Ratio of expenses to average daily net assets(b) .82% .81% .81% .80% .80% Ratio of net investment income (loss) to average daily net assets 3.65% 3.60% 4.23% 5.41% 6.72% Portfolio turnover rate (excluding short-term securities) 293% 295% 251% 167% 122% Total return(c) 4.27% 5.84% 4.50% 3.20% 10.07%
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Diversified Equity Income Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $11.17 $ 9.65 $8.41 $10.20 $10.05 ------ ------ ----- ------ ------ Income from investment operations: Net investment income (loss) .20 .17 .17 .13 .11 Net gains (losses) (both realized and unrealized) 2.65 1.51 1.24 (1.75) .15 ------ ------ ----- ------ ------ Total from investment operations 2.85 1.68 1.41 (1.62) .26 ------ ------ ----- ------ ------ Less distributions: Dividends from net investment income (.19) (.16) (.17) (.13) (.11) Distributions from realized gains -- -- -- (.04) -- ------ ------ ----- ------ ------ Total distributions (.19) (.16) (.17) (.17) (.11) ------ ------ ----- ------ ------ Net asset value, end of period $13.83 $11.17 $9.65 $ 8.41 $10.20 ------ ------ ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,679 $843 $370 $267 $106 Ratio of expenses to average daily net assets(b) .84% .86% .76% .87% .91%(c) Ratio of net investment income (loss) to average daily net assets 1.66% 1.77% 2.13% 1.59% 1.49% Portfolio turnover rate (excluding short-term securities) 25% 19% 39% 35% 68% Total return(d) 25.59% 17.53% 17.00% (16.16%) 2.56%
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.17% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 126 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Emerging Markets Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 9.80 $8.44 $7.04 $6.68 $ 9.61 ------ ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .06 .09 .04 .02 .01 Net gains (losses) (both realized and unrealized) 3.72 1.39 1.38 .34 (2.94) ------ ----- ----- ----- ------ Total from investment operations 3.78 1.48 1.42 .36 (2.93) ------ ----- ----- ----- ------ Less distributions: Dividends from net investment income (.06) (.12) (.02) -- -- Distributions from realized gains (.38) -- -- -- -- ------ ----- ----- ----- ------ Total distributions (.44) (.12) (.02) -- -- ------ ----- ----- ----- ------ Net asset value, end of period $13.14 $9.80 $8.44 $7.04 $ 6.68 ------ ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $192 $46 $16 $10 $6 Ratio of expenses to average daily net assets(b) 1.55% 1.61%(c) 1.75%(c) 1.68%(c) 1.75%(c) Ratio of net investment income (loss) to average daily net assets .58% .65% .67% .31% .20% Portfolio turnover rate (excluding short-term securities) 120% 117% 191% 215% 203% Total return(d) 39.60% 17.63% 20.25% 5.45% (30.49%)
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.67%, 2.04%, 2.36% and 3.49% for the years ended Aug. 31, 2004, 2003, 2002 and 2001, respectively. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Global Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.82 $10.40 $10.02 $ 9.76 $9.34 ------ ------ ------ ------ ----- Income from investment operations: Net investment income (loss) .34 .35 .34 .38 .43 Net gains (losses) (both realized and unrealized) .39 .73 .61 .36 .23 ------ ------ ------ ------ ----- Total from investment operations .73 1.08 .95 .74 .66 ------ ------ ------ ------ ----- Less distributions: Dividends from net investment income (.53) (.66) (.57) (.48) (.24) ------ ------ ------ ------ ----- Net asset value, end of period $11.02 $10.82 $10.40 $10.02 $9.76 ------ ------ ------ ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $575 $409 $312 $233 $191 Ratio of expenses to average daily net assets(b) 1.08% 1.08% 1.09% 1.08% 1.07% Ratio of net investment income (loss) to average daily net assets 2.63% 2.76% 3.08% 3.92% 4.54% Portfolio turnover rate (excluding short-term securities) 79% 105% 102% 46% 34% Total return(c) 6.75% 10.57% 9.56% 7.83% 7.14%
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 127 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005(b) Net asset value, beginning of period $10.00 ------ Income from investment operations: Net investment income (loss) .32 Net gains (losses) (both realized and unrealized) .19 ------ Total from investment operations .51 ------ Less distributions: Dividends from net investment income (.32) ------ Net asset value, end of period $10.19 ------ Ratios/supplemental data Net assets, end of period (in millions) $116 Ratio of expenses to average daily net assets(c),(d) .75%(e) Ratio of net investment income (loss) to average daily net assets 3.42%(e) Portfolio turnover rate (excluding short-term securities) 29% Total return(f) 5.22%(g) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.87% for the period ended Aug. 31, 2005. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - Growth Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $5.69 $5.45 $5.00 $ 6.48 $13.46 ----- ----- ----- ------ ------ Income from investment operations: Net investment income (loss) .03 .02 .01 -- (.01) Net gains (losses) (both realized and unrealized) .91 .24 .45 (1.48) (6.97) ----- ----- ----- ------ ------ Total from investment operations .94 .26 .46 (1.48) (6.98) ----- ----- ----- ------ ------ Less distributions: Dividends from net investment income (.02) (.02) (.01) -- -- ----- ----- ----- ------ ------ Net asset value, end of period $6.61 $5.69 $5.45 $ 5.00 $ 6.48 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $392 $261 $223 $144 $177 Ratio of expenses to average daily net assets(b) .92% .85% .99% .81% .90%(c) Ratio of net investment income (loss) to average daily net assets .42% .27% .20% --% (.19%) Portfolio turnover rate (excluding short-term securities) 154% 192% 199% 272% 41% Total return(d) 16.74% 4.64% 9.29% (22.80%) (51.87%)
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.91% for the year ended Aug 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 128 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - High Yield Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $6.60 $6.22 $5.66 $ 6.83 $7.76 ----- ----- ----- ------ ----- Income from investment operations: Net investment income (loss) .44 .47 .48 .56 .79 Net gains (losses) (both realized and unrealized) .16 .38 .54 (1.17) (.95) ----- ----- ----- ------ ----- Total from investment operations .60 .85 1.02 (.61) (.16) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.44) (.47) (.46) (.56) (.77) ----- ----- ----- ------ ----- Net asset value, end of period $6.76 $6.60 $6.22 $ 5.66 $6.83 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $1,246 $1,130 $843 $577 $609 Ratio of expenses to average daily net assets(b) .83% .82% .83% .83% .82% Ratio of net investment income (loss) to average daily net assets 6.58% 7.30% 8.31% 8.91% 11.04% Portfolio turnover rate (excluding short-term securities) 106% 139% 141% 135% 86% Total return(c) 9.31% 14.03% 18.81% (9.33%) (1.89%)
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Income Opportunities Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $10.29 $ 9.93 ------ ------ Income from investment operations: Net investment income (loss) .59 .15 Net gains (losses) (both realized and unrealized) .18 .36 ------ ------ Total from investment operations .77 .51 ------ ------ Less distributions: Dividends from net investment income (.59) (.15) Distributions from realized gains (.08) -- ------ ------ Total distributions (.67) (.15) ------ ------ Net asset value, end of period $10.39 $10.29 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $45 $16 Ratio of expenses to average daily net assets(c),(d) .99 .99%(e) Ratio of net investment income (loss) to average daily net assets 5.69% 6.03%(e) Portfolio turnover rate (excluding short-term securities) 93% 36% Total return(f) 7.73% 5.17%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.03% and 1.55% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. -------------------------------------------------------------------------------- 129 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - International Opportunity Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 8.23 $7.19 $7.00 $ 8.39 $16.98 ------ ----- ----- ------ ------ Income from investment operations: Net investment income (loss) .11 .08 .08 .07 .03 Net gains (losses) (both realized and unrealized) 1.80 1.05 .16 (1.35) (5.57) ------ ----- ----- ------ ------ Total from investment operations 1.91 1.13 .24 (1.28) (5.54) ------ ----- ----- ------ ------ Less distributions: Dividends from net investment income (.12) (.09) (.05) (.07) (.03) Distributions from realized gains -- -- -- (.01) (2.97) Excess distributions from net investment income -- -- -- (.03) (.05) ------ ----- ----- ------ ------ Total distributions (.12) (.09) (.05) (.11) (3.05) ------ ----- ----- ------ ------ Net asset value, end of period $10.02 $8.23 $7.19 $ 7.00 $ 8.39 ------ ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,184 $974 $738 $873 $1,310 Ratio of expenses to average daily net assets(b) 1.04% .98% 1.06% 1.07% 1.04% Ratio of net investment income (loss) to average daily net assets 1.19% .99% 1.19% .83% .31% Portfolio turnover rate (excluding short-term securities) 90% 142% 102% 140% 278% Total return(c) 23.29% 15.77% 3.48% (15.38%) (36.90%)
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Large Cap Equity Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $19.32 $18.04 $16.48 $20.87 $ 37.21 Income from investment operations: Net investment income (loss) .24 .14 .10 .10 .05 Net gains (losses) (both realized and unrealized) 2.15 1.28 1.56 (2.83) (12.96) ------ ------ ------ ------ ------- Total from investment operations 2.39 1.42 1.66 (2.73) (12.91) ------ ------ ------ ------ ------- Less distributions: Dividends from net investment income (.23) (.14) (.10) (.09) (.04) Distributions from realized gains -- -- -- (1.57) (3.39) ------ ------ ------ ------ ------- Total distributions (.23) (.14) (.10) (1.66) (3.43) ------ ------ ------ ------ ------- Net asset value, end of period $21.48 $19.32 $18.04 $16.48 $ 20.87 ------ ------ ------ ------ ------- Ratios/supplemental data Net assets, end of period (in millions) $2,510 $2,535 $1,982 $2,227 $3,270 Ratio of expenses to average daily net assets(b) .80% .85% .85% .80% .78% Ratio of net investment income (loss) to average daily net assets 1.13% .72% .62% .52% .13% Portfolio turnover rate (excluding short-term securities) 132% 114% 115% 146% 62% Total return(c) 12.42% 7.87% 10.16% (14.08%) (36.48%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 130 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Large Cap Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $10.00 $ 9.99 ------ ------ Income from investment operations: Net investment income (loss) .14 .05 Net gains (losses) (both realized and unrealized) 1.06 .02 ------ ------ Total from investment operations 1.20 .07 ------ ------ Less distributions: Dividends from net investment income (.14) (.06) Distributions from realized gains (.07) -- ------ ------ Total distributions (.21) (.06) ------ ------ Net asset value, end of period $10.99 $10.00 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $15 $7 Ratio of expenses to average daily net assets(c),(d) 1.05% 1.05%(e) Ratio of net investment income (loss) to average daily net assets 1.37% 1.03%(e) Portfolio turnover rate (excluding short-term securities) 52% 24% Total return(f) 12.04% .69%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 2.55% and 2.85% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - Mid Cap Growth Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001(b) Net asset value, beginning of period $10.11 $10.09 $ 8.54 $ 9.57 $10.27 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) (.04) (.05) (.05) (.04) (.01) Net gains (losses) (both realized and unrealized) 2.36 .07 1.60 (.99) (.69) ------ ------ ------ ------ ------ Total from investment operations 2.32 .02 1.55 (1.03) (.70) ------ ------ ------ ------ ------ Net asset value, end of period $12.43 $10.11 $10.09 $ 8.54 $ 9.57 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $255 $225 $170 $72 $14 Ratio of expenses to average daily net assets(c) .82% .85% 1.06% 1.10%(d) 1.10%(d),(e) Ratio of net investment income (loss) to average daily net assets (.32%) (.49%) (.71%) (.76%) (.45%)(e) Portfolio turnover rate (excluding short-term securities) 34% 25% 19% 20% 19% Total return(f) 23.03% .13% 18.20% (10.77%) (6.82%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 1, 2001 (date the Fund became available) to Aug. 31, 2001. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.39% and 2.99% for the periods ended Aug. 31, 2002 and 2001, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. -------------------------------------------------------------------------------- 131 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Mid Cap Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005(b) Net asset value, beginning of period $10.15 ------ Income from investment operations: Net investment income (loss) .01 Net gains (losses) (both realized and unrealized) 1.28 ------ Total from investment operations 1.29 ------ Less distributions: Dividends from net investment income (.02) ------ Net asset value, end of period $11.42 ------ Ratios/supplemental data Net assets, end of period (in millions) $7 Ratio of expenses to average daily net assets(c),(d) 1.08%(e) Ratio of net investment income (loss) to average daily net assets .62%(e) Portfolio turnover rate (excluding short-term securities) 7% Total return(f) 12.70%(g) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 2.97% for the period ended Aug. 31, 2005. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - New Dimensions Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $14.52 $14.29 $13.06 $15.49 $25.03 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .15 .10 .08 .07 .02 Net gains (losses) (both realized and unrealized) .91 .23 1.23 (2.42) (8.01) ------ ------ ------ ------ ------ Total from investment operations 1.06 .33 1.31 (2.35) (7.99) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.15) (.10) (.08) (.07) (.02) Distributions from realized gains -- -- -- (.01) (1.53) ------ ------ ------ ------ ------ Total distributions (.15) (.10) (.08) (.08) (1.55) ------ ------ ------ ------ ------ Net asset value, end of period $15.43 $14.52 $14.29 $13.06 $15.49 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $2,200 $2,932 $3,115 $3,045 $3,892 Ratio of expenses to average daily net assets(b) .75% .72% .82% .79% .79% Ratio of net investment income (loss) to average daily net assets 1.01% .66% .64% .47% .12% Portfolio turnover rate (excluding short-term securities) 89% 55% 23% 27% 27% Total return(c) 7.28% 2.29% 10.11% (15.17%) (33.05%)
(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 credit on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 132 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - S&P 500 Index Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $7.54 $6.88 $6.24 $ 7.71 $10.38 ----- ----- ----- ------ ------ Income from investment operations: Net investment income (loss) .13 .09 .08 .07 .06 Net gains (losses) (both realized and unrealized) .76 .66 .64 (1.47) (2.65) ----- ----- ----- ------ ------ Total from investment operations .89 .75 .72 (1.40) (2.59) ----- ----- ----- ------ ------ Less distributions: Dividends from net investment income (.13) (.09) (.08) (.07) (.06) Distributions from realized gains -- -- -- -- (.02) ----- ----- ----- ------ ------ Total distributions (.13) (.09) (.08) (.07) (.08) ----- ----- ----- ------ ------ Net asset value, end of period $8.30 $7.54 $6.88 $ 6.24 $ 7.71 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $367 $283 $171 $99 $56 Ratio of expenses to average daily net assets(b),(c) .50% .49% .50% .50% .49% Ratio of net investment income (loss) to average daily net assets 1.65% 1.21% 1.31% 1.01% .85% Portfolio turnover rate (excluding short-term securities) 5% --% 5% 72% 137% Total return(d) 11.98% 10.84% 11.51% (18.29%) (24.96%)
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 0.56%, 0.57%, 0.64%, 0.82% and 1.31% for the years ended Aug. 31, 2005, 2004, 2003, 2002 and 2001, respectively. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Select Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $ 9.95 $9.98 ------ ----- Income from investment operations: Net investment income (loss) .05 .02 Net gains (losses) (both realized and unrealized) 1.55 (.03) ------ ----- Total from investment operations 1.60 (.01) ------ ----- Less distributions: Dividends from net investment income (.05) (.02) Distributions from realized gains (.05) -- ------ ----- Total distributions (.10) (.02) ------ ----- Net asset value, end of period $11.45 $9.95 ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $23 $9 Ratio of expenses to average daily net assets(c),(d) 1.15% 1.15%(e) Ratio of net investment income (loss) to average daily net assets .45% .50%(e) Portfolio turnover rate (excluding short-term securities) 31% 13% Total return(f) 16.18% (.11%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.17% and 1.97% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. -------------------------------------------------------------------------------- 133 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Short Duration U.S. Government Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.34 $10.46 $10.55 $10.34 $ 9.95 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .27 .25 .27 .34 .52 Net gains (losses) (both realized and unrealized) (.13) (.07) (.05) .23 .39 ------ ------ ------ ------ ------ Total from investment operations .14 .18 .22 .57 .91 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.27) (.25) (.27) (.34) (.52) Distributions from realized gains -- (.05) (.04) (.02) -- ------ ------ ------ ------ ------ Total distributions (.27) (.30) (.31) (.36) (.52) ------ ------ ------ ------ ------ Net asset value, end of period $10.21 $10.34 $10.46 $10.55 $10.34 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $484 $506 $479 $276 $106 Ratio of expenses to average daily net assets(b) .83% .82% .82% .83% .84%(c) Ratio of net investment income (loss) to average daily net assets 2.67% 2.36% 2.47% 3.24% 4.94% Portfolio turnover rate (excluding short-term securities) 171% 135% 179% 292% 95% Total return(d) 1.43% 1.70% 2.06% 5.42% 9.29%
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.87% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Small Cap Advantage Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $12.64 $11.25 $ 8.79 $10.13 $12.58 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) (.04) (.05) (.02) (.02) (.01) Net gains (losses) (both realized and unrealized) 3.14 1.44 2.48 (1.32) (2.09) ------ ------ ------ ------ ------ Total from investment operations 3.10 1.39 2.46 (1.34) (2.10) ------ ------ ------ ------ ------ Less distributions: Distributions from realized gains (.63) -- -- -- (.35) ------ ------ ------ ------ ------ Net asset value, end of period $15.11 $12.64 $11.25 $ 8.79 $10.13 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $235 $184 $102 $59 $49 Ratio of expenses to average daily net assets(b) 1.07% 1.10% 1.19% 1.11% 1.16%(c) Ratio of net investment income (loss) to average daily net assets (.28%) (.42%) (.20%) (.21%) (.08%) Portfolio turnover rate (excluding short-term securities) 112% 104% 124% 156% 152% Total return(d) 24.88% 12.40% 27.96% (13.28%) (16.68%)
(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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.26% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 134 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Small Cap Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001(b) Net asset value, beginning of period $13.10 $11.39 $9.52 $9.84 $10.01 ------ ------ ----- ----- ------ Income from investment operations: Net investment income (loss) .02 (.02) (.03) (.03) (.01) Net gains (losses) (both realized and unrealized) 2.53 1.92 1.95 (.29) (.16) ------ ------ ----- ----- ------ Total from investment operations 2.55 1.90 1.92 (.32) (.17) ------ ------ ----- ----- ------ Less distributions: Dividends from net investment income (.01) -- (.01) -- -- Distributions from realized gains (1.18) (.19) (.04) -- -- ------ ------ ----- ----- ------ Total distributions (1.19) (.19) (.05) -- -- ------ ------ ----- ----- ------ Net asset value, end of period $14.46 $13.10 $11.39 $9.52 $9.84 ------ ------ ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $412 $229 $134 $63 $5 Ratio of expenses to average daily net assets(c) 1.28% 1.27% 1.55% 1.48% 1.50%(d),(e) Ratio of net investment income (loss) to average daily net assets .12% (.20%) (.43%) (.67%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 65% 84% 87% 12% --% Total return(f) 20.02% 16.78% 20.24% (3.19%) (1.77%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 14, 2001 (date the Fund became available) to Aug. 31, 2001. (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) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 6.86% for the period ended Aug. 31, 2001. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - Strategy Aggressive Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $6.80 $6.99 $5.72 $ 8.29 $ 27.82 ----- ----- ----- ------ ------- Income from investment operations: Net investment income (loss) (.04) (.03) (.03) (.04) .01 Net gains (losses) (both realized and unrealized) 1.51 (.16) 1.30 (2.53) (13.01) ----- ----- ----- ------ ------- Total from investment operations 1.47 (.19) 1.27 (2.57) (13.00) ----- ----- ----- ------ ------- Less distributions: Dividends from net investment income -- -- -- -- (.02) Distributions from realized gains -- -- -- -- (6.51) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (6.53) ----- ----- ----- ------ ------- Net asset value, end of period $8.27 $6.80 $6.99 $ 5.72 $ 8.29 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in millions) $687 $783 $969 $991 $1,815 Ratio of expenses to average daily net assets(b) .78% .72% .83% .81% .78% Ratio of net investment income (loss) to average daily net assets (.33%) (.43%) (.54%) (.50%) .10% Portfolio turnover rate (excluding short-term securities) 28% 53% 27% 180% 166% Total return(c) 21.58% (2.67%) 22.16% (30.97%) (53.61%)
(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) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. -------------------------------------------------------------------------------- 135 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Investments in Securities RiverSource VP - Balanced Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (63.2%) Issuer Shares Value(a) Aerospace & Defense (2.8%) Boeing 98,124 $6,576,270 Empresa Brasileira de Aeronautica ADR 218,511(c) 7,835,804 General Dynamics 40,709 4,664,844 Goodrich 75,883 3,476,959 Honeywell Intl 301,913 11,557,230 Lockheed Martin 169,433 10,545,510 Northrop Grumman 258,556 14,502,407 United Technologies 205,255 10,262,750 Total 69,421,774 Auto Components (0.1%) Lear 36,332 1,369,716 Automobiles (0.1%) General Motors 57,260(o) 1,957,719 Beverages (0.8%) Coca-Cola 57,695 2,538,580 Coca-Cola Enterprises 135,284 3,023,597 PepsiCo 273,201 14,985,075 Total 20,547,252 Biotechnology (0.1%) Biogen Idec 45,902(b) 1,934,769 Building Products (0.3%) American Standard Companies 88,200 4,021,920 Masco 143,407 4,399,727 Total 8,421,647 Capital Markets (3.0%) Bank of New York 343,625 10,504,616 E*TRADE Financial 109,352(b) 1,749,632 Franklin Resources 75,747 6,093,089 Investors Financial Services 184,918 6,494,320 Legg Mason 36,014 3,764,543 Lehman Brothers Holdings 90,350 9,546,381 Merrill Lynch & Co 173,892 9,939,667 Morgan Stanley 371,627 18,904,665 State Street 111,490 5,388,312 Total 72,385,225 Chemicals (1.2%) Dow Chemical 494,072 21,343,911 Eastman Chemical 58,877 2,824,330 Lyondell Chemical 148,999 3,844,174 RPM Intl 87,432 1,656,836 Total 29,669,251 Commercial Banks (4.9%) Bank of America 1,192,451 51,311,166 Commerce Bancorp 111,322(o) 3,753,778 PNC Financial Services Group 144,244 8,110,840 Regions Financial 74,465 2,436,495 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) US Bancorp 513,174 $14,994,944 Wachovia 337,537 16,748,586 Wells Fargo & Co 380,351 22,676,527 Total 120,032,336 Commercial Services & Supplies (0.4%) Avery Dennison 64,885 3,467,454 Cendant 249,598 5,076,824 Total 8,544,278 Communications Equipment (0.8%) Cisco Systems 388,576(b) 6,846,709 Corning 81,610(b) 1,628,936 Motorola 209,939 4,593,465 Nokia ADR 463,885(c) 7,315,466 Total 20,384,576 Computers & Peripherals (1.9%) Dell 279,700(b) 9,957,320 EMC 437,615(b) 5,627,729 Hewlett-Packard 558,544 15,505,181 Intl Business Machines 187,335 15,102,948 Total 46,193,178 Consumer Finance (0.9%) Capital One Financial 143,041 11,763,692 First Marblehead 50,837(b,o) 1,470,714 MBNA 370,621 9,339,649 Total 22,574,055 Containers & Packaging (0.3%) Temple-Inland 183,872 7,077,233 Diversified Financial Services (3.3%) Citigroup 1,184,765 51,857,164 Contax Participacoes ADR 26,800(b,c) 17,447 JPMorgan Chase & Co 852,211 28,881,431 Total 80,756,042 Diversified Telecommunication Services (3.9%) ALLTEL 40,993 2,541,156 BellSouth 602,336 15,835,413 Chunghwa Telecom ADR 306,262(c) 5,895,544 Citizens Communications 125,241 1,708,287 MCI 441,573 11,321,932 SBC Communications 891,391 21,464,694 Sprint Nextel 761,978 19,758,090 Tele Norte Leste Participacoes ADR 37,100(c) 557,984 Telewest Global 111,724(b,c) 2,480,273 Verizon Communications 416,059 13,609,290 Total 95,172,663 Electric Utilities (2.0%) Entergy 136,829 10,249,860 Exelon 266,322 14,352,092 FPL Group 120,810 5,205,703 Common Stocks (continued) Issuer Shares Value(a) Electric Utilities (cont.) PPL 173,954 $5,559,570 Southern 272,295 9,366,948 Xcel Energy 158,324 3,046,154 Total 47,780,327 Electronic Equipment & Instruments (0.1%) Flextronics Intl 277,799(b,c) 3,628,055 Energy Equipment & Services (1.2%) Cooper Cameron 59,549(b) 4,296,460 Halliburton 133,571 8,277,395 Schlumberger 34,583 2,982,092 Transocean 101,757(b) 6,007,733 Weatherford Intl 99,232(b) 6,718,999 Total 28,282,679 Food & Staples Retailing (0.6%) CVS 132,731 3,898,309 Wal-Mart Stores 229,040 10,297,639 Total 14,195,948 Food Products (0.6%) General Mills 161,819 7,463,093 Kellogg 152,613 6,917,947 Total 14,381,040 Gas Utilities (0.2%) ONEOK 156,507 5,321,238 Health Care Equipment & Supplies (0.7%) Baxter Intl 207,049 8,350,286 Boston Scientific 57,184(b) 1,537,106 Guidant 59,383 4,194,815 Hospira 89,099(b) 3,549,704 Total 17,631,911 Health Care Providers & Services (0.8%) Cardinal Health 73,673 4,391,648 CIGNA 54,005 6,227,856 HCA 137,905 6,798,716 Medco Health Solutions 51,154(b) 2,520,358 Total 19,938,578 Hotels, Restaurants & Leisure (0.3%) McDonald's 189,175(b) 6,138,729 Household Durables (0.1%) Leggett & Platt 68,331 1,654,294 Tempur-Pedic Intl 45,158(b) 725,689 Total 2,379,983 Household Products (1.3%) Colgate-Palmolive 148,129 7,776,773 Procter & Gamble 237,015 13,149,592 Spectrum Brands 372,393(b) 10,482,863 Total 31,409,228 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 136 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Common Stocks (continued) Issuer Shares Value(a) Industrial Conglomerates (1.3%) General Electric 384,450 $12,921,365 Tyco Intl 652,022(c) 18,145,772 Total 31,067,137 Insurance (3.5%) ACE 400,141(c) 17,770,262 AFLAC 40,479 1,749,502 Allstate 65,413 3,676,865 American Intl Group 565,400 33,471,679 Assurant 67,642 2,525,076 Chubb 138,877 12,076,744 Endurance Specialty Holdings 94,684(c) 3,474,903 First American 86,796 3,611,582 Hartford Financial Services Group 97,882 7,150,280 Total 85,506,893 Internet Software & Services (0.1%) Google Cl A 4,327(b) 1,237,522 IT Services (0.5%) Accenture Cl A 103,481(b,c) 2,524,936 Affiliated Computer Services Cl A 172,531(b) 8,962,986 Total 11,487,922 Leisure Equipment & Products (0.1%) Mattel 165,216 2,978,844 Machinery (0.6%) Caterpillar 101,610 5,638,340 Illinois Tool Works 33,772 2,846,304 Ingersoll-Rand Cl A 38,202(c) 3,041,643 ITT Inds 28,160 3,072,819 Total 14,599,106 Media (4.3%) Comcast Cl A 241,454(b) 7,424,711 Comcast Special Cl A 336,241(b) 10,147,753 EchoStar Communications Cl A 103,514 3,098,174 Liberty Global Cl A 113,964(b) 5,783,673 Liberty Media Cl A 1,544,542(b) 12,835,144 News Corp Cl A 143,150 2,320,462 NTL 231,856(b) 14,810,961 Time Warner 575,387 10,310,935 Tribune 186,779 7,017,287 Viacom Cl B 485,909 16,516,047 Vivendi Universal ADR 159,143(c) 5,020,962 Walt Disney 372,512 9,383,577 Total 104,669,686 Metals & Mining (0.3%) Alcan 101,512(c) 3,354,972 Alcoa 130,755 3,502,926 Total 6,857,898 Multi-Utilities & Unregulated Power (0.6%) Dominion Resources 199,874 15,286,364 Common Stocks (continued) Issuer Shares Value(a) Multiline Retail (0.6%) Federated Dept Stores 51,646 $3,562,541 JC Penney 79,732 3,877,367 Target 147,465 7,926,244 Total 15,366,152 Office Electronics (0.1%) Xerox 116,381(b) 1,560,669 Oil & Gas (7.9%) Anadarko Petroleum 233,547 21,222,416 BP ADR 226,360(c) 15,478,497 Chevron 492,395 30,233,053 ConocoPhillips 603,596 39,801,120 Devon Energy 122,189 7,425,426 Exxon Mobil 1,118,320 66,987,367 Newfield Exploration 166,397(b) 7,857,266 Royal Dutch Shell Cl A ADR 69,710(c) 4,528,362 Total 193,533,507 Paper & Forest Products (0.7%) Bowater 162,164 5,031,949 Intl Paper 240,538 7,420,597 Weyerhaeuser 78,079 5,076,697 Total 17,529,243 Personal Products (0.8%) Avon Products 304,519 9,994,313 Gillette 155,665 8,385,674 Total 18,379,987 Pharmaceuticals (2.3%) Bristol-Myers Squibb 185,597 4,541,559 GlaxoSmithKline ADR 46,995(c) 2,289,596 Johnson & Johnson 77,820 4,933,010 Merck & Co 193,246 5,455,335 Novartis ADR 116,774(c) 5,692,733 Pfizer 877,334 22,345,696 Schering-Plough 296,728 6,352,946 Wyeth 92,454 4,233,469 Total 55,844,344 Real Estate Investment Trust (0.7%) Apartment Investment & Management Cl A 102,005 4,070,000 Equity Office Properties Trust 319,995(o) 10,655,833 HomeBanc 179,813 1,433,110 Total 16,158,943 Semiconductors & Semiconductor Equipment (1.3%) Broadcom Cl A 68,947(b) 2,999,195 Credence Systems 148,143(b) 1,314,028 Cypress Semiconductor 507,833(b) 7,937,430 Freescale Semiconductor Cl A 113,983(b) 2,721,914 Freescale Semiconductor Cl B 37,409(b) 900,809 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (cont.) Intel 271,038 $6,971,097 MEMC Electronic Materials 332,649(b) 5,608,462 Texas Instruments 96,183 3,143,260 Total 31,596,195 Software (0.8%) Cadence Design Systems 379,465(b) 6,075,235 Microsoft 351,985 9,644,388 Siebel Systems 184,310 1,520,558 Symantec 67,586(b) 1,417,954 TIBCO Software 109,415(b) 835,931 Total 19,494,066 Specialty Retail (0.4%) Gap 118,349 2,249,814 Home Depot 203,714 8,213,749 Total 10,463,563 Thrifts & Mortgage Finance (2.0%) Countrywide Financial 507,733 17,156,298 Fannie Mae 344,500 17,583,280 Freddie Mac 192,062 11,596,704 Washington Mutual 75,557 3,141,660 Total 49,477,942 Tobacco (1.4%) Altria Group 479,697 33,914,578 Wireless Telecommunication Services (0.2%) Vodafone Group ADR 218,522(c) 5,954,725 Total Common Stocks (Cost: $1,324,957,472) $1,540,494,716 Preferred Stocks & Other (--%) Issuer Shares Value(a) Mexico Value Recovery Series D Rights 2,000,000(b,c) $55,000 Mexico Value Recovery Series E Rights 2,000,000(b,c) 51,000 Paxson Communications 13.25% Pay-in-kind --(e) 1,160 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 2(b,e,l) 16 Xerox 6.25% Cv 5,390 630,630 Total Preferred Stocks & Other (Cost: $540,971) $737,806 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 137 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (36.4%) Issuer Coupon Principal Value(a) rate amount Sovereign (0.7%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 6,661,000(c) $8,622,596 United Kingdom Treasury (British Pound) 12-07-06 7.50 3,124,000(c) 5,861,554 United Mexican States 09-27-34 6.75 1,684,000(c) 1,825,456 Total 16,309,606 U.S. Government Obligations & Agencies (8.8%) Federal Farm Credit Bank 10-10-08 4.25 3,480,000 3,499,902 Federal Home Loan Bank 05-22-06 2.88 7,120,000 7,067,241 08-11-06 3.25 19,400,000 19,259,156 04-18-08 4.13 1,240,000 1,242,634 Federal Home Loan Mtge Corp 09-15-06 3.63 7,265,000 7,239,580 06-15-08 3.88 18,465,000 18,371,198 10-15-08 5.13 5,800,000 5,976,163 03-18-09 3.76 2,790,000 2,756,417 07-15-09 4.25 800,000 803,487 07-12-10 4.13 22,646,000 22,605,215 Federal Natl Mtge Assn 05-15-08 6.00 13,985,000 14,672,545 U.S. Treasury 02-15-07 2.25 5,000,000 4,889,845 08-15-10 4.13 65,000 65,757 05-15-15 4.13 19,480,000 19,605,549 08-15-15 4.25 13,775,000 14,035,430 08-15-23 6.25 32,588,000(n) 40,381,127 02-15-26 6.00 16,650,000 20,418,361 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 8,912,750(s) 8,902,131 Total 211,791,738 Asset-Backed (1.6%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 5,183,061(d,m) 5,177,698 Aesop Funding II LLC Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 800,000(d) 783,729 AmeriCredit Automobile Receivables Trust Series 2002-C Cl A4 (FSA) 02-12-09 3.55 1,500,000(g) 1,493,048 Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 1,500,000(g) 1,483,359 Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 3,000,000(g) 2,986,407 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 2,200,000(d,g) 2,185,305 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 1,000,000 974,882 Series 2005-1 Cl A4 07-15-09 4.05 2,400,000 2,403,648 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08% $1,750,000 $1,738,275 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 850,000 852,350 Citibank Credit Card Issuance Trust Series 2003-A3 Cl A3 03-10-10 3.10 2,450,000 2,385,923 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 1,200,000 1,187,664 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 1,450,000(g) 1,434,877 Metris Master Trust Series 2001-2 Cl C 11-20-09 5.51 675,000(d,m) 675,000 Series 2004-2 Cl D 10-20-10 6.86 450,000(d,m) 456,750 Series 2004-2 Cl M 10-20-10 4.00 800,000(m) 800,760 Series 2005-1A Cl D 03-21-11 5.51 400,000(d,m) 399,998 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 1,300,000 1,280,804 Nissan Auto Lease Trust Series 2004-A Cl A3 08-15-07 2.90 1,000,000 989,640 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 1,900,000 1,880,373 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 925,000 920,807 Residential Asset Securities Series 2002-KS1 Cl AI4 (AMBAC) 11-25-29 5.86 314,367(g) 313,682 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 2,700,000(g) 2,686,392 WFS Financial Owner Trust Series 2004-3 Cl A3 03-17-09 3.30 1,350,000 1,337,089 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 2,750,000 2,722,115 Total 39,550,575 Commercial Mortgage-Backed(f) (4.1%) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 1,250,000 1,284,661 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 3.74 2,000,000(d,m) 2,000,355 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89% $1,308,547 $1,322,439 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 3,180,769 3,114,578 Series 2004-T16 Cl A3 02-13-46 4.03 960,000 946,585 Series 2005-PWR8 Cl A1 06-11-41 4.21 2,448,130 2,441,862 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 3,322,914(d) 3,330,070 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 1,700,000 1,793,535 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 4,202,692(d) 4,187,795 Commercial Mtge Pass-Through Ctfs Series 2004-CNL Cl A1 09-15-14 3.79 1,660,000(d,m) 1,652,563 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 1,890,234 1,892,931 Series 2004-C1 Cl A2 01-15-37 3.52 1,550,000 1,515,748 Federal Natl Mtge Assn 08-25-12 4.72 320,000 323,277 Federal Natl Mtge Assn #385717 11-01-12 4.84 1,157,780 1,176,848 Federal Natl Mtge Assn #386599 11-01-10 4.47 580,668 578,288 Federal Natl Mtge Assn #555316 02-01-13 4.87 1,730,709 1,768,955 GE Capital Commercial Mtge Series 2004-C2 Cl A2 03-10-40 4.12 2,050,000 2,021,710 Series 2005-C3 Cl A1 07-10-45 4.59 1,630,000 1,642,192 Series 2005-C3 Cl A2 07-10-45 4.85 1,220,000 1,240,327 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 2,650,000(d) 2,676,155 General Electric Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 1,394,578 1,432,507 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 1,700,000 1,696,444 Series 2005-C1 Cl A1 05-10-43 4.21 1,276,158 1,272,195 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 138 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88% $775,000 $789,092 Series 2005-GG3 Cl A1 08-10-42 3.92 1,144,279 1,136,155 Series 2005-GG3 Cl A3 08-10-42 4.57 2,500,000 2,501,458 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 1,500,000 1,529,135 Series 2005-GG4 Cl A1 07-10-39 4.37 2,130,849 2,132,127 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 1,144,257 1,144,696 Series 2003-CB6 Cl A2 07-12-37 5.26 1,400,000 1,458,934 Series 2003-LN1 Cl A1 10-15-37 4.13 1,819,489 1,792,823 Series 2003-ML1A Cl A1 03-12-39 3.97 1,101,528 1,083,530 Series 2004-CBX Cl A3 01-12-37 4.18 1,000,000 989,008 Series 2004-CBX Cl A5 01-12-37 4.65 1,500,000 1,506,407 Series 2005-CB11 Cl A3 08-12-37 5.20 1,750,000 1,810,813 Series 2005-LDP2 Cl A1 07-15-42 4.33 2,640,862 2,647,913 LB-UBS Commercial Mtge Trust Series 2002-C2 Cl A3 06-15-26 5.39 2,500,000 2,595,390 Series 2002-C4 Cl A5 09-15-31 4.85 1,000,000 1,016,750 Series 2003-C8 Cl A2 11-15-27 4.21 2,415,000 2,399,641 Series 2003-C8 Cl A3 11-15-27 4.83 1,625,000 1,647,523 Series 2004-C2 Cl A3 03-15-29 3.97 1,250,000 1,208,025 Series 2004-C4 Cl A3 06-15-29 5.16 1,150,000(m) 1,188,107 Series 2004-C6 Cl A2 08-15-29 4.19 1,800,000 1,785,924 Series 2004-C6 Cl A4 08-15-29 4.58 1,550,000 1,555,506 Series 2004-C7 Cl A2 10-15-29 3.99 1,600,000 1,571,680 Series 2004-C8 Cl A2 12-15-29 4.20 2,000,000 1,982,240 Series 2005-C3 Cl A1 07-15-30 4.39 1,365,785 1,368,666 Series 2005-C5 Cl A2 09-15-40 4.89 1,625,000 1,649,018 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 1,710,639 1,706,093 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27% $2,895,270 $2,769,259 Series 2004-HQ4 Cl A5 04-14-40 4.59 1,250,000 1,249,288 Series 2004-IQ8 Cl A2 06-15-40 3.96 2,310,860 2,290,314 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 2,100,000 2,267,353 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 1,562,571 1,526,981 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A2 10-15-41 4.38 1,500,000 1,494,739 Series 2005-C16 Cl A3 10-15-41 4.62 2,000,000 2,005,669 Total 97,112,277 Mortgage-Backed (13.4%)(f,q) Adjustable Rate Mtge Trust Series 2004-2 Cl 6A1 02-25-35 5.27 1,853,989(i) 1,874,764 Banc of America Mtge Securities Series 2004-E Cl B1 06-25-34 4.04 1,013,883(i) 1,000,186 Series 2004-F Cl B1 07-25-34 4.14 1,831,046(i) 1,816,746 Bank of America Alternative Loan Trust Series 2003-11 Cl 1A1 01-25-34 6.00 1,949,172 1,976,382 Series 2003-11 Cl 4A1 01-25-19 4.75 1,333,412 1,329,814 Bear Stearns Adjustable Rate Mtge Trust Series 2004-10 Cl 13A1 01-25-35 5.03 2,574,470(i) 2,579,659 Chaseflex Trust Series 2005-2 Cl 2A2 06-25-35 6.50 3,215,359 3,308,807 Countrywide Alternative Loan Trust Series 2003-11T1 Cl A1 07-25-18 4.75 1,481,669 1,473,230 Series 2005-6CB Cl 1A1 04-25-35 7.50 2,125,435 2,227,808 Countrywide Home Loans Series 2004-12 Cl 1M 08-25-34 4.63 973,578(i) 957,304 Series 2005-R2 Cl 2A1 06-25-35 7.00 2,852,108(d) 3,024,126 CS First Boston Mtge Securities Series 2004-AR5 Cl CB1 06-25-34 4.42 1,164,777(i) 1,146,550 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Home Loan Mtge Corp 10-01-34 6.50% $898,716 $928,555 Collateralized Mtge Obligation 01-15-18 6.50 1,373,219 1,462,661 02-15-27 5.00 2,700,000 2,732,637 10-15-27 5.00 7,250,000 7,330,412 06-15-28 5.00 4,500,000 4,555,260 12-15-28 5.50 2,115,000 2,171,923 02-15-33 5.50 2,274,787 2,358,484 Interest Only 02-15-14 7.40 805,214(k) 49,972 07-15-17 0.92 2,817,955(k) 290,254 08-01-20 8.00 3,589,506(k) 619,154 10-15-22 14.56 3,386,869(k) 193,640 Principal Only 08-01-20 4.60 3,589,506(r) 2,949,066 Federal Home Loan Mtge Corp #A28602 11-01-34 6.50 1,336,500 1,380,875 Federal Home Loan Mtge Corp #B10258 10-01-18 5.00 3,774,142 3,806,099 Federal Home Loan Mtge Corp #B11835 01-01-19 5.50 699,007 714,570 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 3,125,001 3,163,682 Federal Home Loan Mtge Corp #C65869 04-01-32 6.00 1,885,820 1,934,017 Federal Home Loan Mtge Corp #C66871 05-01-32 6.50 4,895,477 5,087,833 Federal Home Loan Mtge Corp #C71514 07-01-32 6.50 200,232 207,312 Federal Home Loan Mtge Corp #C77689 03-01-33 6.50 613,463 639,546 Federal Home Loan Mtge Corp #C90598 10-01-22 6.50 674,364 702,082 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 3,424,655 3,527,718 Federal Home Loan Mtge Corp #D32310 11-01-22 8.00 23,505 25,150 Federal Home Loan Mtge Corp #D55755 08-01-24 8.00 82,599 88,625 Federal Home Loan Mtge Corp #D96300 10-01-23 5.50 422,910 430,481 Federal Home Loan Mtge Corp #D96348 10-01-23 5.50 6,926,873 7,050,872 Federal Home Loan Mtge Corp #E01127 02-01-17 6.50 462,357 478,604 Federal Home Loan Mtge Corp #E01419 05-01-18 5.50 1,968,038 2,011,854 Federal Home Loan Mtge Corp #E81009 07-01-15 7.50 153,320 162,135 Federal Home Loan Mtge Corp #E89496 04-01-17 6.00 4,061,758 4,190,974 Federal Home Loan Mtge Corp #E96516 05-01-13 4.50 1,480,055 1,478,049 Federal Home Loan Mtge Corp #E97591 06-01-18 5.50 471,716 483,093 Federal Home Loan Mtge Corp #E97855 08-01-18 5.00 2,289,025 2,314,305 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 139 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Home Loan Mtge Corp #E98725 08-01-18 5.00% $4,673,221 $4,715,187 Federal Home Loan Mtge Corp #E99592 10-01-18 5.00 234,472 236,592 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 2,190,374 2,210,353 Federal Home Loan Mtge Corp #G01410 04-01-32 7.00 727,014 760,709 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 2,821,597 2,917,242 Federal Home Loan Mtge Corp #G30216 04-01-22 6.50 5,874,977 6,118,665 Federal Natl Mtge Assn 09-01-20 5.50 3,650,000(j) 3,727,563 09-01-20 6.00 4,000,000(j) 4,127,500 09-01-35 6.50 1,000,000(j) 1,033,125 10-01-35 6.00 4,100,000(j) 4,189,688 Collateralized Mtge Obligation 12-25-26 8.00 1,100,840 1,169,593 Interest Only 12-25-12 13.29 672,830(k) 28,001 12-25-22 8.27 1,071,392(k) 138,256 12-25-31 1.19 2,294,144(k) 375,458 Federal Natl Mtge Assn #190899 04-01-23 8.50 290,331 313,122 Federal Natl Mtge Assn #190944 05-01-24 6.00 1,095,200 1,125,645 Federal Natl Mtge Assn #190988 06-01-24 9.00 178,308 192,734 Federal Natl Mtge Assn #250322 08-01-25 7.50 25,121 26,706 Federal Natl Mtge Assn #250384 11-01-25 7.50 280,796 298,511 Federal Natl Mtge Assn #250495 03-01-26 7.00 407,720 429,149 Federal Natl Mtge Assn #252381 04-01-14 5.50 5,779,529 5,907,814 Federal Natl Mtge Assn #254259 04-01-17 5.50 864,344 883,577 Federal Natl Mtge Assn #254494 08-01-22 7.00 359,876 378,538 Federal Natl Mtge Assn #254675 01-01-23 6.50 426,117 443,753 Federal Natl Mtge Assn #254708 02-01-23 7.00 597,202 628,171 Federal Natl Mtge Assn #254916 09-01-23 5.50 3,143,281 3,198,953 Federal Natl Mtge Assn #304279 02-01-25 8.50 113,416 123,726 Federal Natl Mtge Assn #309341 05-01-25 8.50 164,970 179,967 Federal Natl Mtge Assn #313049 08-01-11 8.50 436,237 461,340 Federal Natl Mtge Assn #323606 03-01-29 6.50 79,947 82,988 Federal Natl Mtge Assn #440730 12-01-28 6.00 289,399 299,129 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Natl Mtge Assn #505122 07-01-29 7.00% $1,105,594 $1,160,399 Federal Natl Mtge Assn #50553 04-01-22 8.00 131,369 141,005 Federal Natl Mtge Assn #510587 08-01-29 7.00 385,456 404,563 Federal Natl Mtge Assn #540041 02-01-29 7.00 761,587 801,614 Federal Natl Mtge Assn #545684 05-01-32 7.50 241,804 256,410 Federal Natl Mtge Assn #545885 08-01-32 6.50 415,845 431,439 Federal Natl Mtge Assn #555375 04-01-33 6.00 5,713,109 5,890,824 Federal Natl Mtge Assn #555376 04-01-18 4.50 1,236,615 1,228,083 Federal Natl Mtge Assn #555458 05-01-33 5.50 2,062,381 2,087,521 Federal Natl Mtge Assn #555734 07-01-23 5.00 2,000,034 2,003,428 Federal Natl Mtge Assn #555740 08-01-18 4.50 3,220,452 3,197,179 Federal Natl Mtge Assn #615135 11-01-16 6.00 220,780 228,028 Federal Natl Mtge Assn #616572 03-01-17 6.50 926,450 960,471 Federal Natl Mtge Assn #643381 06-01-17 6.00 243,474 251,486 Federal Natl Mtge Assn #645277 05-01-32 7.00 145,905 153,035 Federal Natl Mtge Assn #646446 06-01-17 6.50 231,691 240,183 Federal Natl Mtge Assn #650105 08-01-17 6.50 1,091,345 1,131,347 Federal Natl Mtge Assn #662197 09-01-32 6.50 514,184 532,511 Federal Natl Mtge Assn #667604 10-01-32 5.50 503,895 509,663 Federal Natl Mtge Assn #670387 08-01-32 7.00 378,228 396,839 Federal Natl Mtge Assn #670461 11-01-32 7.50 552,675 585,974 Federal Natl Mtge Assn #670711 10-01-32 7.00 670,188 702,936 Federal Natl Mtge Assn #673179 02-01-18 6.00 546,647 564,635 Federal Natl Mtge Assn #676511 12-01-32 7.00 385,733 404,581 Federal Natl Mtge Assn #678397 12-01-32 7.00 1,252,586 1,313,791 Federal Natl Mtge Assn #684601 03-01-33 6.00 4,095,856 4,234,882 Federal Natl Mtge Assn #687736 02-01-33 5.50 1,528,087 1,545,216 Federal Natl Mtge Assn #687887 03-01-33 5.50 2,114,205 2,146,203 Federal Natl Mtge Assn #688002 03-01-33 5.50 2,436,023 2,473,031 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Natl Mtge Assn #688034 03-01-33 5.50% $2,120,197 $2,150,407 Federal Natl Mtge Assn #689093 07-01-28 5.50 1,132,483 1,146,212 Federal Natl Mtge Assn #694546 03-01-33 5.50 994,756 1,005,907 Federal Natl Mtge Assn #694795 04-01-33 5.50 4,343,379 4,409,314 Federal Natl Mtge Assn #701937 04-01-33 6.00 2,215,916 2,270,281 Federal Natl Mtge Assn #703726 02-01-33 5.00 3,562,894 3,539,877 Federal Natl Mtge Assn #703818 05-01-33 6.00 2,455,575 2,519,875 Federal Natl Mtge Assn #709901 06-01-18 5.00 2,155,886 2,174,536 Federal Natl Mtge Assn #710823 05-01-33 5.50 2,470,805 2,506,031 Federal Natl Mtge Assn #720006 07-01-33 5.50 2,584,846 2,613,822 Federal Natl Mtge Assn #720070 07-01-23 5.50 2,907,228 2,958,719 Federal Natl Mtge Assn #720378 06-01-18 4.50 2,953,266 2,932,890 Federal Natl Mtge Assn #725232 03-01-34 5.00 7,754,480 7,723,694 Federal Natl Mtge Assn #725284 11-01-18 7.00 339,176 355,218 Federal Natl Mtge Assn #725431 08-01-15 5.50 186,023 190,115 Federal Natl Mtge Assn #725684 05-01-18 6.00 3,987,177 4,118,317 Federal Natl Mtge Assn #725737 08-01-34 4.53 6,088,215(i) 6,091,989 Federal Natl Mtge Assn #726940 08-01-23 5.50 395,465 400,926 Federal Natl Mtge Assn #730231 08-01-23 5.50 2,766,909 2,815,914 Federal Natl Mtge Assn #737330 09-01-18 5.50 2,101,606 2,149,589 Federal Natl Mtge Assn #737374 09-01-18 5.50 2,544,358 2,605,632 Federal Natl Mtge Assn #747642 11-01-28 5.50 440,366 445,704 Federal Natl Mtge Assn #747784 10-01-18 4.50 919,202 912,861 Federal Natl Mtge Assn #753074 12-01-28 5.50 2,252,878 2,280,190 Federal Natl Mtge Assn #753206 01-01-34 6.00 1,771,118 1,814,570 Federal Natl Mtge Assn #755056 12-01-23 5.50 2,319,773 2,360,859 Federal Natl Mtge Assn #755598 11-01-28 5.00 722,413 717,746 Federal Natl Mtge Assn #758947 12-01-18 6.00 850,491 878,031 Federal Natl Mtge Assn #761031 01-01-34 5.00 592,241 588,529 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 140 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Natl Mtge Assn #765760 02-01-19 5.00% $4,889,562 $4,928,098 Federal Natl Mtge Assn #766641 03-01-34 5.00 2,667,257(j) 2,652,764 Federal Natl Mtge Assn #768117 08-01-34 5.44 1,047,087(i) 1,064,695 Federal Natl Mtge Assn #775582 05-01-34 6.50 4,374,590 4,521,144 Federal Natl Mtge Assn #790759 09-01-34 4.84 2,859,523(i) 2,870,166 Federal Natl Mtge Assn #811925 04-01-35 4.92 2,155,856(i) 2,170,467 Federal Natl Mtge Assn #815264 05-01-35 5.25 4,062,061(i) 4,109,877 First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.41 1,787,145(m) 1,822,941 Series 2005-AA2 Cl 2A1 04-25-35 5.43 2,124,329(m) 2,158,297 Series 2005-AA3 Cl 3A1 05-25-35 5.41 2,211,357(m) 2,235,350 Govt Natl Mtge Assn 09-01-35 5.00 6,800,000(j) 6,821,250 Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 230,352(k) 24,699 Govt Natl Mtge Assn #604708 10-15-33 5.50 2,244,367 2,289,957 Govt Natl Mtge Assn #780394 12-15-08 7.00 1,043,570 1,074,520 Harborview Mtge Loan Trust Series 2004-3 Cl B1 05-19-34 4.39 1,434,753(i) 1,416,372 IndyMac Index Mtge Loan Trust Series 2005-AR3 Cl 3A1 04-25-35 5.34 1,315,772(i) 1,329,746 Collateralized Mtge Obligation Interest Only Series 2005-AR8 Cl AX1 04-25-35 4.50 66,926,694(i,k) 826,126 Master Adjustable Rate Mtge Trust Series 2004-5 Cl B1 07-25-34 4.40 1,456,588(i) 1,437,506 Master Alternative Loans Trust Series 2004-2 Cl 4A1 02-25-19 5.00 2,313,426 2,326,439 Series 2004-4 Cl 2A1 05-25-34 6.00 2,618,537 2,673,710 Series 2004-7 Cl 8A1 08-25-19 5.00 4,777,442 4,780,452 Series 2004-8 Cl 7A1 09-25-19 5.00 2,299,209 2,301,141 Structured Adjustable Rate Mtge Loan Trust Series 2004-3AC Cl B1 03-25-34 4.93 1,837,589(i) 1,831,856 Series 2004-5 Cl B1 05-25-34 4.61 1,320,626(i) 1,301,266 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Structured Asset Securities Series 2003-33H Cl 1A1 10-25-33 5.50% $4,786,529 $4,813,982 Washington Mutual Series 2003-AR10 Cl A7 10-25-33 4.07 2,400,000(i) 2,405,853 Series 2004-CB2 Cl 6A 07-25-19 4.50 228,358 222,885 Series 2004-CB4 Cl 22A 12-25-19 6.00 2,341,769 2,415,609 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 4,200,000(j) 4,221,656 Series 2005-5 Cl 2A1 05-25-35 5.50 3,883,237 3,937,747 Series 2005-AR1 Cl 1A1 02-25-35 4.56 9,875,595(i) 9,832,736 Series 2005-AR4 Cl B1 04-25-35 4.58 623,581(i) 606,477 Total 325,037,841 Aerospace & Defense (--%) L-3 Communications 06-15-12 7.63 495,000 524,700 07-15-13 6.13 125,000 126,250 Moog Sr Sub Nts 01-15-15 6.25 50,000 50,000 Total 700,950 Automotive (0.1%) DaimlerChrysler NA Holding 11-15-13 6.50 735,000 790,529 Ford Motor 02-01-29 6.38 775,000 566,512 Total 1,357,041 Banking (1.9%) Bank of America Sr Unsecured 08-01-10 4.50 7,685,000 7,711,137 Bank United 03-15-09 8.00 3,500,000 3,888,063 Banknorth Group Sr Nts 05-01-08 3.75 3,385,000 3,348,137 Citigroup 08-03-10 4.63 11,000,000 11,092,213 Sr Nts 05-29-15 4.70 1,085,000 1,083,742 HSBC Bank USA Sub Nts 08-15-35 5.63 1,750,000 1,805,428 KFW Intl Finance 10-17-05 2.50 6,250,000(c) 6,240,099 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Banking (cont.) M&I Marshall & Ilsley Bank Sub Nts 06-16-15 4.85% $1,025,000 $1,032,148 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 8,420,000 9,248,730 Total 45,449,697 Building Materials (--%) Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 205,000 215,250 Chemicals (--%) Airgas 10-01-11 9.13 225,000 241,875 Compass Minerals Group 08-15-11 10.00 305,000 333,975 Georgia Gulf Sr Nts 12-15-13 7.13 428,000 444,050 MacDermid 07-15-11 9.13 175,000 188,125 Total 1,208,025 Diversified Manufacturing (0.2%) Tyco Intl Group 02-15-11 6.75 5,385,000(c) 5,930,113 Electric (1.1%) CMS Energy Sr Nts 01-15-09 7.50 450,000 474,750 Consumers Energy 1st Mtge 09-15-35 5.80 1,875,000 1,954,635 Dayton Power & Light 1st Mtge 10-01-13 5.13 1,175,000 1,210,004 Dominion Resources 06-15-35 5.95 1,980,000 2,068,146 DPL Sr Nts 09-01-11 6.88 975,000 1,067,625 Exelon 06-15-35 5.63 1,515,000 1,524,920 IPALCO Enterprises Secured 11-14-08 8.38 375,000 402,188 11-14-11 8.63 595,000 669,375 NorthWestern Energy Secured 11-01-14 5.88 215,000(d) 222,015 Ohio Edison 06-15-09 5.65 1,425,000(d) 1,467,180 Sr Nts 05-01-15 5.45 425,000 439,572 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 141 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) Ohio Power Sr Nts Series H 01-15-14 4.85% $2,530,000 $2,549,329 Pacific Gas & Electric 03-01-34 6.05 1,605,000 1,758,743 Pacificorp 1st Mtge 06-15-35 5.25 985,000 990,994 Potomac Edison 1st Mtge 11-15-14 5.35 1,035,000(d) 1,072,353 08-15-15 5.13 890,000(d) 910,014 Southern California Edison 1st Mtge 07-15-35 5.35 2,035,000 2,078,079 Tenaska Alabama Partners LP Secured 06-30-21 7.00 130,000(d) 135,615 Utilicorp Canada Finance 06-15-11 7.75 675,000(c) 705,375 Westar Energy 1st Mtge 07-01-14 6.00 4,033,000 4,390,355 Total 26,091,267 Entertainment (0.1%) Time Warner 05-15-29 6.63 1,715,000 1,865,693 United Artists Theatre 07-01-15 9.30 1,579,696 1,563,899 Total 3,429,592 Food and Beverage (0.1%) Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75 250,000(c) 278,750 Cott Beverages 12-15-11 8.00 310,000 327,050 Kraft Foods 06-01-12 6.25 1,840,000 2,019,297 Total 2,625,097 Gaming (0.2%) Boyd Gaming Sr Sub Nts 12-15-12 7.75 120,000 127,800 04-15-14 6.75 165,000 168,506 Caesars Entertainment Sr Nts 04-15-13 7.00 895,000 1,000,411 MGM MIRAGE 10-01-09 6.00 265,000 265,000 Sr Nts 02-27-14 5.88 115,000 110,975 07-15-15 6.63 770,000(d,j) 777,700 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 165,000 167,063 Sr Sub Nts 04-01-12 8.00 310,000 330,150 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gaming (cont.) Station Casinos Sr Nts 04-01-12 6.00% $345,000 $347,588 Sr Sub Nts 03-01-16 6.88 540,000(d,j) 554,850 Total 3,850,043 Gas Pipelines (0.1%) ANR Pipeline 03-15-10 8.88 440,000 480,021 Colorado Interstate Gas Sr Nts 03-15-15 5.95 160,000(d) 158,800 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 410,000 438,908 Southern Natural Gas 03-15-10 8.88 290,000 316,377 Southern Star Central Secured 08-01-10 8.50 190,000 205,200 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 400,000 430,000 Total 2,029,306 Health Care (0.2%) Cardinal Health 06-15-15 4.00 5,610,000 5,192,341 HCA Sr Nts 03-15-14 5.75 340,000 336,011 Triad Hospitals Sr Nts 05-15-12 7.00 300,000 310,500 Total 5,838,852 Home Construction (0.1%) DR Horton 12-01-07 7.50 225,000 237,301 01-15-09 5.00 410,000 408,548 Sr Nts 02-15-15 5.25 1,595,000 1,532,181 Meritage Homes 03-15-15 6.25 130,000 121,713 Standard-Pacific Sr Nts 08-15-15 7.00 330,000 325,050 Total 2,624,793 Independent Energy (0.1%) Chesapeake Energy 01-15-15 7.75 450,000 483,750 Sr Nts 06-15-14 7.50 39,000 42,120 Sr Unsecured 08-15-17 6.50 660,000(d) 673,200 Encore Acquisition Sr Sub Nts 04-15-14 6.25 180,000 179,100 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Independent Energy (cont.) Newfield Exploration Sr Nts 03-01-11 7.63% $50,000 $54,500 Sr Sub Nts 08-15-12 8.38 880,000 957,000 Plains Exploration & Production Sr Nts 06-15-14 7.13 235,000 250,275 Total 2,639,945 Life Insurance (0.7%) ASIF Global Financing XIX Secured 01-17-13 4.90 2,030,000(d) 2,057,750 ING Security Life Institutional Funding 01-15-10 4.25 4,065,000(d) 4,037,484 Metlife Sr Nts 06-15-35 5.70 3,520,000 3,657,319 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 825,000(d) 831,422 Pricoa Global Funding I 06-25-12 4.63 5,655,000(d) 5,665,478 Prudential Financial 06-13-35 5.40 1,675,000 1,667,473 Total 17,916,926 Lodging (--%) Hilton Hotels 12-01-12 7.63 495,000 567,933 ITT 11-15-15 7.38 225,000 246,375 Total 814,308 Media Cable (0.1%) Comcast 03-15-11 5.50 1,845,000 1,907,637 DIRECTV Holdings LLC/Finance Sr Nts 03-15-13 8.38 180,000 197,550 Videotron Ltee 01-15-14 6.88 145,000(c) 148,988 Total 2,254,175 Media Non Cable (0.2%) Corus Entertainment Sr Sub Nts 03-01-12 8.75 140,000(c) 150,500 Dex Media East LLC/Finance 11-15-09 9.88 75,000 81,844 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 340,000 367,625 Emmis Operating Sr Sub Nts 05-15-12 6.88 110,000 110,000 Gray Television 12-15-11 9.25 325,000 351,813 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 142 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Non Cable (cont.) Lamar Media 01-01-13 7.25% $165,000 $173,663 Sr Sub Nts 08-15-15 6.63 285,000(d) 290,700 News America 12-15-34 6.20 3,280,000 3,398,673 Quebecor Media Sr Nts 07-15-11 11.13 95,000(c) 104,500 Radio One Series B 07-01-11 8.88 350,000 374,062 Sun Media 02-15-13 7.63 240,000(c) 253,500 Susquehanna Media Sr Sub Nts 04-15-13 7.38 300,000 314,625 Total 5,971,505 Metals (--%) Peabody Energy Series B 03-15-13 6.88 550,000 572,688 Oil Field Services (0.1%) Halliburton 10-15-10 5.50 1,255,000 1,312,594 Key Energy Services Series C 03-01-08 8.38 210,000 217,350 Offshore Logistics 06-15-13 6.13 70,000 68,250 Pride Intl Sr Nts 07-15-14 7.38 140,000 151,900 Total 1,750,094 Other Financial Institutions (0.3%) HSBC Finance 06-30-15 5.00 5,535,000 5,563,820 Residential Capital 06-30-10 6.38 2,340,000(d) 2,388,719 Total 7,952,539 Packaging (--%) Owens-Illinois Glass Container 05-15-11 7.75 340,000 360,400 Silgan Holdings Sr Sub Nts 11-15-13 6.75 155,000 158,294 Total 518,694 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Paper (--%) Crown Paper Sr Sub Nts 09-01-05 11.00% $1,000,000(b,h,l) $-- Pharmaceuticals (--%) Merck & Co 03-01-15 4.75 505,000 500,630 Property & Casualty (--%) Willis Group North America 07-15-15 5.63 1,180,000 1,198,148 Railroads (0.1%) Union Pacific 04-15-12 6.50 255,000 281,276 05-01-14 5.38 3,010,000 3,134,021 Total 3,415,297 REIT (0.2%) Archstone-Smith Operating Trust 05-01-15 5.25 2,720,000 2,763,156 ERP Operating LP 04-01-13 5.20 990,000 1,009,813 Simon Property Group LP 06-15-15 5.10 1,715,000(d) 1,708,637 Total 5,481,606 Retailers (0.1%) Flooring America Series B 10-15-07 9.25 1,849,000(b,h,l) -- United Auto Group 03-15-12 9.63 125,000 134,219 Wal-Mart Stores 09-01-35 5.25 1,940,000(j) 1,957,584 Total 2,091,803 Transportation Services (0.1%) ERAC USA Finance 05-01-15 5.60 1,755,000(d) 1,812,575 Wireless (0.1%) Nextel Communications Sr Nts Series E 10-31-13 6.88 690,000 739,040 US Cellular Sr Nts 12-15-33 6.70 2,075,000 2,224,209 Total 2,963,249 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wirelines (1.6%) BellSouth Sr Unsecured 11-15-34 6.00% $985,000 $1,039,908 Qwest 03-15-12 8.88 350,000 382,375 Sprint Capital 01-30-11 7.63 9,430,000 10,777,764 11-15-28 6.88 295,000 338,054 Telecom Italia Capital 09-30-34 6.00 2,225,000(c,d) 2,284,198 TELUS 06-01-11 8.00 7,102,500(c) 8,261,649 Verizon Pennsylvania Series A 11-15-11 5.65 14,270,000 14,921,711 Total 38,005,659 Total Bonds (Cost: $883,303,754) $887,011,904 Short-Term Securities (3.2%)(p) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (1.2%) Federal Natl Mtge Assn Disc Nt 09-08-05 3.25% $30,200,000 $30,178,190 Commercial Paper (2.0%) Fairway Finance 10-03-05 3.61 10,000,000(t) 9,967,000 HSBC Finance 09-01-05 3.56 18,400,000 18,398,180 Ranger Funding 09-26-05 3.56 15,000,000(t) 14,961,542 Windmill Funding 09-01-05 3.42 5,000,000(t) 4,999,525 Total 48,326,247 Total Short-Term Securities (Cost: $78,511,936) $78,504,437 Total Investments in Securities (Cost: $2,287,314,133)(u) $2,506,748,863 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 143 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 6.4% of net assets. (d) 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 Aug. 31, 2005, the value of these securities amounted to $53,598,234 or 2.2% of net assets. (e) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) The following abbreviations are used in the portfolio security description(s) to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (h) Negligible market value. (i) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (j) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $28,439,783. (k) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (l) 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 Aug. 31, 2005, is as follows: Security Acquisition Cost dates Crown Paper 11.00% Sr Sub Nts 2005 03-03-00 $580,109 Flooring America 9.25% Series B 2007 10-09-97 thru 12-17-02 2,058,360 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 06-15-01 1,558 (m) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (n) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Long Bond, Dec. 2005, 20-year $12,200,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 7,100,000 U.S. Treasury Note, Dec. 2005, 5-year 31,400,000 U.S. Treasury Note, Sept. 2005, 10-year 6,100,000 U.S. Treasury Note, Dec. 2005, 10-year 61,600,000 (o) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (p) Cash collateral received from security lending activity is invested in short-term securities and represents 1.3% of net assets. See Note 6 to the financial statements. 1.9% of net assets is the Fund's cash equivalent position. -------------------------------------------------------------------------------- 144 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Notes to Investments in Securities (continued) (q) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-20 4.50% $4,000,000 9-19-05 $3,920,625 $3,966,248 09-01-20 5.00 6,405,000 9-19-05 6,399,996 6,449,034 09-01-35 5.00 8,000,000 9-14-05 7,826,250 7,945,000 09-01-35 5.50 17,000,000 9-14-05 16,972,969 17,170,000 Federal Home Loan Mtge Corp 09-01-35 6.50 5,000,000 9-14-05 5,156,250 5,164,060 (r) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (s) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (t) 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 Aug. 31, 2005, the value of these securities amounted to $29,928,067 or 1.2% of net assets. (u) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $2,300,814,408 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $253,768,394 Unrealized depreciation (47,833,939) ----------- Net unrealized appreciation $205,934,455 ------------ 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/investments. -------------------------------------------------------------------------------- 145 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Cash Management Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Certificates of Deposit (5.2%) Issuer Effective Principal Value(a) yield amount Certificate of Deposit Barclays Bank 06-01-06 3.46% $5,000,000(c) $4,999,627 Citibank 09-16-05 3.41 5,000,000 5,000,000 11-10-05 3.72 3,000,000 3,000,000 Credit Suisse First Boston NY 02-14-06 3.76 10,000,000(c) 10,000,000 DEPFA Bank 10-13-05 3.52 3,000,000 3,000,000 11-09-05 3.72 5,000,000 5,000,000 SunTrust Banks 05-12-06 3.73 5,000,000(c) 4,999,829 Total Certificates of Deposit (Cost: $35,999,456) $35,999,456 Commercial Paper (95.7%) Issuer Effective Principal Value(a) yield amount Asset-Backed (64.1%) Alpine Securitization 10-03-05 3.41% $5,000,000(b) $4,984,400 Amstel Funding 09-07-05 2.85 6,800,000(b) 6,796,237 09-19-05 3.18 10,000,000(b) 9,983,250 Amsterdam Funding 09-14-05 3.26 4,000,000(b) 3,994,930 10-12-05 3.53 8,000,000(b) 7,967,200 Beta Finance 09-29-05 3.31 5,400,000 5,385,636 10-20-05 3.47 5,500,000 5,473,649 10-21-05 3.50 12,300,000 12,239,322 Bryant Park Funding LLC 09-12-05 3.13 4,300,000(b) 4,295,520 09-20-05 3.35 6,300,000(b) 6,288,296 10-04-05 3.51 1,200,000(b) 1,196,040 10-17-05 3.47 5,000,000(b) 4,977,447 10-25-05 3.52 7,700,000(b) 7,658,767 CAFCO LLC 09-02-05 1.70 3,100,000(b) 3,099,707 09-27-05 3.42 3,000,000(b) 2,992,330 10-07-05 3.53 8,100,000(b) 8,070,759 10-25-05 3.55 7,000,000(b) 6,962,200 11-02-05 3.67 2,400,000(b) 2,384,665 CC (USA)/Centari 09-12-05 3.05 5,000,000 4,994,928 09-15-05 3.21 5,600,000 5,592,508 10-03-05 3.36 5,000,000 4,984,667 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Asset-Backed (cont.) CHARTA LLC 09-08-05 3.02% $5,000,000(b) $4,996,646 10-03-05 3.49 5,000,000(b) 4,984,044 10-05-05 3.35 4,200,000(b) 4,186,355 10-12-05 3.58 2,700,000(b) 2,688,776 10-17-05 3.55 4,000,000(b) 3,981,549 11-14-05 3.71 4,100,000(b) 4,068,522 Citibank Credit Card Dakota Notes 10-19-05 3.50 5,200,000(b) 5,175,317 CRC Funding LLC 09-21-05 3.29 3,400,000(b) 3,393,483 09-23-05 3.38 3,000,000(b) 2,993,528 10-14-05 3.55 6,000,000(b) 5,974,057 10-18-05 3.58 2,700,000(b) 2,687,169 11-01-05 3.65 3,500,000(b) 3,478,116 Dorado Finance 09-12-05 3.05 5,000,000 4,994,928 09-19-05 3.15 3,000,000 2,995,020 10-24-05 3.55 2,300,000 2,287,810 11-03-05 3.63 2,000,000 1,987,190 Edison Asset Securitization 12-13-05 3.76 3,000,000(b) 2,967,727 Emerald Certificates MBNA MCCT 09-01-05 3.22 5,300,000(b) 5,300,000 09-27-05 3.31 9,000,000(b) 8,977,705 11-08-05 3.71 5,000,000(b) 4,964,678 11-16-05 3.76 5,000,000(b) 4,960,100 Fairway Finance 01-03-06 3.64 5,000,000(c) 4,999,830 Falcon Asset Securitization 09-13-05 3.16 9,800,000(b) 9,788,828 FCAR Owner Trust 12-02-05 3.76 6,300,000 6,239,472 FCAR Owner Trust I 09-07-05 2.85 11,000,000 10,993,913 10-17-05 3.51 10,000,000 9,954,319 Five Finance 11-28-05 3.76 2,800,000 2,774,196 Galaxy Funding 09-16-05 3.15 3,300,000(b) 3,295,394 10-06-05 3.49 2,200,000(b) 2,192,343 10-27-05 3.56 11,500,000(b) 11,435,600 10-28-05 3.57 4,300,000(b) 4,275,422 Grampian Funding LLC 09-01-05 3.21 5,000,000(b) 5,000,000 10-20-05 3.48 5,000,000(b) 4,975,976 11-04-05 3.60 7,000,000(b) 6,954,827 11-08-05 3.64 4,400,000(b) 4,369,498 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Asset-Backed (cont.) Greyhawk Funding LLC 09-12-05 3.05% $5,800,000(b) $5,794,116 K2 (USA) LLC 09-22-05 3.20 14,500,000 14,471,665 09-26-05 3.29 2,300,000 2,294,553 11-04-05 3.65 5,000,000 4,967,289 01-17-06 3.52 3,500,000(c) 3,499,746 Nieuw Amsterdam 09-09-05 3.10 5,000,000(b) 4,996,122 09-28-05 3.45 2,200,000(b) 2,194,110 10-21-05 3.50 2,300,000(b) 2,288,660 10-24-05 3.52 7,500,000(b) 7,460,581 Old Line Funding 10-05-05 3.52 7,500,000(b) 7,474,429 Scaldis Capital LLC 10-24-05 3.52 7,400,000(b) 7,361,107 10-31-05 3.56 5,700,000(b) 5,665,800 11-08-05 3.66 3,900,000(b) 3,872,817 Sedna Finance 10-27-05 3.61 3,000,000 2,982,967 11-02-05 3.66 3,500,000 3,477,697 11-23-05 3.75 4,800,000 4,758,389 08-15-06 3.74 10,000,000(c) 10,000,000 Sigma Finance 11-03-05 3.61 4,600,000 4,570,698 03-20-06 3.57 15,000,000(c) 14,999,457 Thames Asset Global Securitization No 1 09-20-05 3.37 9,900,000(b) 9,881,504 Variable Funding Capital 09-06-05 2.82 3,500,000(b) 3,498,357 09-21-05 3.28 8,500,000(b) 8,483,756 White Pine Finance LLC 02-10-06 3.53 5,500,000(c) 5,499,512 03-15-06 3.53 5,000,000(c) 4,999,399 Windmill Funding 11-02-05 3.65 3,000,000(b) 2,980,935 Total 444,088,462 Banking (14.6%) DekaBank Deutsche Girozentrale 08-18-06 3.61 4,000,000(c) 4,000,000 DEPFA Bank 06-15-06 3.42 10,000,000(c) 10,000,000 Nordea Bank 09-06-05 2.82 12,900,000 12,893,944 09-26-05 3.28 4,200,000 4,190,083 Northern Rock 10-14-05 3.48 5,000,000(b) 4,978,799 10-26-05 3.54 5,800,000(b) 5,768,277 02-03-06 3.54 5,000,000(c) 5,000,000 07-07-06 3.41 10,700,000(c) 10,700,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 146 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Cash Management Fund Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Banking (cont.) Skandinaviska Enskilda Banken 09-18-06 3.58% $10,000,000(c) $10,000,000 12-31-40 3.55 5,000,000(c) 5,000,000 Societe Generale North America 09-06-05 2.73 3,500,000 3,498,410 12-14-05 3.77 7,800,000 7,715,275 Wells Fargo Bank 09-01-06 3.49 5,000,000(c) 5,000,000 Westpac Banking 07-11-06 3.40 10,700,000(c) 10,700,000 Westpac Capital 11-14-05 3.61 2,000,000 1,985,077 Total 101,429,865 Brokerage (7.7%) Bear Stearns Companies 09-08-05 2.99 2,500,000 2,498,342 11-07-05 3.66 10,000,000 9,931,325 09-15-06 3.58 5,000,000(c) 5,000,000 09-28-06 3.68 5,000,000(c) 5,000,000 Goldman Sachs Group 05-24-06 3.61 5,000,000(b,c) 5,000,000 05-25-06 3.54 5,000,000(b,c) 5,000,000 09-15-06 3.56 5,000,000(c) 5,000,000 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Brokerage (cont.) Lehman Brothers Holdings 06-22-06 3.70% $8,000,000(c) $8,000,000 Merrill Lynch & Co 02-03-06 3.60 5,000,000(c) 5,000,000 Morgan Stanley & Co 10-05-05 3.55 3,000,000 2,989,687 Total 53,419,354 Foreign Local Government (0.7%) Westdeutsche Landesbank Girozentrale 09-08-06 3.58 5,000,000(c) 5,000,000 Life Insurance (3.8%) Irish Life & Permanent 10-11-05 3.46 7,000,000(b) 6,972,545 10-13-05 3.46 5,000,000(b) 4,979,408 10-27-05 3.55 5,000,000(b) 4,972,078 11-14-05 3.73 2,600,000(b) 2,579,958 11-15-05 3.68 2,200,000(b) 2,183,042 09-21-06 3.64 5,000,000(c) 4,999,490 Total 26,686,521 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Non Captive Consumer (2.5%) SLM 03-15-06 3.57% $7,500,000(c) $7,500,000 08-18-06 3.61 10,000,000(c) 10,000,000 Total 17,500,000 Other Financial Institutions (0.7%) HSBC Finance 09-25-06 3.63 5,000,000(c) 5,000,000 Pharmaceuticals (0.7%) Eli Lilly Services 09-01-06 3.72 5,000,000 5,000,000 Total Commercial Paper (Cost: $658,124,202) $658,124,202 Total Investments in Securities (Cost: $694,123,658)(d) $694,123,658 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) 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 Aug. 31, 2005, the value of these securities amounted to $324,103,809 or 47.1% of net assets. (c) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. The maturity date disclosed represents the final maturity. For purposes of Rule 2a-7, maturity is the later of the next put or interest rate reset date. (d) Also represents the cost of securities for federal income tax purposes at Aug. 31, 2005. 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/investments. -------------------------------------------------------------------------------- 147 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Core Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (93.4%) Issuer Coupon Principal Value(a) rate amount Sovereign (1.7%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 409,000(c) $529,446 United Kingdom Treasury (British Pound) 12-07-06 7.50 180,000(c) 337,734 United Mexican States 09-27-34 6.75 115,000(c) 124,660 Total 991,840 U.S. Government Obligations & Agencies (28.3%) Federal Farm Credit Bank 10-10-08 4.25 225,000 226,287 Federal Home Loan Bank 09-22-05 2.13 275,000 274,761 08-11-06 3.25 850,000 843,829 Federal Home Loan Mtge Corp 09-15-06 3.63 895,000 891,868 06-15-08 3.88 870,000 865,580 10-15-08 5.13 185,000 190,619 03-18-09 3.76 125,000 123,495 07-12-10 4.13 962,000 960,267 Federal Natl Mtge Assn 05-15-07 3.88 1,250,000 1,247,275 05-15-08 6.00 580,000 608,515 02-15-09 3.25 1,215,000 1,182,083 U.S. Treasury 11-30-06 2.88 75,000 74,150 08-15-07 2.75 815,000 798,478 07-15-10 3.88 1,375,000 1,375,054 08-15-10 4.13 670,000 677,799 02-15-15 4.00 630,000 628,154 05-15-15 4.13 125,000 125,806 08-15-15 4.25 485,000 494,169 08-15-23 6.25 1,522,000(h) 1,885,973 02-15-26 6.00 1,958,000 2,401,151 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 534,765(m) 534,128 Total 16,409,441 Asset-Backed (3.2%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 297,301(d,j) 296,993 Aesop Funding II LLC Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 50,000(d,e) 48,983 AmeriCredit Automobile Receivables Trust Series 2002-C Cl A4 (FSA) 02-12-09 3.55 100,000(e) 99,537 Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 50,000(e) 49,445 Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 150,000(e) 149,320 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29% $100,000(d,e) $99,332 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 50,000 48,744 Series 2005-1 Cl A4 07-15-09 4.05 125,000 125,190 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 100,000 99,330 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 50,000 50,138 Franklin Auto Trust Series 2004-1 Cl A3 (MBIA) 03-15-12 4.15 25,000(e) 24,972 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 50,000 49,486 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 50,000(e) 49,479 Metris Master Trust Series 2004-2 Cl M 10-20-10 4.00 50,000(j) 50,048 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 60,000 59,114 Nissan Auto Lease Trust Series 2004-A Cl A3 08-15-07 2.90 50,000 49,482 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 75,000 74,225 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 55,000 54,751 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 150,000(e) 149,244 WFS Financial Owner Trust Series 2004-1 Cl D 08-22-11 3.17 54,603 53,841 Series 2004-3 Cl A3 03-17-09 3.30 50,000 49,522 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 100,000 98,986 Total 1,830,162 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (10.4%) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03% $75,000 $77,080 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 60,163 60,802 Bear Stearns Commercial Mtge Securities Series 2004-PWR5 Cl A3 07-11-42 4.57 100,000 100,224 Series 2004-T16 Cl A3 02-13-46 4.03 195,000 192,275 Series 2005-PWR8 Cl A1 06-11-41 4.21 146,888 146,512 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 166,146(d) 166,503 CDC Commercial Mtge Trust Series 2002-FX1 Cl A1 05-15-19 5.25 156,978 161,341 Series 2002-FX1 Cl A2 11-15-30 5.68 100,000 105,502 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 186,786(d) 186,124 Commercial Mtge Pass-Through Ctfs Series 2004-CNL Cl A1 09-15-14 3.79 50,000(d,j) 49,776 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 246,550 246,903 Series 2004-C1 Cl A2 01-15-37 3.52 50,000 48,895 Federal Natl Mtge Assn 08-25-12 4.72 100,000 101,024 Federal Natl Mtge Assn #385717 11-01-12 4.84 96,536 98,126 Federal Natl Mtge Assn #386599 11-01-10 4.47 24,195 24,095 Federal Natl Mtge Assn #386768 01-01-11 4.23 97,757 96,848 Federal Natl Mtge Assn #555806 10-01-13 5.11 185,613 192,679 Federal Natl Mtge Assn #735029 09-01-13 5.28 148,338 154,483 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 60,634 62,283 Series 2004-C2 Cl A2 03-10-40 4.12 50,000 49,310 Series 2005-C1 Cl A5 06-10-48 4.77 100,000 100,988 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 148 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) GE Capital Commercial Mtge (cont.) Series 2005-C3 Cl A1 07-10-45 4.59% $110,000 $110,823 Series 2005-C3 Cl A2 07-10-45 4.85 80,000 81,333 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 175,000(d) 176,727 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 100,000 99,791 Series 2005-C1 Cl A1 05-10-43 4.21 73,625 73,396 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 125,000 126,299 Series 2004-GG1 Cl A5 06-10-36 4.88 50,000 50,909 Series 2005-GG3 Cl A1 08-10-42 3.92 45,771 45,446 Series 2005-GG3 Cl A3 08-10-42 4.57 150,000 150,088 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 75,000 76,457 Series 2005-GG4 Cl A1 07-10-39 4.37 123,887 123,961 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 66,015 66,040 Series 2003-CB6 Cl A2 07-12-37 5.26 50,000 52,105 Series 2003-LN1 Cl A1 10-15-37 4.13 113,718 112,051 Series 2003-ML1A Cl A1 03-12-39 3.97 45,897 45,147 Series 2004-C2 Cl A2 05-15-41 5.26 100,000(j) 103,020 Series 2004-CBX Cl A3 01-12-37 4.18 50,000 49,450 Series 2004-CBX Cl A5 01-12-37 4.65 50,000 50,214 Series 2005-CB11 Cl A3 08-12-37 5.20 100,000 103,475 Series 2005-LDP2 Cl A1 07-15-42 4.33 244,524 245,177 LB-UBS Commercial Mtge Trust Series 2002-C4 Cl A4 09-15-26 4.56 60,000 60,074 Series 2003-C8 Cl A2 11-15-27 4.21 180,000 178,855 Series 2003-C8 Cl A3 11-15-27 4.83 100,000 101,386 Series 2004-C2 Cl A3 03-15-29 3.97 50,000 48,321 Series 2004-C4 Cl A3 06-15-29 5.16 50,000(j) 51,657 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) JPMorgan Chase Commercial Mtge Securities (cont.) Series 2004-C6 Cl A2 08-15-29 4.19% $100,000 $99,218 Series 2004-C6 Cl A4 08-15-29 4.58 125,000 125,444 Series 2004-C7 Cl A2 10-15-29 3.99 50,000 49,115 Series 2004-C8 Cl A2 12-15-29 4.20 75,000 74,334 Series 2005-C3 Cl A1 07-15-30 4.39 73,167 73,321 Series 2005-C5 Cl A2 09-15-40 4.89 100,000 101,478 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 97,751 97,491 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 136,491 130,551 Series 2004-HQ4 Cl A5 04-14-40 4.59 75,000 74,957 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 125,000 134,962 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 86,810 84,832 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A2 10-15-41 4.38 100,000 99,649 Series 2005-C16 Cl A3 10-15-41 4.62 100,000 100,283 Total 6,049,610 Mortgage-Backed (32.6%)(f,i) Adjustable Rate Mtge Trust Series 2005-3 Cl 7A1 07-25-35 5.10 141,670(g) 142,579 Bank of America Alternative Loan Trust Series 2003-11 Cl 4A1 01-25-19 4.75 80,813 80,595 Bear Stearns Adjustable Rate Mtge Trust Series 2004-10 Cl 13A1 01-25-35 5.03 152,723(g) 153,031 Series 2004-12 Cl 3A1 02-25-35 5.19 101,963(g) 102,441 Countrywide Alternative Loan Trust Series 2003-11T1 Cl A1 07-25-18 4.75 49,389 49,108 Series 2005-6CB Cl 1A1 04-25-35 7.50 116,782 122,407 Countrywide Home Loans Series 2005-R2 Cl 2A1 06-25-35 7.00 175,880(d) 186,488 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,i) (cont.) Federal Home Loan Mtge Corp Collateralized Mtge Obligation 01-15-18 6.50% $70,421 $75,008 10-15-27 5.00 300,000 303,306 06-15-28 5.00 275,000 278,377 12-15-28 5.50 125,000 128,364 Collateralized Mtge Obligation Interest Only 07-15-17 0.92 304,644(k) 31,379 08-01-20 8.00 247,552(k) 42,700 Collateralized Mtge Obligation Principal Only 08-01-20 4.60 250,000(l) 205,395 Federal Home Loan Mtge Corp #B11452 12-01-18 6.00 192,300 198,419 Federal Home Loan Mtge Corp #B11835 01-01-19 5.50 155,335 158,793 Federal Home Loan Mtge Corp #B12280 02-01-19 5.50 190,762 195,009 Federal Home Loan Mtge Corp #C46101 08-01-29 6.50 386,707 401,316 Federal Home Loan Mtge Corp #C90613 01-01-23 5.00 64,546 64,640 Federal Home Loan Mtge Corp #C90683 06-01-23 5.00 127,834 128,018 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 67,150 69,171 Federal Home Loan Mtge Corp #D96348 10-01-23 5.50 192,220 195,661 Federal Home Loan Mtge Corp #G01410 04-01-32 7.00 111,848 117,032 Federal Natl Mtge Assn 09-01-20 5.00 550,000(b) 553,781 09-01-20 5.50 540,000(b) 551,475 09-01-20 6.00 500,000(b) 515,938 09-01-35 5.50 300,000(b) 303,000 10-01-35 6.00 1,550,000(b) 1,583,906 Federal Natl Mtge Assn #252440 05-01-29 7.00 221,249 232,216 Federal Natl Mtge Assn #254560 11-01-32 5.00 27,860 27,756 Federal Natl Mtge Assn #255788 06-01-15 5.50 437,208 447,727 Federal Natl Mtge Assn #323715 05-01-29 6.00 101,214 103,912 Federal Natl Mtge Assn #545869 07-01-32 6.50 61,654 64,098 Federal Natl Mtge Assn #545874 08-01-32 6.50 182,344 189,422 Federal Natl Mtge Assn #555340 04-01-33 5.50 185,968 188,792 Federal Natl Mtge Assn #615135 11-01-16 6.00 239,178 247,030 Federal Natl Mtge Assn #650009 09-01-31 7.50 56,312 59,794 Federal Natl Mtge Assn #667604 10-01-32 5.50 229,043 231,665 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 149 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,i) (cont.) Federal Natl Mtge Assn #677089 01-01-33 5.50% $221,820 $224,358 Federal Natl Mtge Assn #677695 02-01-33 6.50 469,842 488,994 Federal Natl Mtge Assn #683116 02-01-33 6.00 390,907 400,504 Federal Natl Mtge Assn #704610 06-01-33 5.50 223,297 225,800 Federal Natl Mtge Assn #720378 06-01-18 4.50 73,832 73,322 Federal Natl Mtge Assn #724867 06-01-18 5.00 144,526 145,781 Federal Natl Mtge Assn #725232 03-01-34 5.00 484,655 482,731 Federal Natl Mtge Assn #725284 11-01-18 7.00 60,567 63,432 Federal Natl Mtge Assn #725431 08-01-15 5.50 128,291 131,114 Federal Natl Mtge Assn #725719 07-01-33 4.85 88,237(g) 87,741 Federal Natl Mtge Assn #725737 08-01-34 4.53 95,877(g) 95,937 Federal Natl Mtge Assn #735160 12-01-34 4.40 95,811(g) 95,614 Federal Natl Mtge Assn #743455 10-01-18 5.50 254,541 260,236 Federal Natl Mtge Assn #743579 11-01-33 5.50 140,538 142,113 Federal Natl Mtge Assn #747784 10-01-18 4.50 259,775 257,982 Federal Natl Mtge Assn #749745 11-01-18 4.50 339,933 337,587 Federal Natl Mtge Assn #753074 12-01-28 5.50 176,006 178,140 Federal Natl Mtge Assn #759330 01-01-19 6.50 170,852 177,109 Federal Natl Mtge Assn #759342 01-01-34 6.50 139,528 144,983 Federal Natl Mtge Assn #761031 01-01-34 5.00 225,563 224,149 Federal Natl Mtge Assn #763754 02-01-29 5.50 179,973 182,067 Federal Natl Mtge Assn #765760 02-01-19 5.00 174,200 175,573 Federal Natl Mtge Assn #790759 09-01-34 4.84 219,963(g) 220,782 Federal Natl Mtge Assn #791447 10-01-34 6.00 480,789 492,209 Federal Natl Mtge Assn #794958 10-01-19 6.00 266,454 275,173 Federal Natl Mtge Assn #800137 11-01-34 6.50 197,085 203,687 Federal Natl Mtge Assn #811925 04-01-35 4.92 143,724(g) 144,698 Federal Natl Mtge Assn #815264 05-01-35 5.25 386,863(g) 391,417 Federal Natl Mtge Assn #829227 08-01-35 6.00 500,000 511,884 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,i) (cont.) First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.41% $72,945(j) $74,406 Series 2005-AA2 Cl 2A1 04-25-35 5.44 111,807 113,595 Series 2005-AA3 Cl 3A1 05-25-35 5.42 113,987 115,224 Series 2005-AA4 Cl B1 06-25-35 5.39 129,935 132,106 Govt Natl Mtge Assn 09-01-35 5.00 100,000(b) 100,313 IndyMac Index Mtge Loan Trust Series 2005-AR3 Cl 3A1 04-25-35 5.34 66,904(g) 67,614 Master Alternative Loans Trust Series 2004-2 Cl 4A1 02-25-19 5.00 137,360 138,132 Series 2004-4 Cl 2A1 05-25-34 6.00 106,157 108,394 Series 2004-7 Cl 8A1 08-25-19 5.00 57,989 58,026 Series 2004-8 Cl 7A1 09-25-19 5.00 89,290 89,365 Series 2005-3 Cl 1A2 04-25-35 5.50 300,000 303,618 Structured Adjustable Rate Mtge Loan Trust Series 2004-5 Cl B1 05-25-34 4.61 99,670(g) 98,209 Structured Asset Securities Series 2003-33H Cl 1A1 10-25-33 5.50 186,488 187,558 Washington Mutual Series 2003-AR10 Cl A7 10-25-33 4.07 125,000(g) 125,305 Series 2004-CB2 Cl 6A 07-25-19 4.50 258,519 252,322 Series 2005-AR11 Cl A1B1 08-25-45 3.93 300,000(g) 300,000 Series 2005-AR8 Cl 2AB1 07-25-45 3.89 442,828(g) 442,690 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 275,000(b) 276,418 Series 2005-5 Cl 2A1 05-25-35 5.50 194,162 196,887 Series 2005-AR1 Cl 1A1 02-25-35 4.56 160,765(g) 160,068 Total 18,905,116 Automotive (0.2%) DaimlerChrysler NA Holding 11-15-13 6.50 45,000 48,400 Lear Series B 08-01-14 5.75 65,000 57,769 Total 106,169 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Banking (4.1%) Bank of America Sr Unsecured 08-01-10 4.50% $520,000 $521,769 Banknorth Group Sr Nts 05-01-08 3.75 155,000 153,312 Citigroup 08-03-10 4.63 700,000 705,867 Sr Nts 05-29-15 4.70 105,000 104,878 KFW Intl Finance 10-17-05 2.50 225,000(c) 224,644 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 615,000 675,531 Total 2,386,001 Diversified Manufacturing (0.7%) Tyco Intl Group 02-15-11 6.75 345,000(c) 379,924 Electric (2.1%) Consumers Energy 1st Mtge 09-15-35 5.80 125,000 130,309 Dayton Power & Light 1st Mtge 10-01-13 5.13 60,000 61,787 Dominion Resources 06-15-35 5.95 115,000 120,120 Exelon 06-15-35 5.63 90,000 90,589 Ohio Power Sr Nts Series H 01-15-14 4.85 155,000 156,184 Pacific Gas & Electric 03-01-34 6.05 85,000 93,142 Pacificorp 1st Mtge 06-15-35 5.25 55,000 55,335 Potomac Edison 1st Mtge 08-15-15 5.13 120,000(d) 122,699 Southern California Edison 1st Mtge 07-15-35 5.35 120,000 122,540 Westar Energy 1st Mtge 07-01-14 6.00 230,000 250,380 Total 1,203,085 Entertainment (0.2%) Time Warner 05-15-29 6.63 115,000 125,105 Food and Beverage (0.2%) Kraft Foods 06-01-12 6.25 85,000 93,283 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 150 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Health Care (0.6%) Cardinal Health 06-15-15 4.00% $353,000 $326,720 Life Insurance (1.8%) ASIF Global Financing XIX Secured 01-17-13 4.90 135,000(d) 136,845 ING Security Life Institutional Funding 01-15-10 4.25 220,000(d) 218,511 Metlife Sr Nts 06-15-35 5.70 215,000 223,387 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 100,000(d) 100,778 Pricoa Global Funding I 06-25-12 4.63 250,000(d) 250,464 Prudential Financial 06-13-35 5.40 100,000 99,551 Total 1,029,536 Media Cable (0.2%) Comcast 03-15-11 5.50 125,000 129,244 Media Non Cable (0.3%) News America 12-15-34 6.20 190,000 196,874 Oil Field Services (0.1%) Halliburton 10-15-10 5.50 80,000 83,671 Other Financial Institutions (0.9%) HSBC Finance 06-30-15 5.00 360,000 361,875 Residential Capital 06-30-10 6.38 155,000(d) 158,227 Total 520,102 Pharmaceuticals (--%) Merck & Co 03-01-15 4.75 25,000 24,784 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Property & Casualty (0.1%) Willis Group North America 07-15-15 5.63% $70,000 $71,077 Railroads (0.4%) Union Pacific 04-15-12 6.50 20,000 22,061 05-01-14 5.38 180,000 187,416 Total 209,477 REITS (0.6%) Archstone-Smith Operating Trust 05-01-15 5.25 170,000 172,697 ERP Operating LP 04-01-13 5.20 60,000 61,201 Simon Property Group LP 06-15-15 5.10 115,000(d) 114,573 Total 348,471 Retailers (0.2%) Wal-Mart Stores 09-01-35 5.25 130,000(b) 131,178 Transportation Services (0.2%) ERAC USA Finance 05-01-15 5.60 90,000(d) 92,953 Wireless (0.2%) US Cellular Sr Nts 12-15-33 6.70 115,000 123,269 Wirelines (4.1%) BellSouth Sr Unsecured 11-15-34 6.00 65,000 68,623 Sprint Capital 01-30-11 7.63 560,000 640,037 11-15-28 6.88 40,000 45,838 Telecom Italia Capital 09-30-34 6.00 135,000(c,d) 138,592 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wirelines (cont.) TELUS 06-01-11 8.00% $395,000(c) $459,465 Verizon Pennsylvania Series A 11-15-11 5.65 960,000 1,003,843 Total 2,356,398 Total Bonds (Cost: $53,812,827) $54,123,490 Short-Term Securities (14.1%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (9.7%) Federal Home Loan Bank Disc Nt 09-23-05 3.48% $700,000 $698,448 Federal Home Loan Mtge Corp Disc Nts 09-06-05 3.43 2,500,000 2,498,571 09-20-05 3.43 1,000,000 998,100 Federal Natl Mtge Assn Disc Nts 09-08-05 3.25 900,000 899,350 10-05-05 3.49 500,000 498,308 Total 5,592,777 Commercial Paper (4.4%) General Electric Capital 09-01-05 3.56 1,100,000 1,099,891 Rabobank USA Financial 09-09-05 3.50 1,500,000 1,498,688 Total 2,598,579 Total Short-Term Securities (Cost: $8,192,141) $8,191,356 Total Investments in Securities (Cost: $62,004,968)(n) $62,314,846 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $3,907,593. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 3.8% of net assets. (d) 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 Aug. 31, 2005, the value of these securities amounted to $2,544,568 or 4.4% of net assets. (e) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation -------------------------------------------------------------------------------- 151 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Notes to Investments in Securities (continued) (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (h) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Long Bond, Dec. 2005, 20-year $1,000,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 800,000 U.S. Treasury Note, Sept. 2005, 10-year 100,000 U.S. Treasury Note, Dec. 2005, 5-year 2,700,000 U.S. Treasury Note, Dec. 2005, 10-year 1,600,000 (i) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-20 4.50% $50,000 9-19-05 $49,008 $49,578 09-01-35 5.00 500,000 9-14-05 489,140 496,563 (j) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (k) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (l) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (m) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (n) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $62,028,410 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 479,699 Unrealized depreciation (193,263) -------- Net unrealized appreciation $ 286,436 --------- 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/investments. -------------------------------------------------------------------------------- 152 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Diversified Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (99.1%) Issuer Coupon Principal Value(a) rate amount Sovereign (1.8%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 13,364,000(c) $17,299,561 United Kingdom Treasury (British Pound) 12-07-06 7.50 6,159,000(c) 11,556,118 United Mexican States 09-27-34 6.75 3,591,000(c) 3,892,644 Total 32,748,323 U.S. Government Obligations & Agencies (26.7%) Federal Farm Credit Bank 10-10-08 4.25 7,115,000 7,155,691 Federal Home Loan Bank 09-22-05 2.13 12,775,000 12,763,891 05-22-06 2.88 19,005,000 18,864,173 08-11-06 3.25 12,875,000 12,781,528 04-18-08 4.13 3,310,000 3,317,030 Federal Home Loan Mtge Corp 09-15-06 3.63 9,085,000 9,053,212 06-15-08 3.88 33,800,000 33,628,296 10-15-08 5.13 23,060,000 23,760,401 03-18-09 3.76 5,110,000 5,048,491 07-12-10 4.13 30,380,000 30,325,286 Federal Natl Mtge Assn 04-13-06 2.15 20,300,000 20,076,984 02-15-09 3.25 45,124,000 43,901,501 U.S. Treasury 11-15-05 5.75 7,461,000 7,493,351 12-31-05 1.88 10,255,000 10,194,516 11-30-06 2.88 6,520,000 6,446,141 08-15-07 3.25 29,000,000 28,683,958 05-15-15 4.13 30,350,000(r) 30,545,606 08-15-15 4.25 23,355,000 23,796,550 08-15-23 6.25 109,797,000(p) 136,053,963 02-15-26 6.00 4,610,000 5,653,372 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 17,784,756(h) 17,763,567 Total 487,307,508 Asset-Backed (4.1%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 10,197,772(d,m) 10,187,220 Aesop Funding II LLC Series 2002-1A Cl A1 (AMBAC) 10-20-06 3.85 1,333,333(d,l) 1,333,251 Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 1,500,000(d,l) 1,469,492 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) AmeriCredit Automobile Receivables Trust Series 2002-C Cl A4 (FSA) 02-12-09 3.55% $1,000,000(l) $995,365 Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 2,750,000(l) 2,719,492 Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 5,800,000(l) 5,773,720 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 3,900,000(d,l) 3,873,949 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 2,000,000 1,949,764 Series 2005-1 Cl A4 07-15-09 4.05 5,200,000 5,207,904 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 3,100,000 3,079,230 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 1,600,000 1,604,423 Citibank Credit Card Issuance Trust Series 2003-A3 Cl A3 03-10-10 3.10 300,000 292,154 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 2,200,000 2,177,384 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 2,500,000(l) 2,473,925 Metris Master Trust Series 2001-2 Cl C 11-20-09 5.51 1,625,000(d,m) 1,625,000 Series 2004-2 Cl D 10-20-10 6.86 850,000(d,m) 862,750 Series 2004-2 Cl M 10-20-10 4.00 1,600,000(m) 1,601,520 Series 2005-1A Cl D 03-21-11 5.51 900,000(d,m) 899,997 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 2,500,000 2,463,085 Nissan Auto Lease Trust Series 2004-A Cl A3 08-15-07 2.90 1,500,000 1,484,461 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 3,400,000 3,364,878 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 1,815,000 1,806,773 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) Residential Asset Securities Series 2002-KS1 Cl AI4 (AMBAC) 11-25-29 5.86% $628,734(l) $627,363 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 5,000,000(l) 4,974,800 WFS Financial Owner Trust Series 2004-3 Cl A3 03-17-09 3.30 8,200,000 8,121,577 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 4,500,000 4,454,370 Total 75,423,847 Commercial Mortgage-Backed(f) (10.6%) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 2,250,000 2,312,389 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 3.74 3,800,000(d,m) 3,800,675 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 2,316,279 2,340,869 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 358,766 351,300 Series 2004-PWR5 Cl A3 07-11-42 4.57 1,790,000 1,794,017 Series 2004-T16 Cl A3 02-13-46 4.03 2,140,000 2,110,097 Series 2005-PWR8 Cl A1 06-11-41 4.21 4,798,334 4,786,050 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 5,221,721(d) 5,232,965 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 3,275,000 3,455,193 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 7,471,452(d) 7,444,967 Commercial Mtge Pass-Through Ctfs Series 2004-CNL Cl A1 09-15-14 3.79 3,400,000(d,m) 3,384,768 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 4,355,756 4,361,970 Series 2004-C1 Cl A2 01-15-37 3.52 1,750,000 1,711,328 Federal Natl Mtge Assn #385683 02-01-13 4.83 3,136,681 3,194,557 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 153 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Federal Natl Mtge Assn #385717 11-01-12 4.84% $2,312,028 $2,350,107 Federal Natl Mtge Assn #386599 11-01-10 4.47 1,064,558 1,060,195 Federal Natl Mtge Assn #555316 02-01-13 4.87 981,380 1,003,067 Federal Natl Mtge Assn #555806 10-01-13 5.11 976,911 1,014,102 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 2,425,352 2,491,317 Series 2004-C2 Cl A2 03-10-40 4.12 5,150,000 5,078,930 Series 2005-C1 Cl A5 06-10-48 4.77 2,200,000 2,221,741 Series 2005-C3 Cl A1 07-10-45 4.59 3,350,000 3,375,056 Series 2005-C3 Cl A2 07-10-45 4.85 2,520,000 2,561,987 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 5,625,000(d) 5,680,518 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 3,235,000 3,228,233 Series 2005-C1 Cl A1 05-10-43 4.21 3,239,479 3,229,418 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 3,200,000 3,233,245 Series 2004-GG1 Cl A5 06-10-36 4.88 1,625,000 1,654,547 Series 2005-GG3 Cl A1 08-10-42 3.92 2,105,474 2,090,525 Series 2005-GG3 Cl A3 08-10-42 4.57 5,000,000 5,002,917 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 3,000,000 3,058,270 Series 2005-GG4 Cl A1 07-10-39 4.37 4,013,925 4,016,333 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 2,464,555 2,465,499 Series 2003-CB6 Cl A1 07-12-37 4.39 3,825,953 3,806,823 Series 2003-CB6 Cl A2 07-12-37 5.26 2,500,000 2,605,240 Series 2003-LN1 Cl A1 10-15-37 4.13 2,274,361 2,241,029 Series 2003-ML1A Cl A1 03-12-39 3.97 1,927,675 1,896,177 Series 2004-C2 Cl A2 05-15-41 5.26 1,000,000(m) 1,030,201 Series 2004-CBX Cl A3 01-12-37 4.18 1,950,000 1,928,566 Series 2004-CBX Cl A5 01-12-37 4.65 3,000,000 3,012,815 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) JPMorgan Chase Commercial Mtge Securities (cont.) Series 2005-CB11 Cl A3 08-12-37 5.20% $3,150,000 $3,259,464 Series 2005-LDP2 Cl A1 07-15-42 4.33 5,086,104 5,099,684 LB-UBS Commercial Mtge Trust Series 2002-C2 Cl A3 06-15-26 5.39 3,590,000 3,726,980 Series 2002-C4 Cl A5 09-15-31 4.85 3,000,000 3,050,250 Series 2003-C8 Cl A2 11-15-27 4.21 4,600,000 4,570,744 Series 2003-C8 Cl A3 11-15-27 4.83 4,550,000 4,613,063 Series 2004-C2 Cl A3 03-15-29 3.97 2,200,000 2,126,124 Series 2004-C4 Cl A3 06-15-29 5.16 2,100,000(m) 2,169,587 Series 2004-C6 Cl A2 08-15-29 4.19 3,175,000 3,150,172 Series 2004-C6 Cl A4 08-15-29 4.58 2,925,000 2,935,391 Series 2004-C7 Cl A2 10-15-29 3.99 3,200,000 3,143,360 Series 2004-C8 Cl A2 12-15-29 4.20 3,700,000 3,667,144 Series 2005-C3 Cl A1 07-15-30 4.39 2,731,569 2,737,333 Series 2005-C5 Cl A2 09-15-40 4.89 3,350,000 3,399,513 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 3,250,213 3,241,578 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 6,121,427 5,855,003 Series 2004-HQ4 Cl A5 04-14-40 4.59 2,400,000 2,398,632 Series 2004-IQ8 Cl A2 06-15-40 3.96 2,836,055 2,810,840 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 7,185,000 7,757,587 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 2,821,310 2,757,049 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A3 10-15-41 4.62 3,500,000 3,509,921 Total 193,597,422 Mortgage-Backed(f,n) (35.5%) Adjustable Rate Mtge Trust Series 2004-2 Cl 6A1 02-25-35 5.27 3,416,339(k) 3,454,621 Series 2005-3 Cl 7A1 07-25-35 5.10 1,133,361(k) 1,140,631 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Banc of America Mtge Securities Series 2004-E Cl B1 06-25-34 4.04% $1,755,749(k) $1,732,029 Series 2004-F Cl B1 07-25-34 4.14 3,167,216(k) 3,142,480 Bank of America Alternative Loan Trust Series 2003-11 Cl 1A1 01-25-34 6.00 3,537,386 3,586,768 Series 2003-11 Cl 4A1 01-25-19 4.75 2,525,401 2,518,587 Series 2004-3 Cl 1A1 04-25-34 6.00 6,163,685 6,317,777 Bear Stearns Adjustable Rate Mtge Trust Series 2004-10 Cl 13A1 01-25-35 5.03 5,301,663(k) 5,312,349 Series 2004-12 Cl 3A1 02-25-35 5.19 3,677,772(k) 3,694,984 Countrywide Alternative Loan Trust Series 2003-11T1 Cl A1 07-25-18 4.75 2,679,351 2,664,090 Series 2005-6CB Cl 1A1 04-25-35 7.50 4,059,347 4,254,869 Countrywide Home Loans Series 2004-12 Cl 1M 08-25-34 4.62 1,997,084(k) 1,963,701 Series 2005-R2 Cl 2A1 06-25-35 7.00 5,704,216(d) 6,048,252 CS First Boston Mtge Securities Series 2003-29 Cl 8A1 11-25-18 6.00 2,684,246 2,736,051 Series 2004-AR5 Cl CB1 06-25-34 4.42 2,056,946(k) 2,024,758 Federal Home Loan Mtge Corp 10-01-34 6.50 1,120,323 1,157,520 Collateralized Mtge Obligation 01-15-18 6.50 2,570,384 2,737,801 06-15-20 8.00 13,031 13,005 03-15-22 7.00 1,736,403 1,733,484 02-15-27 5.00 5,500,000 5,566,483 10-15-27 5.00 13,400,000 13,548,600 06-15-28 5.00 8,400,000 8,503,152 12-15-28 5.50 4,175,000 4,287,366 02-15-33 5.50 5,849,099 6,064,307 Interest Only 02-15-14 7.40 1,811,731(i) 112,436 08-01-20 8.00 7,154,257(i) 1,234,038 10-15-22 14.56 5,644,782(i) 322,733 Principal Only 08-01-20 4.60 7,154,257(j) 5,877,794 Federal Home Loan Mtge Corp #B11452 12-01-18 6.00 1,888,192 1,948,272 Federal Home Loan Mtge Corp #C00356 08-01-24 8.00 156,033 167,416 Federal Home Loan Mtge Corp #C14412 09-01-28 6.00 1,636,107 1,680,385 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 1,357,887 1,374,695 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 154 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Home Loan Mtge Corp #C59161 10-01-31 6.00% $4,249,834 $4,358,452 Federal Home Loan Mtge Corp #C79930 06-01-33 5.50 3,726,959 3,771,796 Federal Home Loan Mtge Corp #C80198 08-01-24 8.00 104,801 112,446 Federal Home Loan Mtge Corp #C80253 01-01-25 9.00 72,295 79,709 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 5,976,359 6,156,214 Federal Home Loan Mtge Corp #D95319 03-01-22 6.00 569,409 586,737 Federal Home Loan Mtge Corp #D96300 10-01-23 5.50 422,910 430,481 Federal Home Loan Mtge Corp #E01127 02-01-17 6.50 4,068,739 4,211,717 Federal Home Loan Mtge Corp #E01419 05-01-18 5.50 2,031,353 2,076,579 Federal Home Loan Mtge Corp #E77557 06-01-14 6.50 369,808 383,037 Federal Home Loan Mtge Corp #E96516 05-01-13 4.50 1,769,631 1,767,232 Federal Home Loan Mtge Corp #E97591 06-01-18 5.50 470,606 481,957 Federal Home Loan Mtge Corp #E98725 08-01-18 5.00 6,377,310 6,434,579 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 4,928,341 4,973,294 Federal Home Loan Mtge Corp #G01108 04-01-30 7.00 3,318,798(g) 3,474,334 Federal Home Loan Mtge Corp #G01427 12-01-31 6.50 835,089 865,023 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 705,399 729,311 Federal Home Loan Mtge Corp #G10198 05-01-07 9.00 54,664 55,409 Federal Home Loan Mtge Corp #G30225 02-01-23 6.00 7,377,434 7,601,943 Federal Natl Mtge Assn 03-01-15 6.00 4,332,185 4,474,567 09-01-20 5.00 6,205,000(g) 6,247,659 09-01-20 5.50 15,000,000(g) 15,318,750 09-01-20 6.00 17,000,000(g) 17,541,876 12-01-33 6.50 10,840,772 11,217,927 07-01-34 6.50 4,853,185 5,015,771 10-01-35 6.00 16,700,000(g) 17,065,313 Collateralized Mtge Obligation 12-25-26 8.00 2,259,619 2,400,743 Interest Only 12-25-12 13.29 1,513,868(i) 63,001 12-25-22 8.27 2,142,783(i) 276,511 12-25-31 1.19 2,380,258(i) 389,551 Federal Natl Mtge Assn #125032 11-01-21 8.00 31,572 33,854 Federal Natl Mtge Assn #125474 02-01-27 7.50 940,619 999,339 Federal Natl Mtge Assn #190764 09-01-07 8.50 107,246 107,875 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #190899 04-01-23 8.50% $414,746 $447,304 Federal Natl Mtge Assn #190988 06-01-24 9.00 441,495 477,216 Federal Natl Mtge Assn #253883 08-01-16 6.00 928,006 958,471 Federal Natl Mtge Assn #254224 02-01-17 7.00 1,431,892 1,499,560 Federal Natl Mtge Assn #254560 11-01-32 5.00 4,082,971 4,067,666 Federal Natl Mtge Assn #254675 01-01-23 6.50 183,849 191,458 Federal Natl Mtge Assn #254906 10-01-18 4.50 6,535,641 6,490,549 Federal Natl Mtge Assn #254916 09-01-23 5.50 5,534,908 5,632,939 Federal Natl Mtge Assn #255788 06-01-15 5.50 6,864,034 7,029,171 Federal Natl Mtge Assn #303727 02-01-11 6.00 156,055 160,845 Federal Natl Mtge Assn #442411 11-01-28 6.50 2,045,430 2,123,256 Federal Natl Mtge Assn #445254 12-01-13 5.50 2,818,163 2,880,159 Federal Natl Mtge Assn #446964 10-01-28 6.00 4,338,667 4,454,284 Federal Natl Mtge Assn #450370 01-01-29 6.50 2,232,967 2,317,929 Federal Natl Mtge Assn #484820 04-01-14 5.50 18,152 18,552 Federal Natl Mtge Assn #50553 04-01-22 8.00 121,106 129,989 Federal Natl Mtge Assn #510587 08-01-29 7.00 192,728 202,282 Federal Natl Mtge Assn #545339 11-01-31 6.50 144,267 150,365 Federal Natl Mtge Assn #545342 04-01-13 7.00 2,383,860 2,458,506 Federal Natl Mtge Assn #545869 07-01-32 6.50 1,972,922 2,051,143 Federal Natl Mtge Assn #545885 08-01-32 6.50 4,158,449 4,314,391 Federal Natl Mtge Assn #545910 08-01-17 6.00 2,270,754 2,351,245 Federal Natl Mtge Assn #555375 04-01-33 6.00 12,695,797 13,090,721 Federal Natl Mtge Assn #555376 04-01-18 4.50 269,579 267,719 Federal Natl Mtge Assn #555458 05-01-33 5.50 13,994,728 14,165,323 Federal Natl Mtge Assn #555734 07-01-23 5.00 3,960,068 3,966,787 Federal Natl Mtge Assn #555740 08-01-18 4.50 2,377,001 2,359,823 Federal Natl Mtge Assn #609621 11-01-31 7.00 3,402,761 3,570,206 Federal Natl Mtge Assn #617746 08-01-32 6.50 313,110 324,270 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #626720 01-01-17 6.00% $233,453 $241,117 Federal Natl Mtge Assn #630599 05-01-32 7.00 4,558,118 4,780,842 Federal Natl Mtge Assn #634367 03-01-17 6.50 1,415,020 1,469,865 Federal Natl Mtge Assn #640961 06-01-32 7.50 371,410 393,787 Federal Natl Mtge Assn #646938 06-01-32 7.00 2,242,301 2,351,866 Federal Natl Mtge Assn #647549 08-01-17 6.00 2,157,074 2,228,055 Federal Natl Mtge Assn #650159 10-01-32 6.50 3,221,741 3,361,384 Federal Natl Mtge Assn #652600 02-01-18 5.50 7,868,452 8,043,529 Federal Natl Mtge Assn #667604 10-01-32 5.50 7,438,465 7,523,603 Federal Natl Mtge Assn #667721 03-01-33 6.00 2,527,263 2,594,014 Federal Natl Mtge Assn #667787 02-01-18 5.50 1,065,657 1,089,321 Federal Natl Mtge Assn #669925 09-01-17 6.50 3,296,105 3,428,708 Federal Natl Mtge Assn #670382 09-01-32 6.00 7,980,500 8,176,428 Federal Natl Mtge Assn #670387 08-01-32 7.00 1,113,755 1,168,556 Federal Natl Mtge Assn #672289 12-01-17 5.50 654,282 670,064 Federal Natl Mtge Assn #678028 09-01-17 6.00 679,858 702,230 Federal Natl Mtge Assn #683116 02-01-33 6.00 390,907 400,504 Federal Natl Mtge Assn #684585 02-01-33 5.50 657,119 665,248 Federal Natl Mtge Assn #684586 03-01-33 6.00 2,446,718 2,513,216 Federal Natl Mtge Assn #684601 03-01-33 6.00 1,499,576 1,550,477 Federal Natl Mtge Assn #687051 01-01-33 6.00 6,571,307 6,727,496 Federal Natl Mtge Assn #687302 11-01-32 7.00 780,443 818,578 Federal Natl Mtge Assn #687736 02-01-33 5.50 3,397,188 3,435,270 Federal Natl Mtge Assn #688691 03-01-33 5.50 859,117 868,748 Federal Natl Mtge Assn #689093 07-01-28 5.50 1,981,845 2,005,871 Federal Natl Mtge Assn #694316 03-01-18 5.50 2,467,739 2,524,930 Federal Natl Mtge Assn #694546 03-01-33 5.50 2,233,589 2,258,628 Federal Natl Mtge Assn #694628 04-01-33 5.50 2,917,227 2,958,810 Federal Natl Mtge Assn #694795 04-01-33 5.50 3,691,873 3,747,917 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 155 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #694988 03-01-33 5.50% $7,585,066 $7,678,588 Federal Natl Mtge Assn #695202 03-01-33 6.50 2,883,909 2,984,241 Federal Natl Mtge Assn #695220 04-01-33 5.50 187,986 190,093 Federal Natl Mtge Assn #695387 04-01-18 5.00 1,377,762 1,393,049 Federal Natl Mtge Assn #705096 06-01-18 5.00 647,697 653,288 Federal Natl Mtge Assn #709901 06-01-18 5.00 3,521,281 3,551,743 Federal Natl Mtge Assn #711501 05-01-33 5.50 1,799,842 1,827,182 Federal Natl Mtge Assn #712109 04-01-18 5.00 1,807,435 1,827,459 Federal Natl Mtge Assn #720006 07-01-33 5.50 5,037,137 5,093,603 Federal Natl Mtge Assn #720378 06-01-18 4.50 4,303,031 4,273,343 Federal Natl Mtge Assn #723687 08-01-28 5.50 2,741,898 2,775,138 Federal Natl Mtge Assn #725232 03-01-34 5.00 15,024,305 14,964,656 Federal Natl Mtge Assn #725284 11-01-18 7.00 193,815 202,982 Federal Natl Mtge Assn #725684 05-01-18 6.00 6,997,104 7,227,243 Federal Natl Mtge Assn #725719 07-01-33 4.85 3,750,087(k) 3,729,011 Federal Natl Mtge Assn #725737 08-01-34 4.53 3,595,402(k) 3,597,632 Federal Natl Mtge Assn #726940 08-01-23 5.50 79,093 80,185 Federal Natl Mtge Assn #730153 08-01-33 5.50 729,348 737,524 Federal Natl Mtge Assn #730231 08-01-23 5.50 8,148,027 8,292,340 Federal Natl Mtge Assn #731075 07-01-18 5.50 170,921 174,961 Federal Natl Mtge Assn #731417 09-01-18 5.50 2,126,394 2,175,116 Federal Natl Mtge Assn #732094 08-01-18 5.50 145,819 149,199 Federal Natl Mtge Assn #735160 12-01-34 4.40 2,491,093(k) 2,485,961 Federal Natl Mtge Assn #737330 09-01-18 5.50 1,752,975 1,792,998 Federal Natl Mtge Assn #742840 10-01-18 5.50 1,615,410 1,651,856 Federal Natl Mtge Assn #743262 10-01-18 5.00 3,471,315 3,498,337 Federal Natl Mtge Assn #743455 10-01-18 5.50 6,132,783 6,270,000 Federal Natl Mtge Assn #747584 11-01-28 5.50 4,705,739 4,762,787 Federal Natl Mtge Assn #753919 12-01-33 4.95 4,175,469(k) 4,191,905 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #756844 02-01-19 5.00% $2,919,713 $2,941,733 Federal Natl Mtge Assn #759342 01-01-34 6.50 1,088,315 1,130,867 Federal Natl Mtge Assn #761031 01-01-34 5.00 601,501 597,731 Federal Natl Mtge Assn #765758 02-01-19 5.00 3,304,594 3,330,638 Federal Natl Mtge Assn #765760 02-01-19 5.00 348,400 351,145 Federal Natl Mtge Assn #776962 04-01-29 5.00 10,392,429 10,327,284 Federal Natl Mtge Assn #776987 04-01-29 5.00 336,071 333,964 Federal Natl Mtge Assn #790759 09-01-34 4.84 3,695,383(k) 3,709,137 Federal Natl Mtge Assn #811925 04-01-35 4.92 4,527,297(k) 4,557,981 Federal Natl Mtge Assn #837258 09-01-35 4.92 2,475,000(g,k) 2,488,043 First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.41 3,246,038(m) 3,311,056 Series 2005-AA2 Cl 2A1 04-25-35 5.44 3,913,237(m) 3,975,810 Series 2005-AA3 Cl 3A1 05-25-35 5.42 4,194,739(m) 4,240,252 Series 2005-AA4 Cl B1 06-25-35 5.39 2,473,767 2,515,104 Govt Natl Mtge Assn 09-01-35 5.00 8,900,000(g) 8,927,813 Collateralized Mtge Obligation Interest Only Series 2002-70 Cl IC 08-20-32 0.00 4,859,624(i) 636,375 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 1,209,350(i) 129,669 Govt Natl Mtge Assn #604708 10-15-33 5.50 4,850,729 4,949,261 Harborview Mtge Loan Trust Series 2004-3 Cl B1 05-19-34 4.39 2,383,149(k) 2,352,619 IndyMac Index Mtge Loan Trust Series 2005-AR3 Cl 3A1 04-25-35 5.34 2,475,435(k) 2,501,726 Series 2005-AR8 Cl AX1 Collateralized Mtge Obligation Interest Only 04-25-35 4.50 130,589,613(i,k) 1,611,966 Master Adjustable Rate Mtge Trust Series 2004-5 Cl B1 07-25-34 4.40 2,542,856(k) 2,509,545 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Master Alternative Loans Trust Series 2004-2 Cl 4A1 02-25-19 5.00% $4,626,852 $4,652,878 Series 2004-7 Cl 8A1 08-25-19 5.00 2,984,229 2,986,109 Series 2004-8 Cl 7A1 09-25-19 5.00 4,107,325 4,110,775 Structured Adjustable Rate Mtge Loan Trust Series 2004-3AC Cl B1 03-25-34 4.93 3,210,318(k) 3,200,302 Series 2004-5 Cl B1 05-25-34 4.61 2,367,160(k) 2,332,458 Structured Asset Securities Series 2003-33H Cl 1A1 10-25-33 5.50 8,516,292 8,565,138 Washington Mutual Series 2003-AR10 Cl A7 10-25-33 4.07 4,425,000(k) 4,435,792 Series 2004-CB2 Cl 6A 07-25-19 4.50 2,757,534 2,691,436 Series 2004-CB3 Cl 4A 10-25-19 6.00 3,833,042 3,970,499 Series 2004-CB4 Cl 22A 12-25-19 6.00 1,923,596 1,984,250 Series 2005-AR11 Cl A1B1 08-25-45 3.93 9,200,000(k) 9,200,000 Series 2005-AR8 Cl 2AB1 07-25-45 3.89 7,065,565(k) 7,063,357 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 8,800,000(g) 8,845,375 Series 2005-5 Cl 2A1 05-25-35 5.50 6,795,665 6,891,057 Series 2005-AR1 Cl 1A1 02-25-35 4.56 6,315,787(k) 6,288,377 Series 2005-AR4 Cl B1 04-25-35 4.58 1,097,503(k) 1,067,399 Total 647,422,953 Aerospace & Defense (0.1%) L-3 Communications 06-15-12 7.63 1,460,000 1,547,600 07-15-13 6.13 5,000 5,050 Moog Sr Sub Nts 01-15-15 6.25 85,000 85,000 Total 1,637,650 Automotive (0.2%) DaimlerChrysler NA Holding 11-15-13 6.50 1,565,000 1,683,236 Ford Motor 02-01-29 6.38 1,895,000 1,385,213 Total 3,068,449 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 156 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Banking (3.7%) Bank of America Sr Unsecured 08-01-10 4.50% $1,025,000 $1,028,486 Banknorth Group Sr Nts 05-01-08 3.75 3,405,000 3,367,920 Citigroup 08-03-10 4.63 23,800,000 23,999,515 Sr Nts 05-29-15 4.70 2,050,000 2,047,624 HSBC Bank USA Sub Nts 08-15-35 5.63 4,000,000 4,126,692 KFW Intl Finance 10-17-05 2.50 11,250,000(c) 11,232,179 M&I Marshall & Ilsley Bank Sub Nts 06-16-15 4.85 1,925,000 1,938,425 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 17,620,000(p) 19,354,231 Total 67,095,072 Building Materials (--%) Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 300,000 315,000 Chemicals (0.1%) Airgas 10-01-11 9.13 800,000 860,000 Compass Minerals Group 08-15-11 10.00 535,000 585,825 Georgia Gulf Sr Nts 12-15-13 7.13 792,000 821,700 MacDermid 07-15-11 9.13 290,000 311,750 Total 2,579,275 Diversified Manufacturing (0.7%) Tyco Intl Group 02-15-11 6.75 11,010,000(c) 12,124,520 Electric (2.8%) CMS Energy Sr Nts 01-15-09 7.50 860,000 907,300 Consumers Energy 1st Mtge 09-15-35 5.80 3,900,000 4,065,641 Dayton Power & Light 1st Mtge 10-01-13 5.13 2,220,000 2,286,136 Dominion Resources 06-15-35 5.95 3,930,000 4,104,956 DPL Sr Nts 09-01-11 6.88 1,841,000 2,015,895 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) Exelon 06-15-35 5.63% $3,015,000 $3,034,742 IPALCO Enterprises Secured 11-14-08 8.38 265,000 284,213 11-14-11 8.63 1,765,000 1,985,625 NorthWestern Energy Secured 11-01-14 5.88 400,000(d) 413,051 Ohio Edison 06-15-09 5.65 2,895,000(d) 2,980,692 Sr Nts 05-01-15 5.45 785,000 811,915 Ohio Power Sr Nts Series H 01-15-14 4.85 5,080,000 5,118,811 Pacific Gas & Electric 03-01-34 6.05 3,260,000 3,572,275 Pacificorp 1st Mtge 06-15-35 5.25 1,970,000 1,981,987 Potomac Edison 1st Mtge 11-15-14 5.35 1,865,000(d) 1,932,308 08-15-15 5.13 2,095,000(d) 2,142,112 Southern California Edison 1st Mtge 07-15-35 5.35 4,020,000 4,105,099 Tenaska Alabama Partners LP Secured 06-30-21 7.00 245,000(d) 255,582 Utilicorp Canada Finance 06-15-11 7.75 1,290,000(c) 1,348,050 Westar Energy 1st Mtge 07-01-14 6.00 7,940,000 8,643,548 Total 51,989,938 Entertainment (0.4%) Time Warner 05-15-29 6.63 3,640,000 3,959,840 United Artists Theatre 07-01-15 9.30 2,929,618 2,900,321 Total 6,860,161 Food and Beverage (0.3%) Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75 435,000(c) 485,025 Cott Beverages 12-15-11 8.00 555,000 585,525 Kraft Foods 06-01-12 6.25 3,365,000 3,692,899 Total 4,763,449 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gaming (0.4%) Boyd Gaming Sr Sub Nts 12-15-12 7.75% $215,000 $228,975 04-15-14 6.75 300,000 306,375 Caesars Entertainment Sr Nts 04-15-13 7.00 1,710,000 1,911,402 MGM MIRAGE 10-01-09 6.00 355,000 355,000 Sr Nts 02-27-14 5.88 370,000 357,050 07-15-15 6.63 1,550,000(d,g) 1,565,500 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 290,000 293,625 Sr Sub Nts 04-01-12 8.00 380,000 404,700 Station Casinos Sr Nts 04-01-12 6.00 530,000 533,975 Sr Sub Nts 03-01-16 6.88 1,090,000(d,g) 1,119,975 Total 7,076,577 Gas Pipelines (0.2%) ANR Pipeline 03-15-10 8.88 880,000 960,041 Colorado Interstate Gas Sr Nts 03-15-15 5.95 295,000(d) 292,788 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 640,000 685,124 Southern Natural Gas 03-15-10 8.88 410,000 447,292 Southern Star Central Secured 08-01-10 8.50 345,000 372,600 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 910,000 978,250 Total 3,736,095 Health Care (0.6%) Cardinal Health 06-15-15 4.00 11,375,000 10,528,143 HCA Sr Nts 03-15-14 5.75 595,000 588,019 Triad Hospitals Sr Nts 05-15-12 7.00 550,000 569,250 Total 11,685,412 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 157 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Home Construction (0.3%) DR Horton 12-01-07 7.50% $520,000 $548,429 01-15-09 5.00 535,000 533,106 Sr Nts 02-15-15 5.25 3,180,000 3,054,755 Meritage Homes 03-15-15 6.25 235,000 220,019 Standard-Pacific Sr Nts 08-15-15 7.00 670,000 659,950 Total 5,016,259 Independent Energy (0.3%) Chesapeake Energy 01-15-15 7.75 860,000 924,500 Sr Nts 06-15-14 7.50 69,000 74,520 Sr Unsecured 08-15-17 6.50 1,335,000(d) 1,361,700 Encore Acquisition Sr Sub Nts 04-15-14 6.25 325,000 323,375 Kerr-McGee 10-15-05 8.13 500,000 502,076 Newfield Exploration Sr Nts 03-01-11 7.63 1,500,000 1,635,000 Sr Sub Nts 08-15-12 8.38 270,000 293,625 Plains Exploration & Production Sr Nts 06-15-14 7.13 400,000 426,000 Total 5,540,796 Life Insurance (2.0%) ASIF Global Financing XIX Secured 01-17-13 4.90 4,190,000(d) 4,247,277 ING Security Life Institutional Funding 01-15-10 4.25 8,315,000(d) 8,258,716 Metlife Sr Nts 06-15-35 5.70 7,065,000 7,340,613 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 2,065,000(d) 2,081,074 Pricoa Global Funding I 06-25-12 4.63 10,280,000(d) 10,299,049 Prudential Financial 06-13-35 5.40 3,425,000 3,409,608 Total 35,636,337 Lodging (0.1%) Hilton Hotels 12-01-12 7.63 675,000 774,455 ITT 11-15-15 7.38 430,000 470,850 Total 1,245,305 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Cable (0.2%) Comcast 03-15-11 5.50% $2,695,000 $2,786,495 DIRECTV Holdings LLC Sr Nts 03-15-13 8.38 320,000 351,200 Videotron Ltee 01-15-14 6.88 255,000(c) 262,013 Total 3,399,708 Media Non Cable (0.6%) Corus Entertainment Sr Sub Nts 03-01-12 8.75 240,000(c) 258,000 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 795,000 859,593 Emmis Operating Sr Sub Nts 05-15-12 6.88 200,000 200,000 Gray Television 12-15-11 9.25 25,000 27,063 Lamar Media 01-01-13 7.25 335,000 352,588 Sr Sub Nts 08-15-15 6.63 585,000(d) 596,700 News America 12-15-34 6.20 6,535,000 6,771,442 Quebecor Media Sr Nts 07-15-11 11.13 295,000(c) 324,500 Radio One Series B 07-01-11 8.88 535,000 571,781 Sun Media 02-15-13 7.63 400,000(c) 422,500 Susquehanna Media Sr Sub Nts 04-15-13 7.38 450,000 471,938 Total 10,856,105 Metals (0.1%) Peabody Energy Series B 03-15-13 6.88 970,000 1,010,013 Oil Field Services (0.2%) Halliburton 10-15-10 5.50 2,520,000 2,635,648 Key Energy Services Series C 03-01-08 8.38 235,000 243,225 Offshore Logistics 06-15-13 6.13 135,000 131,625 Pride Intl Sr Nts 07-15-14 7.38 250,000 271,250 Total 3,281,748 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Other Financial Institutions (0.9%) HSBC Finance 06-30-15 5.00% $11,435,000 $11,494,542 Residential Capital 06-30-10 6.38 4,970,000(d) 5,073,475 Total 16,568,017 Other Industry (--%) ARAMARK Services 12-01-06 7.10 500,000 513,567 Packaging (--%) Owens-Illinois Glass Container 05-15-11 7.75 575,000 609,500 Silgan Holdings Sr Sub Nts 11-15-13 6.75 295,000 301,269 Total 910,769 Paper (0.1%) Crown Paper Sr Sub Nts 09-01-05 11.00 3,450,000(b,o,q) -- Louisiana-Pacific Sr Nts 08-15-10 8.88 1,440,000 1,627,553 Total 1,627,553 Pharmaceuticals (0.1%) Merck & Co 03-01-15 4.75 1,060,000 1,050,827 Property & Casualty (0.1%) Willis Group North America 07-15-15 5.63 2,385,000 2,421,681 Railroads (0.4%) Union Pacific 04-15-12 6.50 2,280,000 2,514,940 05-01-14 5.38 4,530,000 4,716,650 Total 7,231,590 REITS (0.6%) Archstone-Smith Operating Trust 05-01-15 5.25 5,535,000 5,622,818 ERP Operating LP 04-01-13 5.20 1,970,000 2,009,426 Simon Property Group LP 06-15-15 5.10 3,655,000(d) 3,641,440 Total 11,273,684 Retailers (0.2%) Flooring America Series B 10-15-07 9.25 185,000(b,o,q) -- United Auto Group 03-15-12 9.63 240,000 257,700 Wal-Mart Stores 09-01-35 5.25 4,120,000(g) 4,157,344 Total 4,415,044 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 158 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Transportation Services (0.2%) ERAC USA Finance 05-01-15 5.60% $3,330,000(d) $3,439,244 Greater Beijing First Expressways Sr Nts 06-15-07 9.50 2,290,000(b,o,q) -- Total 3,439,244 Wireless (0.3%) Nextel Communications Sr Nts Series E 10-31-13 6.88 1,025,000 1,097,850 US Cellular Sr Nts 12-15-33 6.70 4,175,000 4,475,216 Total 5,573,066 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wirelines (4.3%) BellSouth Sr Unsecured 11-15-34 6.00% $2,025,000 $2,137,882 Qwest 03-15-12 8.88 655,000 715,588 Sprint Capital 01-30-11 7.63 18,765,000 21,446,950 11-15-28 6.88 855,000 979,783 Telecom Italia Capital 09-30-34 6.00 4,540,000(c,d) 4,660,791 TELUS 06-01-11 8.00 13,955,000(c) 16,232,498 Verizon Pennsylvania Series A 11-15-11 5.65 30,293,000 31,676,480 Total 77,849,972 Total Bonds (Cost: $1,797,018,246) $1,808,292,936 Preferred Stock (--%) Issuer Shares Value(a) Pegasus Satellite 12.75% Cm Pay-in-kind Series B --(b,e,o) $1 Total Preferred Stock (Cost: $123) $1 Short-Term Securities (8.4%)(s) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (3.9%) Federal Home Loan Bank Disc Nt 10-14-05 3.65% $15,000,000 $14,933,445 Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43 20,000,000 19,962,000 Federal Natl Mtge Assn Disc Nt 09-08-05 3.25 35,900,000 35,874,073 Total 70,769,518 Commercial Paper (4.5%) Amsterdam Funding 10-03-05 3.61 15,000,000(t) 14,950,500 Nieuw Amsterdam 09-21-05 3.54 20,000,000(t) 19,958,817 Ranger Funding LLC 09-01-05 3.51 5,000,000(t) 4,999,513 09-26-05 3.56 15,000,000(t) 14,961,542 Sheffield Receivables 09-01-05 3.56 23,100,000(t) 23,097,715 Windmill Funding 09-01-05 3.42 5,000,000(t) 4,999,525 Total 82,967,612 Total Short-Term Securities (Cost: $153,754,035) $153,737,130 Total Investments in Securities (Cost: $1,950,772,404)(u) $1,962,030,067 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 4.4% of net assets. (d) 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 Aug. 31, 2005, the value of these securities amounted to $106,205,278 or 5.8% of net assets. (e) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $83,374,383. (h) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (i) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (j) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (k) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. -------------------------------------------------------------------------------- 159 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Notes to Investments in Securities (continued) (l) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (m) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (n) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-20 4.50% $1,000,000 9-19-05 $980,156 $991,562 09-01-35 5.00 15,500,000 9-14-05 15,163,359 15,393,437 09-01-35 5.50 30,000,000 9-14-05 29,942,906 30,300,000 09-01-35 6.50 14,500,000 9-14-05 14,965,020 14,980,313 (o) 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 Aug. 31, 2005, is as follows: Security Acquisition Cost dates Crown Paper 11.00% Sr Sub Nts 2005 02-10-00 thru 02-14-00 $2,093,399 Flooring America 9.25% Series B 2007 10-09-97 thru 12-17-02 205,934 Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 thru 11-03-98 380,438 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 2007 06-15-01 123 (p) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Long Bond, Dec. 2005, 20-year $22,800,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 8,100,000 U.S. Treasury Note, Sept. 2005, 10-year 10,100,000 U.S. Treasury Note, Dec. 2005, 5-year 27,000,000 U.S. Treasury Note, Dec. 2005, 10-year 105,800,000 (q) Negligible market value. (r) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (s) Cash collateral received from security lending activity is invested in short-term securities and represents 1.7% of net assets. See Note 6 to the financial statements. 6.7% of net assets is the Fund's cash equivalent position. (t) 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 Aug. 31, 2005, the value of these securities amounted to $82,967,612 or 4.5% of net assets. (u) At Aug 31, 2005, the cost of securities for federal income tax purposes was $1,955,077,199 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 18,687,671 Unrealized depreciation (11,734,803) ----------- Net unrealized appreciation $ 6,952,868 ------------ 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/investments. -------------------------------------------------------------------------------- 160 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Diversified Equity Income Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.0%) Issuer Shares Value(a) Aerospace & Defense (2.9%) Goodrich 252,700 $11,578,714 Honeywell Intl 597,000 22,853,160 United Technologies 291,000 14,550,000 Total 48,981,874 Airlines (0.8%) AMR 796,500(b,d) 10,027,935 Continental Airlines Cl B 52,500(b) 701,925 Northwest Airlines 645,400(b,d) 3,246,362 Total 13,976,222 Auto Components (0.3%) Ballard Power Systems 280,500(b,c) 1,582,020 Dana 216,500 2,914,090 Total 4,496,110 Building Products (1.8%) Ameron Intl 1,900 80,674 YORK Intl 514,700 29,533,486 Total 29,614,160 Capital Markets (1.9%) Lehman Brothers Holdings 50,900 5,378,094 Mellon Financial 356,700 11,574,915 Merrill Lynch & Co 164,400 9,397,104 Morgan Stanley 92,800 4,720,736 Total 31,070,849 Chemicals (1.8%) Air Products & Chemicals 32,600 1,806,040 Cabot 42,400 1,399,200 Dow Chemical 309,600 13,374,720 EI du Pont de Nemours & Co 247,300 9,785,661 Olin 179,107 3,345,719 Total 29,711,340 Commercial Banks (3.7%) Bank of America 761,900 32,784,557 US Bancorp 275,300 8,044,266 Wachovia 262,300 13,015,326 Wells Fargo & Co 139,700 8,328,914 Total 62,173,063 Commercial Services & Supplies (2.0%) Avery Dennison 30,100 1,608,544 Cendant 496,400 10,096,776 PHH 24,665(b) 745,870 Pitney Bowes 93,200 4,030,900 RR Donnelley & Sons 250,900 9,373,624 Waste Management 267,900 7,348,497 Total 33,204,211 Computers & Peripherals (1.1%) Hewlett-Packard 663,900 18,429,864 Common Stocks (continued) Issuer Shares Value(a) Construction & Engineering (2.7%) Fluor 192,000 $11,886,720 Insituform Technologies Cl A 92,100(b) 1,906,470 McDermott Intl 896,200(b) 30,963,710 Total 44,756,900 Construction Materials (1.6%) CEMEX ADR 217,902(c) 10,387,388 Hanson ADR 310,900(c) 16,319,141 Total 26,706,529 Consumer Finance (0.5%) Capital One Financial 98,800 8,125,312 Diversified Financial Services (3.4%) Citigroup 1,290,000 56,463,300 Diversified Telecommunication Services (7.3%) AT&T 1,003,600 19,750,848 BellSouth 589,800 15,505,842 BT Group 3,455,540(c) 13,444,516 MCI 180,100 4,617,764 SBC Communications 826,900 19,911,752 Sprint Nextel 372,700 9,664,111 Telefonos de Mexico ADR Cl L 1,326,600(c) 25,470,720 Verizon Communications 451,300 14,762,023 Total 123,127,576 Electrical Equipment (1.4%) Cooper Inds Cl A 106,900 7,102,436 Energy Conversion Devices 80,600(b,d) 2,797,626 FuelCell Energy 143,800(b,d) 1,637,882 Hubbell Cl B 32,600 1,473,520 Plug Power 237,200(b) 1,748,164 Rockwell Automation 170,900 8,893,636 Total 23,653,264 Energy Equipment & Services (8.1%) Baker Hughes 529,100 31,084,625 GlobalSantaFe 179,100 8,396,208 Halliburton 688,800 42,684,936 Schlumberger 328,100 28,292,063 Tidewater 581,500 25,900,010 Total 136,357,842 Food & Staples Retailing (0.9%) Albertson's 441,000 8,877,330 Wal-Mart Stores 131,900 5,930,224 Total 14,807,554 Food Products (0.6%) Archer-Daniels-Midland 475,200 10,696,752 Gas Utilities (0.5%) NiSource 379,400 9,158,716 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (1.0%) CIGNA 62,400 $7,195,968 Tenet Healthcare 738,400(b) 8,993,712 Total 16,189,680 Hotels, Restaurants & Leisure (1.2%) Royal Caribbean Cruises 345,600 14,764,032 Starwood Hotels & Resorts Worldwide Unit 93,900 5,474,370 Total 20,238,402 Household Durables (0.9%) Whirlpool 194,100 14,761,305 Industrial Conglomerates (3.6%) General Electric 1,102,508 37,055,294 Textron 204,400 14,573,720 Tomkins ADR 406,400(c,d) 8,355,584 Total 59,984,598 Insurance (12.8%) ACE 647,300(c) 28,746,593 American Intl Group 134,000 7,932,800 Aon 497,900 14,897,168 Axis Capital Holdings 349,200(c) 9,864,900 Endurance Specialty Holdings 234,800(c) 8,617,160 Hartford Financial Services Group 57,000 4,163,850 Jefferson-Pilot 166,600 8,285,018 Lincoln Natl 166,700 8,266,653 Loews 236,400 20,729,916 Marsh & McLennan Companies 699,498 19,620,919 Montpelier Re Holdings 276,000(c) 9,025,200 Safeco 237,700 12,393,678 St. Paul Travelers Companies 403,400 17,350,234 Torchmark 164,800 8,691,552 UnumProvident 76,300 1,474,116 XL Capital Cl A 529,500(c) 36,800,249 Total 216,860,006 IT Services (0.8%) Electronic Data Systems 600,889 13,459,914 Leisure Equipment & Products (0.6%) Eastman Kodak 397,400 9,684,638 Machinery (8.4%) Caterpillar 1,118,700 62,076,663 Crane 273,600 8,101,296 Deere & Co 264,058 17,264,112 Eaton 151,700 9,696,664 Ingersoll-Rand Cl A 320,900(c) 25,550,058 Parker Hannifin 283,100 18,242,964 Total 140,931,757 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 161 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund Common Stocks (continued) Issuer Shares Value(a) Media (1.4%) Gannett 129,300 $9,402,696 Time Warner 367,900 6,592,768 Viacom Cl B 226,000 7,681,740 Total 23,677,204 Metals & Mining (0.8%) Alcoa 307,900 8,248,641 Compass Minerals Intl 164,100 4,038,501 Freeport-McMoRan Copper & Gold Cl B 41,100 1,733,187 Total 14,020,329 Multiline Retail (0.3%) JC Penney 97,900 4,760,877 Oil & Gas (10.8%) Anadarko Petroleum 50,400 4,579,848 BP ADR 109,800(c) 7,508,124 Burlington Resources 100,400 7,408,516 Chevron 548,618 33,685,145 ConocoPhillips 193,800 12,779,172 Devon Energy 80,400 4,885,908 EnCana 226,200(c) 11,126,778 EOG Resources 49,600 3,165,968 Exxon Mobil 57,900 3,468,210 Kerr-McGee 110,352 9,714,287 Marathon Oil 406,100 26,116,291 Petroleo Brasileiro ADR 462,500(c) 28,934,000 Pioneer Natural Resources 179,900 8,887,060 Repsol ADR 268,000(c) 7,922,080 Total ADR 92,000(c,d) 12,129,280 Total 182,310,667 Paper & Forest Products (1.7%) Abitibi-Consolidated 647,100(c) 2,808,414 Intl Paper 427,400 13,185,290 MeadWestvaco 128,600 3,725,542 Weyerhaeuser 137,800 8,959,756 Total 28,679,002 Common Stocks (continued) Issuer Shares Value(a) Pharmaceuticals (3.0%) Abbott Laboratories 223,500 $10,086,555 Bristol-Myers Squibb 366,000(d) 8,956,020 Merck & Co 395,800 11,173,434 Pfizer 580,900 14,795,523 Wyeth 118,100 5,407,799 Total 50,419,331 Real Estate Investment Trust (0.1%) Rayonier 43,100 2,338,175 Road & Rail (1.7%) Burlington Northern Santa Fe 335,300 17,777,606 Union Pacific 166,600 11,373,782 Total 29,151,388 Semiconductors & Semiconductor Equipment (1.1%) Intel 616,200 15,848,664 Linear Technology 82,800 3,140,604 Total 18,989,268 Software (0.6%) Microsoft 355,900 9,751,660 Thrifts & Mortgage Finance (1.9%) Fannie Mae 478,100 24,402,224 Washington Mutual 167,900 6,981,282 Total 31,383,506 Tobacco (1.9%) Altria Group 452,800 32,012,960 Total Common Stocks (Cost: $1,396,763,242) $1,645,116,105 Preferred Stocks (0.3%) Issuer Shares Value(a) Schering-Plough 6.00% Cv 66,600 $3,623,972 Xerox 6.25% Cv 6,410 749,970 Total Preferred Stocks (Cost: $3,971,000) $4,373,942 Short-Term Securities (4.6%)(e) Issuer Effective Amount Value(a) Yield payable at maturity U.S. Government Agency (0.9%) Federal Home Loan Bank 09-02-05 3.39% $15,000,000 $14,997,177 Commercial Paper (3.7%) Amsterdam Funding 10-03-05 3.61 15,000,000(f) 14,950,500 Jupiter Securitization 09-29-05 3.60 10,000,000(f) 9,971,080 Nieuw Amsterdam 10-03-05 3.61 10,000,000(f) 9,967,000 Old Line Funding 09-01-05 3.56 11,700,000(f) 11,698,843 Windmill Funding 09-01-05 3.42 15,000,000(f) 14,998,575 Total 61,585,998 Total Short-Term Securities (Cost: $76,590,711) $76,583,175 Total Investments in Securities (Cost: $1,477,324,953)(g) $1,726,073,222 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 162 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 15.8% of net assets. (d) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 1.9% of net assets. See Note 6 to the financial statements. 2.7% of net assets is the Fund's cash equivalent position. (f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $61,585,998 or 3.7% of net assets. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $1,482,222,616 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $279,737,503 Unrealized depreciation (35,886,897) ----------- Net unrealized appreciation $243,850,606 ------------ 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/investments. -------------------------------------------------------------------------------- 163 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Emerging Markets Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (94.8%)(c) Issuer Shares Value(a) Argentina (1.0%) Real Estate IRSA Inversiones y Representaciones GDR 154,129(b) $1,872,667 Brazil (9.6%) Diversified Financial Services (--%) Contax Participacoes ADR 122,064(b) 79,464 Diversified Telecommunication Services (1.0%) Tele Norte Leste Participacoes ADR 122,064 1,835,843 Metals & Mining (3.8%) Cia Vale do Rio Doce ADR 198,699 5,960,970 Companhia Siderurgica Nacional ADR 69,462 1,344,784 Total 7,305,754 Oil & Gas (3.8%) Petroleo Brasileiro ADR 132,690 7,296,623 Specialty Retail (1.0%) Lojas Renner 94,157(b) 1,998,239 China (6.2%) Diversified Telecommunication Services (1.0%) China Telecom Cl H 5,058,000 1,899,139 Insurance (1.3%) China Life Insurance Cl H 3,114,000(b) 2,426,223 Oil & Gas (3.9%) CNOOC 6,895,000 4,972,868 PetroChina Cl H 3,250,000 2,634,660 Total 7,607,528 Czechoslovakia Federated Republic (1.4%) Pharmaceuticals Zentiva 68,824 2,718,738 Egypt (1.4%) Commercial Banks (0.5%) Commercial Intl Bank 103,960 883,922 Wireless Telecommunication Services (0.9%) Orascom Telecom GDR 38,448(d) 1,777,836 Finland (0.9%) Auto Components Nokian Renkaat 77,500 1,649,414 Hong Kong (2.9%) Multiline Retail (0.6%) Lifestyle Intl Holdings 756,500 1,230,540 Specialty Retail (2.3%) Esprit Holdings 278,000 2,059,282 Giordano Intl 3,270,000 2,194,565 Sa Sa Intl Holdings 336,000 157,176 Total 4,411,023 Common Stocks (continued) Issuer Shares Value(a) Hungary (2.0%) Commercial Banks (0.6%) OTP Bank 31,300 $1,245,942 Oil & Gas (0.6%) MOL Magyar Olaj-es Gazipari 11,011 1,215,426 Pharmaceuticals (0.8%) Gedeon Richter 8,693 1,391,841 India (6.8%) Commercial Banks (1.9%) ICICI Bank ADR 83,454 1,951,155 State Bank of India GDR 38,938(d) 1,752,210 Total 3,703,365 Construction Materials (0.5%) Grasim Inds GDR 34,710 1,023,945 IT Services (1.6%) Infosys Technologies 56,994 3,076,627 Oil & Gas (1.1%) Oil & Natural Gas 91,528 2,034,785 Tobacco (1.1%) ITC 52,510 2,067,911 Wireless Telecommunication Services (0.6%) Bharti Tele-Ventures 167,947(b) 1,202,923 Indonesia (0.4%) Machinery PT United Tractors 1,788,109 679,127 Israel (3.0%) Chemicals (0.7%) Makhteshin-Agan Inds 233,572 1,321,017 Electronic Equipment & Instruments (1.6%) Lipman Electronic Engineering 60,078 1,918,291 Orbotech 46,199(b) 1,140,653 Total 3,058,944 Pharmaceuticals (0.7%) Teva Pharmaceutical Inds ADR 41,650 1,351,126 Mexico (9.4%) Beverages (1.6%) Grupo Modelo Series C 975,400 3,154,732 Commercial Banks (0.7%) Grupo Financiero Banorte Cl O 160,465 1,320,607 Construction Materials (0.5%) CEMEX ADR 19,955 951,255 Common Stocks (continued) Issuer Shares Value(a) Mexico (cont.) Food & Staples Retailing (1.1%) Wal-Mart de Mexico Series V 471,506 $2,054,659 Household Durables (0.7%) Urbi Desarrollos Urbanos 220,800(b) 1,348,392 Media (1.7%) Grupo Televisa ADR 51,672 3,245,002 Metals & Mining (0.5%) Grupo Mexico SA de CV Series B 507,330 894,969 Wireless Telecommunication Services (2.6%) America Movil ADR Series L 230,769 5,076,917 Netherlands (1.0%) Beverages Efes Breweries Intl GDR 47,458(b,d) 1,874,591 Poland (0.1%) Media TVN 8,324(b) 129,477 Russia (6.1%) Food & Staples Retailing (0.5%) Pyaterochka Holding GDR 55,496(b,d) 914,574 Metals & Mining (0.5%) Evraz Group GDR 60,105(b) 921,410 Oil & Gas (4.0%) LUKOIL ADR 122,579 5,969,598 Novatek GDR 83,548(d) 1,838,056 Total 7,807,654 Wireless Telecommunication Services (1.1%) Mobile Telesystems ADR 56,509 2,090,833 South Africa (9.9%) Commercial Banks (2.7%) ABSA Group 157,353 2,273,974 Standard Bank Group 272,785 2,987,004 Total 5,260,978 Food & Staples Retailing (1.0%) Massmart Holdings 253,699 1,908,198 Metals & Mining (2.8%) Gold Fields 181,742 2,104,781 Impala Platinum Holdings 30,878 3,244,657 Total 5,349,438 Oil & Gas (1.9%) Sasol 110,215 3,709,395 Wireless Telecommunication Services (1.5%) MTN Group 385,172 2,806,781 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 164 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Emerging Markets Fund Common Stocks (continued) Issuer Shares Value(a) South Korea (15.6%) Automobiles (1.5%) Hyundai Motor 41,799 $2,894,475 Commercial Banks (3.8%) Kookmin Bank 89,770 4,557,814 Shinhan Financial Group 91,780 2,725,892 Total 7,283,706 Construction & Engineering (1.2%) Hyundai Development 83,670 2,259,977 Electric Utilities (1.3%) Korea Electric Power 76,100 2,417,483 Food & Staples Retailing (1.6%) Shinsegae 8,753 3,138,241 Semiconductors & Semiconductor Equipment (6.2%) Samsung Electronics 22,697 12,068,746 Taiwan (10.9%) Commercial Banks (0.9%) Chinatrust Financial Holding 1,820,118 1,742,853 Computers & Peripherals (2.5%) Acer 1,158,019 2,254,077 Asustek Computer 628,980 1,572,324 Quanta Computer 605,000 989,196 Total 4,815,597 Common Stocks (continued) Issuer Shares Value(a) Taiwan (cont.) Electronic Equipment & Instruments (2.7%) AU Optronics 1,759,800 $2,681,523 Hon Hai Precision Industry 479,000 2,542,326 Total 5,223,849 Industrial Conglomerates (0.7%) Far Eastern Textile 1,949,400 1,298,125 Insurance (0.9%) Cathay Financial Holding 947,000 1,821,347 Semiconductors & Semiconductor Equipment (3.2%) Taiwan Semiconductor Mfg 2,372,898 3,995,922 United Microelectronics 3,193,000 1,980,757 Total 5,976,679 Thailand (3.2%) Commercial Banks (2.3%) Bangkok Bank 795,500 2,156,298 Kasikornbank 1,467,600 2,259,558 Total 4,415,856 Oil & Gas (0.9%) PTT Public 280,300 1,672,824 Turkey (1.6%) Commercial Banks (0.9%) Akbank 264,001 1,591,516 Common Stocks (continued) Issuer Shares Value(a) Turkey (cont.) Household Durables (0.7%) Arcelik 238,266 $1,427,777 United Kingdom (1.4%) Metals & Mining Anglo American 106,166 2,694,914 Total Common Stocks (Cost: $164,201,395) $181,929,759 Preferred Stock (0.8%)(c) Issuer Shares Value(a) Brazil Banco Bradesco 35,686 $1,514,686 Total Preferred Stock (Cost: $1,182,618) $1,514,686 Short-Term Security (3.4%) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper General Electric Capital 09-01-05 3.56% $6,600,000 $6,599,347 Total Short-Term Security (Cost: $6,600,000) $6,599,347 Total Investments in Securities (Cost: $171,984,013)(e) $190,043,792 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) 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 Aug. 31, 2005, the value of these securities amounted to $8,157,267 or 4.2% of net assets. (e) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $172,260,896 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $19,172,051 Unrealized depreciation (1,389,155) ---------- Net unrealized appreciation $17,782,896 ----------- 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/investments. -------------------------------------------------------------------------------- 165 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Global Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (94.4%)(c) Issuer Coupon Principal Value(a) rate amount Australia (1.7%) Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75% $70,000 $78,050 Commonwealth Bank of Australia (European Monetary Unit) 11-12-09 3.38 610,000 773,617 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 7,755,000 6,221,869 Telstra 04-01-12 6.38 450,000 493,839 Western Australian Treasury (Australian Dollar) 10-16-06 5.50 3,050,000 2,304,514 Total 9,871,889 Austria (1.0%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 4,325,000 5,981,429 Belgium (1.9%) Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 8,495,000 10,688,648 Brazil (0.2%) Federal Republic of Brazil 01-15-18 8.00 1,055,000 1,090,343 Canada (2.3%) Canada Housing Trust #1 (Canadian Dollar) 06-15-06 5.53 3,150,000 2,707,439 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 395,000(d) 349,110 Corus Entertainment Sr Sub Nts 03-01-12 8.75 30,000 32,250 Govt of Canada 11-05-08 5.25 1,000,000 1,039,944 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,150,000 5,875,250 Province of Ontario (Canadian Dollar) 03-08-06 5.90 3,270,000 2,796,170 Sun Media 02-15-13 7.63 50,000 52,813 Utilicorp Canada Finance 06-15-11 7.75 150,000 156,750 Videotron Ltee 01-15-14 6.88 35,000 35,963 Total 13,045,689 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Czechoslovakia Federated Republic (0.2%) Republic of Czechoslovakia (Czech Crown) 06-16-13 3.70% 32,900,000 $1,435,148 Denmark (0.7%) Realkredit Danmark (Danish Krone) 01-01-08 4.00 23,000,000 3,944,158 Finland (2.0%) Republic of Finland (European Monetary Unit) 07-04-07 5.00 9,070,000 11,743,640 France (6.4%) Dexia Municipal Agency (European Monetary Unit) 09-03-07 4.25 600,000 767,971 France Telecom 03-01-06 7.95 550,000 558,206 Govt of France (European Monetary Unit) 04-25-12 5.00 9,135,000 12,777,670 04-25-13 4.00 9,170,000 12,156,079 10-25-16 5.00 7,370,000 10,623,275 Total 36,883,201 Germany (10.8%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) 09-02-09 5.00 1,955,000(d) 2,629,365 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 282,000,000 2,611,093 Bundesrepublik Deutschland (European Monetary Unit) 01-04-10 5.38 520,000 715,973 07-04-13 3.75 11,830,000 15,424,798 07-04-27 6.50 7,130,000 12,726,644 07-04-28 4.75 1,965,000 2,862,344 07-04-34 4.75 4,610,000 6,859,001 Bundesschatzanweisungen (European Monetary Unit) 12-16-05 2.75 7,060,000 8,723,398 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) 01-15-10 5.50 2,090,000 2,888,321 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 375,000 492,824 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Germany (cont.) Landesbank Berlin Girozentrale (European Monetary Unit) 04-30-07 5.00% 1,990,000 $2,560,648 Rheinische Hypothekenbank (European Monetary Unit) 07-05-10 5.75 2,125,000 2,990,012 Total 61,484,421 Greece (4.0%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 7,435,000 9,213,057 04-19-07 4.65 5,735,000 7,344,379 10-22-22 5.90 4,060,000 6,407,553 Total 22,964,989 Italy (4.6%) Buoni Poliennali Del Tesoro (European Monetary Unit) 03-01-07 4.50 7,330,000 9,350,679 10-15-07 5.00 8,425,000 10,980,708 11-01-26 7.25 3,445,191 6,414,218 Total 26,745,605 Japan (7.9%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 629,000,000 5,870,434 Govt of Japan (Japanese Yen) 12-21-09 1.70 2,531,000,000 24,071,211 03-22-10 1.70 328,000,000 3,122,384 06-20-12 1.40 672,000,000 6,277,671 12-20-12 1.00 418,000,000 3,784,364 12-20-14 1.30 233,000,000 2,107,632 12-20-34 2.40 54,000,000 490,408 Total 45,724,104 Luxembourg (0.5%) Telecom Italia Capital 09-30-34 6.00 2,620,000(d) 2,689,708 Malaysia (0.3%) Petronas Capital 05-22-12 7.00 1,475,000(d) 1,671,184 Mexico (0.4%) Govt of Mexico (Mexican Peso) 12-24-09 9.00 15,350,000 1,438,291 United Mexican States 09-27-34 6.75 381,000 413,004 (Japanese Yen) 06-06-06 6.75 48,000,000 454,728 Total 2,306,023 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 166 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Netherlands (2.9%) Bank Nederlandse Gemeenten (British Pound) 08-06-07 7.38% 1,050,000 $1,990,442 Govt of Netherlands (European Monetary Unit) 01-15-08 2.50 9,150,000 11,339,988 07-15-12 5.00 2,565,000 3,587,635 Total 16,918,065 New Zealand (1.1%) Govt of New Zealand (New Zealand Dollar) 11-15-06 8.00 8,550,000 6,087,681 Norway (1.1%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 36,180,000 6,480,741 Poland (1.1%) Republic of Poland (Polish Zloty) 03-24-10 5.75 20,595,000 6,596,351 South Africa (0.3%) Republic of South Africa (South African Rand) 08-31-10 13.00 9,890,000 1,891,127 South Korea (0.1%) Korea Development Bank (Japanese Yen) 06-25-08 .98 65,000,000 592,970 Spain (4.4%) Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 2,900,000 3,707,227 Govt of Spain (European Monetary Unit) 07-30-09 5.15 11,475,000 15,550,681 07-30-10 3.25 4,850,000 6,151,975 Total 25,409,883 Supra-National (1.0%) European Investment Bank (British Pound) 12-07-11 5.50 2,875,000 5,499,507 Sweden (0.5%) Govt of Sweden (Swedish Krona) 04-20-06 3.50 16,550,000 2,215,927 08-15-07 8.00 4,600,000 677,169 Total 2,893,096 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United Kingdom (4.3%) BT Group 12-15-10 8.38% $550,000 $645,814 HBOS Treasury Services (European Monetary Unit) 02-12-09 3.50 1,900,000 2,420,421 United Kingdom Treasury (British Pound) 03-07-12 5.00 6,150,000 11,644,536 09-07-14 5.00 5,355,000 10,265,706 Total 24,976,477 United States (32.7%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 3,141,358(d,g) 3,138,109 Aesop Funding II LLC Series 2002-1A Cl A1 (AMBAC) 10-20-06 3.85 133,333(d,h) 133,325 Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 500,000(d,h) 489,831 Airgas 10-01-11 9.13 75,000 80,625 Allied Waste North America Series B 04-01-08 8.88 35,000 36,925 AmeriCredit Automobile Receivables Trust Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 1,700,000(h) 1,692,297 ANR Pipeline 03-15-10 8.88 75,000 81,822 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 1,000,000(d,h) 993,320 ASIF Global Financing XIX Secured 01-17-13 4.90 3,500,000(d) 3,547,844 Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 650,000(f) 668,024 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 3.74 1,400,000(d,f,g) 1,400,249 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 752,039(f) 760,022 Bayerische Landesbank Sub Nts 12-01-08 5.88 800,000 842,221 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 350,016(f) 342,732 Series 2004-T16 Cl A3 02-13-46 4.03 480,000(f) 473,293 Series 2005-PWR8 Cl A1 06-11-41 4.21 1,468,878(f) 1,465,117 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Boyd Gaming Sr Sub Nts 12-15-12 7.75% $25,000 $26,625 04-15-14 6.75 155,000 158,294 Caesars Entertainment Sr Nts 04-15-13 7.00 510,000(i) 570,067 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 1,898,808(d,f) 1,902,896 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 700,000 682,417 Series 2005-1 Cl A4 07-15-09 4.05 1,400,000 1,402,128 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 1,000,000 993,300 Cardinal Health 06-15-15 4.00 1,300,000(i) 1,203,216 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 500,000 501,382 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 1,000,000(f) 1,055,021 Chesapeake Energy 01-15-15 7.75 105,000 112,875 Sr Nts 06-15-14 7.50 15,000 16,200 Sr Unsecured 08-15-17 6.50 165,000(d) 168,300 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 2,580,000 3,341,795 Citigroup Commercial Mtge Trust Series 2005-C3 Cl A1 05-15-43 4.39 980,726(f) 981,506 Series 2005-EMG Cl A1 09-20-51 4.15 2,241,435(d,f) 2,233,491 CMS Energy Sr Nts 01-15-09 7.50 150,000 158,250 Colorado Interstate Gas Sr Nts 03-15-15 5.95 35,000(d) 34,738 Comcast Cable Communications Holdings 03-15-13 8.38 48,000 57,997 Compass Minerals Group 08-15-11 10.00 75,000 82,125 Cott Beverages 12-15-11 8.00 195,000 205,725 Countrywide Alternative Loan Trust Series 2005-6CB Cl 1A1 04-25-35 7.50 1,223,877(f) 1,282,826 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 167 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49% $1,150,577(f) $1,152,219 Series 2004-C1 Cl A2 01-15-37 3.52 150,000(f) 146,685 Series 2005-C4 Cl A1 08-15-38 4.77 2,250,000(f) 2,273,262 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 655,000 841,305 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 135,000 145,969 DIRECTV Holdings LLC/Finance Sr Nts 03-15-13 8.38 45,000 49,388 DR Horton Sr Nts 02-15-15 5.25 665,000 638,809 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 145,000 155,223 Emmis Operating Sr Sub Nts 05-15-12 6.88 25,000 25,000 Encore Acquisition Sr Sub Nts 04-15-14 6.25 45,000 44,775 ERAC USA Finance 05-01-15 5.60 1,515,000(d) 1,564,701 Federal Home Loan Mtge Corp 07-12-10 4.13 6,650,000 6,638,023 (European Monetary Unit) 02-15-07 4.63 3,570,000 4,551,984 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 142,635(f) 147,561 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 919,493(f) 915,916 Federal Home Loan Mtge Corp #E01377 05-01-18 4.50 717,707(f) 712,982 Federal Home Loan Mtge Corp #E91326 09-01-17 6.50 241,450(f) 249,904 Federal Home Loan Mtge Corp #E99967 10-01-18 5.00 763,461(f) 770,413 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 1,114,531(f) 1,152,311 Federal Natl Mtge Assn 10-15-06 4.38 2,910,000 2,922,464 Federal Natl Mtge Assn #255377 08-01-34 7.00 1,214,344(f) 1,273,104 Federal Natl Mtge Assn #360800 01-01-09 5.74 636,665(f) 661,161 Federal Natl Mtge Assn #386599 11-01-10 4.47 362,918(f) 361,430 Federal Natl Mtge Assn #440730 12-01-28 6.00 964,665(f) 997,096 Federal Natl Mtge Assn #555316 02-01-13 4.87 797,673(f) 815,301 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Federal Natl Mtge Assn #555734 07-01-23 5.00% $680,012(f) $681,166 Federal Natl Mtge Assn #555740 08-01-18 4.50 383,387(f) 380,617 Federal Natl Mtge Assn #575487 04-01-17 6.50 515,043(f) 536,367 Federal Natl Mtge Assn #621581 12-01-31 6.50 423,897(f) 441,769 Federal Natl Mtge Assn #631315 02-01-17 5.50 283,123(f) 289,920 Federal Natl Mtge Assn #639965 08-01-17 6.00 917,357(f) 950,669 Federal Natl Mtge Assn #640996 05-01-32 7.50 327,235(f) 346,951 Federal Natl Mtge Assn #646147 06-01-32 7.00 268,127(f) 282,271 Federal Natl Mtge Assn #652284 08-01-32 6.50 286,231(f) 296,433 Federal Natl Mtge Assn #653145 07-01-17 6.00 186,003(f) 192,758 Federal Natl Mtge Assn #654121 09-01-17 6.00 663,486(f) 687,601 Federal Natl Mtge Assn #655589 08-01-32 6.50 1,194,913(f) 1,244,751 Federal Natl Mtge Assn #666424 08-01-32 6.50 253,099(f) 262,120 Federal Natl Mtge Assn #670461 11-01-32 7.50 455,985(f) 483,458 Federal Natl Mtge Assn #684595 03-01-33 6.00 1,145,044(f) 1,173,155 Federal Natl Mtge Assn #687583 04-01-33 6.00 2,546,363(f) 2,610,445 Federal Natl Mtge Assn #688034 03-01-33 5.50 353,366(f) 358,401 Federal Natl Mtge Assn #688691 03-01-33 5.50 715,931(f) 723,956 Federal Natl Mtge Assn #720786 09-01-33 5.50 1,406,046(f) 1,421,808 Federal Natl Mtge Assn #735029 09-01-13 5.28 692,243(f) 720,918 Federal Natl Mtge Assn #739474 10-01-33 5.50 771,708(f) 782,996 Federal Natl Mtge Assn #741850 09-01-33 5.50 2,028,819(f) 2,051,562 Federal Natl Mtge Assn #748110 10-01-33 6.50 2,543,515(f) 2,632,003 Federal Natl Mtge Assn #753507 12-01-18 5.00 2,682,312(f) 2,703,340 Federal Natl Mtge Assn #755498 11-01-18 5.50 1,797,119(f) 1,837,532 Federal Natl Mtge Assn #756799 11-01-33 6.50 701,961(f) 731,499 Federal Natl Mtge Assn #756844 02-01-19 5.00 631,422(f) 636,184 Federal Natl Mtge Assn #791393 10-01-19 5.50 3,062,628(f) 3,130,352 Ford Motor 10-01-28 6.63 391,000 290,852 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Franklin Auto Trust Series 2004-1 Cl A3 (MBIA) 03-15-12 4.15% $800,000(h) $799,114 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 727,606(f) 747,395 Series 2005-C1 Cl A5 06-10-48 4.77 500,000(f) 504,941 Series 2005-C3 Cl A1 07-10-45 4.59 1,060,000(f) 1,067,928 Series 2005-C3 Cl A2 07-10-45 4.85 790,000(f) 803,163 General Electric Capital (European Monetary Unit) 06-20-07 5.13 540,000 697,759 (New Zealand Dollar) 02-04-10 6.63 3,435,000 2,401,031 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 1,775,000(d,f) 1,792,519 Genworth Financial (Japanese Yen) 06-20-11 1.60 120,000,000 1,095,938 Georgia Gulf Sr Nts 12-15-13 7.13 100,000 103,750 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 900,000(f) 898,117 Series 2005-C1 Cl A1 05-10-43 4.21 785,328(f) 782,889 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 863,822(e,f) 92,621 Govt Natl Mtge Assn #604708 10-15-33 5.50 868,787(f) 886,435 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 800,000(f) 808,311 Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 509,091 Series 2005-GG3 Cl A1 08-10-42 3.92 549,254(f) 545,354 Series 2005-GG3 Cl A3 08-10-42 4.57 1,550,000(f) 1,550,904 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 900,000(f) 917,481 Series 2005-GG4 Cl A1 07-10-39 4.37 1,214,088(f) 1,214,817 HCA Sr Nts 03-15-14 5.75 100,000 98,827 Hilton Hotels 12-01-12 7.63 100,000 114,734 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 168 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53% $600,000 $593,832 HSBC Bank USA Sub Nts 08-15-35 5.63 2,750,000 2,837,101 ING Security Life Institutional Funding 01-15-10 4.25 1,180,000(d) 1,172,013 Intl Paper (European Monetary Unit) 08-11-06 5.38 500,000 633,327 IPALCO Enterprises Secured 11-14-08 8.38 140,000 150,150 ITT 11-15-15 7.38 125,000 136,875 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 792,178(f) 792,482 Series 2003-LN1 Cl A1 10-15-37 4.13 363,898(f) 358,565 Series 2003-ML1A Cl A1 03-12-39 3.97 413,073(f) 406,324 Series 2004-CBX Cl A5 01-12-37 4.65 700,000(f) 702,990 Series 2005-CB11 Cl A3 08-12-37 5.20 950,000(f,i) 983,013 Key Energy Services Series C 03-01-08 8.38 65,000 67,275 L-3 Communications 06-15-12 7.63 230,000 243,800 Lamar Media 01-01-13 7.25 50,000 52,625 Sr Sub Nts 08-15-15 6.63 180,000(d) 183,600 LB-UBS Commercial Mtge Trust Series 2003-C8 Cl A3 11-15-27 4.83 900,000(f) 912,474 Series 2004-C2 Cl A3 03-15-29 3.97 650,000(f) 628,173 Series 2004-C4 Cl A3 06-15-29 5.16 850,000(f,g) 878,166 Series 2004-C6 Cl A1 08-15-29 3.88 1,234,264(f) 1,220,869 Series 2004-C6 Cl A2 08-15-29 4.19 1,100,000(f) 1,091,398 Series 2004-C6 Cl A4 08-15-29 4.58 950,000(f) 953,375 Series 2004-C7 Cl A2 10-15-29 3.99 800,000(f) 785,840 Series 2004-C8 Cl A2 12-15-29 4.20 1,000,000(f) 991,120 Series 2005-C3 Cl A1 07-15-30 4.39 878,004(f) 879,857 Series 2005-C5 Cl A2 09-15-40 4.89 1,050,000(f) 1,065,519 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40% $600,000(h) $593,742 MacDermid 07-15-11 9.13 20,000 21,500 Meritage Homes 03-15-15 6.25 25,000 23,406 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 1,124,134(f) 1,121,147 Metris Master Trust Series 2004-2 Cl M 10-20-10 4.00 275,000(g) 275,261 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 700,000(d) 705,449 MGM MIRAGE 10-01-09 6.00 25,000 25,000 Sr Nts 02-27-14 5.88 125,000 120,625 07-15-15 6.63 190,000(b,d) 191,900 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 30,000 30,375 Sr Sub Nts 04-01-12 8.00 50,000 53,250 Moog Sr Sub Nts 01-15-15 6.25 10,000 10,000 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 690,000(f) 689,607 Morgan Stanley Group (European Monetary Unit) 03-16-06 5.25 2,045,000 2,561,131 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 1,350,000(f) 1,457,584 Newfield Exploration Sr Sub Nts 08-15-12 8.38 320,000 348,000 Nextel Communications Sr Nts Series E 10-31-13 6.88 185,000 198,149 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 900,000 890,703 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 20,000 21,000 NorthWestern Energy Secured 11-01-14 5.88 10,000(d) 10,326 Offshore Logistics 06-15-13 6.13 15,000 14,625 Owens-Illinois Glass Container 05-15-11 7.75 150,000 159,000 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Peabody Energy Series B 03-15-13 6.88% $145,000 $150,981 Plains Exploration & Production Sr Nts 06-15-14 7.13 50,000 53,250 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 560,000 557,462 Potomac Edison 1st Mtge 11-15-14 5.35 75,000(d) 77,707 Pricoa Global Funding I 06-25-12 4.63 2,935,000(d) 2,940,439 Pride Intl Sr Nts 07-15-14 7.38 25,000 27,125 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 824,691(f) 805,907 Qwest 03-15-12 8.88 130,000 142,025 Residential Capital 06-30-10 6.38 1,085,000(d) 1,107,590 Silgan Holdings Sr Sub Nts 11-15-13 6.75 30,000 30,638 Simon Property Group LP 06-15-15 5.10 1,680,000(d) 1,673,767 Southern Natural Gas 03-15-10 8.88 100,000 109,095 Southern Star Central Secured 08-01-10 8.50 50,000 54,000 Sprint Capital 11-15-28 6.88 1,470,000 1,684,539 Standard-Pacific Sr Nts 08-15-15 7.00 85,000 83,725 Station Casinos Sr Nts 04-01-12 6.00 90,000 90,675 Sr Sub Nts 03-01-16 6.88 335,000(b,d) 344,213 Susquehanna Media Sr Sub Nts 04-15-13 7.38 115,000 120,606 Toyota Motor Credit (Japanese Yen) 06-09-08 0.75 292,000,000 2,666,411 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 85,000 91,375 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 1,500,000(h) 1,492,440 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 169 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Triad Hospitals Sr Nts 05-15-12 7.00% $100,000 $103,500 U.S. Treasury 02-15-08 3.38 1,795,000 1,775,366 05-15-15 4.13 540,000 543,480 08-15-15 4.25 3,935,000 4,009,395 08-15-23 6.25 6,600,000 8,178,331 02-15-26 6.00 1,590,000(i) 1,949,862 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 5,678,695(j) 5,671,929 United Auto Group 03-15-12 9.63 35,000 37,581 Verizon Pennsylvania Series A 11-15-11 5.65 7,005,000 7,324,918 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Wachovia Bank Commercial Mtge Trust Series 2003-C8 Cl A2 11-15-35 3.89% $750,000(f) $737,943 Series 2005-C16 Cl A3 10-15-41 4.62 1,050,000(f) 1,052,976 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 2,365,000 2,597,773 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 1,100,000 1,088,846 Total 187,457,302 Total Bonds (Cost: $525,421,390) $543,073,379 Short-Term Securities (4.0%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (0.9%) Federal Home Loan Bank 09-09-05 3.41% $5,000,000 $4,995,737 Commercial Paper (3.1%) HSBC Finance 09-01-05 3.56% $12,800,000 $12,798,735 Natl Australia Funding 09-01-05 3.49 5,000,000(k) 4,999,515 Total 17,798,250 Total Short-Term Securities (Cost: $22,796,211) $22,793,987 Total Investments in Securities (Cost: $548,217,601)(l) $565,867,366 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 170 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $537,876. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. (d) 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 Aug. 31, 2005, the value of these securities amounted to $33,145,694 or 5.8% of net assets. (e) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (h) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (i) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts Eurodollar, Sept. 2005, 10-year $4,400,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 1,200,000 U.S. Treasury Note, Sept. 2005, 10-year 1,400,000 U.S. Treasury Note, Dec. 2005, 5-year 3,900,000 U.S. Treasury Note, Dec. 2005, 10-year 17,300,000 (j) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (k) 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 Aug. 31, 2005, the value of these securities amounted to $4,999,515 or 0.9% of net assets. (l) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $548,386,831 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $20,882,490 Unrealized depreciation (3,401,955) ---------- Net unrealized appreciation $17,480,535 ----------- 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/investments. -------------------------------------------------------------------------------- 171 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Global Inflation Protected Securities Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (98.5%) Issuer Coupon Principal Value(a) rate amount Sovereign (1.0%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 578,000(c) $748,215 United Kingdom Treasury (British Pound) 12-07-06 7.50 235,000(c) 440,930 Total 1,189,145 Bonds (continued) Issuer Coupon Principal Value(a) rate amount U.S. Government Obligations & Agencies (97.5%)(b) U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38% $11,772,780 $12,202,474 01-15-08 3.63 9,896,140 10,495,066 01-15-09 3.88 6,890,428 7,492,391 04-15-10 0.88 5,328,417 5,203,373 07-15-12 3.00 14,895,560 16,301,026 01-15-14 2.00 14,747,206 15,202,559 07-15-14 2.00 8,424,892 8,695,247 01-15-15 1.63 8,026,568 8,017,005 01-15-25 2.38 5,334,561 5,784,153 04-15-28 3.63 13,780,994 18,318,682 04-15-29 3.88 4,129,089 5,742,916 Total 113,454,892 Total Bonds (Cost: $113,791,069) $114,644,037 Short-Term Securities (1.2%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43% $700,000 $698,670 Federal Natl Mtge Assn Disc Nt 09-14-05 3.42 700,000 699,069 Total Short-Term Securities (Cost: $1,397,872) $1,397,739 Total Investments in Securities (Cost: $115,188,941)(d) $116,041,776 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 1.0% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $115,277,487 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $783,988 Unrealized depreciation (19,699) ------- Net unrealized appreciation $764,289 -------- 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/investments. -------------------------------------------------------------------------------- 172 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Growth Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (95.7%) Issuer Shares Value(a) Aerospace & Defense (1.1%) Boeing 21,502 $1,441,064 Goodrich 8,567 392,540 Honeywell Intl 14,806 566,774 Lockheed Martin 33,670 2,095,620 Total 4,495,998 Beverages (1.2%) PepsiCo 88,183 4,836,838 Biotechnology (3.1%) Amgen 75,961(b) 6,069,283 Biogen Idec 28,185(b) 1,187,998 Genentech 39,138(b) 3,676,624 Gilead Sciences 32,556(b) 1,399,908 Total 12,333,813 Capital Markets (0.8%) Franklin Resources 16,062 1,292,027 Investors Financial Services 42,241 1,483,504 State Street 11,237 543,084 Total 3,318,615 Chemicals (0.6%) Monsanto 39,885 2,546,258 Commercial Banks (0.1%) ICICI Bank ADR 21,845(c) 510,736 Commercial Services & Supplies (0.1%) Cendant 18,317 372,568 Communications Equipment (4.0%) CIENA 177,980(b) 400,455 Cisco Systems 329,132(b) 5,799,306 Motorola 91,345 1,998,629 Nokia ADR 370,967(c) 5,850,149 QUALCOMM 40,713 1,616,713 Total 15,665,252 Computers & Peripherals (3.3%) Dell 201,860(b) 7,186,216 EMC 281,874(b) 3,624,900 Hewlett-Packard 71,762 1,992,113 Total 12,803,229 Consumer Finance (0.4%) Capital One Financial 6,110 502,486 First Marblehead 32,798(b) 948,847 Total 1,451,333 Diversified Financial Services (0.5%) Contax Participacoes 45,600(b,c) 29,686 streetTRACKS Gold Trust 45,505(b) 1,974,007 Total 2,003,693 Common Stocks (continued) Issuer Shares Value(a) Diversified Telecommunication Services (19.2%) ALLTEL 27,166 $1,684,020 Brasil Telecom Participacoes ADR 14,800(c) 539,460 Chunghwa Telecom 72,430(c) 1,394,278 France Telecom 31,211(c) 943,561 MCI 265,100 6,797,164 Sprint Nextel 1,900,537 49,280,924 Tele Norte Leste Participacoes 63,200(c) 950,528 Telewest Global 578,623(b,c) 12,845,431 Verizon Communications 16,236 531,080 Total 74,966,446 Electronic Equipment & Instruments (0.2%) Flextronics Intl 50,403(b,c) 658,263 Energy Equipment & Services (1.0%) Halliburton 32,389 2,007,146 Nabors Inds 6,055(b,c) 405,685 Schlumberger 9,277 799,956 Transocean 12,960(b) 765,158 Total 3,977,945 Food & Staples Retailing (1.1%) Rite Aid 192,600(b) 785,808 Safeway 16,300 386,799 Wal-Mart Stores 72,776 3,272,009 Total 4,444,616 Food Products (0.7%) Kellogg 61,640 2,794,141 Health Care Equipment & Supplies (2.8%) Alcon 6,754(c) 797,310 Baxter Intl 123,528 4,981,885 Boston Scientific 49,765(b) 1,337,683 Guidant 47,924 3,385,351 Hospira 13,900(b) 553,776 Total 11,056,005 Health Care Providers & Services (5.5%) Aetna 15,959 1,271,454 AmerisourceBergen 11,932 890,962 Cardinal Health 92,692 5,525,370 HCA 101,913 5,024,311 HealthSouth 55,731(b) 295,374 Magellan Health Services 50,738(b) 1,798,662 McKesson 15,126 705,930 Medco Health Solutions 43,829(b) 2,159,455 UnitedHealth Group 70,881 3,650,372 WellPoint 4,530(b) 336,353 Total 21,658,243 Hotels, Restaurants & Leisure (0.2%) McDonald's 22,150 718,768 Common Stocks (continued) Issuer Shares Value(a) Household Durables (0.1%) Harman Intl Inds 1,306 $135,040 Tempur-Pedic Intl 17,639(b) 283,459 Total 418,499 Household Products (2.4%) Procter & Gamble 59,529 3,302,669 Spectrum Brands 217,277(b) 6,116,347 Total 9,419,016 Industrial Conglomerates (1.3%) General Electric 28,070 943,433 Tyco Intl 148,504(c) 4,132,866 Total 5,076,299 Insurance (2.3%) ACE 47,797(c) 2,122,665 American Intl Group 93,242 5,519,926 Chubb 4,157 361,493 Hartford Financial Services Group 14,668 1,071,497 Total 9,075,581 Internet & Catalog Retail (0.2%) eBay 15,167(b) 614,112 Internet Software & Services (2.0%) Google Cl A 26,796(b) 7,663,656 Media (11.9%) Comcast Cl A 169,404(b) 5,209,173 Grupo Televisa ADR 5,535(c) 347,598 Liberty Global Cl A 68,635(b) 3,483,226 News Corp Cl A 56,455 915,136 NTL 440,298(b) 28,126,237 Time Warner 62,811(b) 1,125,573 Viacom Cl B 22,121 751,893 Vivendi Universal ADR 197,160(c) 6,220,398 Total 46,179,234 Metals & Mining (3.0%) Agnico-Eagle Mines 28,201(c) 368,869 Barrick Gold 25,187(c) 660,403 Coeur d'Alene Mines 579,462(b) 2,115,036 Glamis Gold 35,199(b,c) 669,485 Harmony Gold Mining ADR 123,159(c) 932,314 Kinross Gold 80,667(b,c) 509,815 Newmont Mining 137,210 5,430,773 PAN American Silver 56,000(b,c) 873,040 Stillwater Mining 33,478(b) 268,828 Total 11,828,563 Multiline Retail (0.4%) JC Penney 11,011 535,465 Kohl's 19,885(b) 1,042,968 Total 1,578,433 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 173 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Growth Fund Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (4.3%) Anadarko Petroleum 25,618 $2,327,908 Burlington Resources 24,859 1,834,346 Chevron 35,445 2,176,323 ConocoPhillips 40,906 2,697,341 Devon Energy 26,185 1,591,262 EnCana 8,330(c) 409,753 Exxon Mobil 32,290 1,934,171 Kinder Morgan Management LLC --(b) 1 Marathon Oil 23,638 1,520,160 Valero Energy 22,548 2,401,361 Total 16,892,626 Personal Products (2.5%) Avon Products 11,139 365,582 Gillette 176,159 9,489,685 Total 9,855,267 Pharmaceuticals (7.8%) Abbott Laboratories 63,096 2,847,522 AstraZeneca 12,349(c) 566,970 Bristol-Myers Squibb 58,258 1,425,573 GlaxoSmithKline ADR 32,394(c) 1,578,236 Johnson & Johnson 88,884 5,634,357 Novartis ADR 79,865(c) 3,893,419 Pfizer 314,755 8,016,809 Roche Holding 20,680(c) 2,869,652 Schering-Plough 52,426 1,122,441 Wyeth 53,496 2,449,582 Total 30,404,561 Semiconductors & Semiconductor Equipment (3.4%) Applied Materials 20,202 369,899 Freescale Semiconductor Cl A 68,897(b) 1,645,260 Freescale Semiconductor Cl B 37,150(b) 894,572 Intel 255,751 6,577,916 MEMC Electronic Materials 143,201(b) 2,414,369 Texas Instruments 45,608 1,490,469 Total 13,392,485 Software (4.0%) Adobe Systems 13,899 375,829 BMC Software 18,140(b) 362,800 Compuware 52,600(b) 476,556 Electronic Arts 20,192(b) 1,156,598 Macromedia 20,555(b) 759,507 Mercury Interactive 43,663(b) 1,601,122 Microsoft 194,495 5,329,164 Novell 62,656(b) 412,276 Oracle 226,561(b) 2,938,496 Siebel Systems 148,080 1,221,660 Symantec 42,897(b) 899,979 Total 15,533,987 Common Stocks (continued) Issuer Shares Value(a) Specialty Retail (--%) Gap 7,353 $139,781 Thrifts & Mortgage Finance (0.8%) Countrywide Financial 40,669 1,374,205 Fannie Mae 23,467 1,197,756 Freddie Mac 7,816 471,930 Total 3,043,891 Tobacco (0.8%) Altria Group 43,275 3,059,543 Wireless Telecommunication Services (2.6%) Hutchison Telecommunications Intl ADR 41,132(b,c) 746,546 KT Freetel 7,750(c) 187,754 LG Telecom 38,503(b,c) 207,782 Millicom Intl Cellular 46,138(b,c) 886,311 NeuStar Cl A 81,137(b) 2,232,079 O2 277,378(c) 767,990 Orascom Telecom GDR 74,302(c) 3,435,724 Telesp Celular Participacoes 91,685(c) 380,493 Turkcell Iletisim Hizmetleri ADR 59,080(c) 793,444 Vodafone Group ADR 24,663(c) 672,067 Total 10,310,190 Total Common Stocks (Cost: $353,587,807) $375,098,484 Options Purchased (0.2%) Issuer Contracts Exercise Expiration Value(a) price date Calls Sprint Nextel 920 $27.50 Jan. 2006 $625,600 Puts S&P 500 Index 135 1,135 Dec. 2005 135,000 Total Options Purchased (Cost: $823,415) $760,600 Short-Term Securities (4.4%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (2.6%) Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43% $2,300,000 $2,295,624 Federal Natl Mtge Assn Disc Nt 09-14-05 3.31 8,000,000 7,989,702 Total 10,285,326 Commercial Paper (1.8%) Bear Stearns Companies 09-09-05 3.43 900,000 899,228 Citibank 09-01-05 3.51 5,000,000(d) 4,999,513 Old Line Funding 09-01-05 3.56 1,200,000(d) 1,199,881 Total 7,098,622 Total Short-Term Securities (Cost: $17,385,594) $17,383,948 Total Investments in Securities (Cost: $371,796,816)(e) $393,243,032 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 174 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Growth Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 15.1% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $6,199,394 or 1.6% of net assets. (e) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $376,792,457 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $22,666,204 Unrealized depreciation (6,215,629) ---------- Net unrealized appreciation $16,450,575 ----------- 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/investments. -------------------------------------------------------------------------------- 175 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - High Yield Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (93.2%) Issuer Coupon Principal Value(a) rate amount Aerospace & Defense (3.2%) Communications & Power Inds Sr Sub Nts 02-01-12 8.00% $4,300,000 $4,439,750 CPI Holdco Sr Nts 02-01-15 9.67 4,200,000(h) 4,164,896 DRS Technologies Sr Sub Nts 11-01-13 6.88 3,190,000 3,229,875 L-3 Communications 06-15-12 7.63 7,425,000 7,870,500 07-15-13 6.13 7,425,000 7,499,250 Sr Sub Nts 10-15-15 6.38 8,100,000(d) 8,221,500 Moog Sr Sub Nts 01-15-15 6.25 1,660,000 1,660,000 Standard Aero Holdings 09-01-14 8.25 2,895,000 2,895,000 Total 39,980,771 Automotive (3.6%) Affinia Group 11-30-14 9.00 5,455,000(d) 4,500,375 ArvinMeritor 02-15-09 6.80 3,920,000 3,861,200 GMAC 09-15-11 6.88 13,440,000 12,727,452 IAAI Finance Sr Unsecured 04-01-13 11.00 4,900,000(d) 5,116,384 Lear Series B 08-01-14 5.75 9,375,000 8,332,031 Tenneco Automotive Series B 07-15-13 10.25 5,250,000 5,958,750 TRW Automotive Sr Nts 02-15-13 9.38 4,325,000 4,800,750 Total 45,296,942 Brokerage (0.7%) LaBranche & Co Sr Nts 05-15-09 9.50 830,000 879,800 05-15-12 11.00 6,855,000 7,574,775 Total 8,454,575 Building Materials (2.0%) Ainsworth Lumber 10-01-12 7.25 5,595,000(c) 5,231,325 Compression Polymers Holdings Sr Nts 07-01-13 10.50 2,425,000(d) 2,437,125 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Building Materials (cont.) Euramax Term Loan B 08-08-13 10.56% $6,000,000 $6,075,000 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 5,190,000 5,449,500 Norcraft Holdings/Capital Sr Disc Nts (Zero coupon through 09-01-08, thereafter 9.75%) 09-01-12 9.80 6,090,000(f) 4,323,900 NTK Holdings Sr Disc Nts (Zero coupon through 09-01-09, thereafter 10.375%) 03-01-14 11.12 2,695,000(d,f) 1,549,625 Total 25,066,475 Chemicals (2.9%) BCP Crystal US Holdings Sr Sub Nts 06-15-14 9.63 3,438,000 3,897,833 BCP Crystal US Holdings/Sub3 Sr Disc Nts Series B (Zero coupon through 10-01-09, thereafter 10.50%) 10-01-14 9.37 3,774,000(f) 2,698,410 Equistar Chemicals LP/Funding Sr Nts 05-01-11 10.63 3,875,000 4,301,250 Georgia Gulf Sr Nts 12-15-13 7.13 4,005,000 4,155,188 INVISTA 05-01-12 9.25 13,360,000(d) 14,629,199 Nell Sr Nts 08-15-15 8.38 3,440,000(c,d) 3,478,700 PQ 02-15-13 7.50 3,580,000(d) 3,597,900 Total 36,758,480 Construction Machinery (2.1%) Columbus McKinnon Sr Sub Nts 11-01-13 8.88 1,510,000(d,g) 1,528,875 Gardner Denver 05-01-13 8.00 460,000(d) 487,600 NationsRent Companies Secured 10-15-10 9.50 7,070,000 7,741,650 Neff Rental LLC/Finance Secured 06-15-12 11.25 2,540,000(d) 2,705,100 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Construction Machinery (cont.) United Rentals North America 02-15-12 6.50% $6,425,000 $6,272,406 Sr Sub Nts 02-15-14 7.00 7,295,000 6,948,488 Total 25,684,119 Consumer Cyclical Services (0.1%) Da-Lite Screen Sr Nts 05-15-11 9.50 1,195,000 1,269,688 Consumer Products (2.5%) AAC Group Holding Sr Disc Nts (Zero coupon through 10-01-08, thereafter 10.25%) 10-01-12 10.07 3,225,000(d,f) 2,386,500 ACCO Brands Sr Sub Nts 08-15-15 7.63 2,840,000(d) 2,847,100 Amscan Holdings Sr Sub Nts 05-01-14 8.75 1,895,000 1,804,988 Sealy Mattress Sr Sub Nts 06-15-14 8.25 3,995,000 4,264,663 Simmons Bedding Sr Disc Nts (Zero coupon through 12-15-09, thereafter 10.00%) 12-15-14 10.00 2,265,000(d,f) 1,302,375 Sr Sub Nts 01-15-14 7.88 5,665,000 5,438,399 Spectrum Brands 02-01-15 7.38 5,885,000 5,664,312 Visant 10-01-12 7.63 5,105,000 5,245,388 Visant Holding Sr Disc Nts (Zero coupon through 12-01-08, thereafter 10.25%) 12-01-13 10.14 3,350,000(f) 2,437,125 Total 31,390,850 Diversified Manufacturing (0.7%) ALH Finance LLC Sr Sub Nts 01-15-13 8.50 5,605,000 5,422,838 TriMas 06-15-12 9.88 3,815,000 3,261,825 Total 8,684,663 Electric (4.6%) Aquila Sr Nts 11-15-09 7.63 6,185,000 6,416,938 02-01-11 9.95 3,645,000 4,055,063 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 176 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) CMS Energy Sr Nts 08-01-10 7.75% $5,905,000 $6,406,925 Midwest Generation LLC Series B 01-02-16 8.56 6,910,160 7,601,176 Mirant Americas Generation LLC Sr Nts 10-01-21 8.50 3,615,000(b) 4,247,625 NRG Energy 12-15-13 8.00 2,943,000 3,178,440 Reliant Energy Secured 12-15-14 6.75 8,665,000 8,491,700 Tenaska Alabama Partners LP Secured 06-30-21 7.00 4,990,000(d) 5,205,518 Texas Genco LLC/Financing Sr Nts 12-15-14 6.88 9,238,000(d) 9,584,424 Utilicorp Canada Finance 06-15-11 7.75 2,005,000(c) 2,095,225 Total 57,283,034 Entertainment (2.3%) Hit Entertainment Term Loan B 02-24-12 8.88 2,700,000(g) 2,740,500 Loews Cineplex 08-01-14 9.00 11,850,000(d) 11,642,625 Six Flags Sr Nts 06-01-14 9.63 4,115,000 4,125,288 Speedway Motorsports Sr Sub Nts 06-01-13 6.75 6,425,000 6,649,875 United Artists Theatre 07-01-15 9.30 3,092,333 3,061,410 Total 28,219,698 Environmental (2.4%) Allied Waste North America Secured 02-15-14 6.13 6,740,000 6,285,050 Series B 09-01-12 9.25 695,000 759,288 Sr Nts 04-15-13 7.88 5,180,000 5,335,400 Clean Harbors Secured 07-15-12 11.25 5,350,000(d) 5,992,000 Waste Services Sr Sub Nts 04-15-14 9.50 7,030,000(d) 7,012,424 Term Loan B 03-31-11 5.28 4,505,779 4,573,366 Total 29,957,528 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Food and Beverage (1.9%) American Seafoods Group LLC/Finance Sr Disc Nts (Zero coupon through 11-01-08, thereafter 11.50%) 11-01-11 12.12% $10,755,000(f) $8,039,363 Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75 13,645,000(c) 15,214,175 Total 23,253,538 Gaming (5.5%) Boyd Gaming Sr Sub Nts 04-15-14 6.75 15,500,000 15,829,374 CCM Merger 08-01-13 8.00 3,225,000(d) 3,289,500 MGM MIRAGE Sr Nts 02-27-14 5.88 15,345,000 14,807,924 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 6,175,000 6,252,188 Sr Sub Nts 04-01-12 8.00 6,277,000 6,685,005 Penn Natl Gaming Sr Sub Nts 03-01-15 6.75 3,135,000 3,103,650 River Rock Entertainment Authority Sr Nts 11-01-11 9.75 6,105,000 6,700,238 Seneca Gaming Sr Nts 05-01-12 7.25 3,405,000 3,541,200 Station Casinos Sr Nts 04-01-12 6.00 7,605,000 7,662,038 Wheeling Island Gaming 12-15-09 10.13 560,000 592,900 Total 68,464,017 Gas Pipelines (2.9%) ANR Pipeline 03-15-10 8.88 8,045,000 8,776,741 Colorado Interstate Gas Sr Nts 03-15-15 5.95 4,775,000(d) 4,739,188 El Paso CGP 06-15-10 7.75 650,000 666,250 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 9,185,000 9,832,607 Southern Natural Gas 03-15-10 8.88 4,925,000 5,372,958 Southern Star Central Secured 08-01-10 8.50 6,190,000 6,685,200 Total 36,072,944 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Health Care (7.7%) Community Health Systems Sr Sub Nts 12-15-12 6.50% $6,060,000 $6,128,175 DaVita Sr Nts 03-15-13 6.63 1,885,000(d) 1,913,275 Sr Sub Nts 03-15-15 7.25 7,875,000(d) 8,002,969 Fisher Scientific Intl Sr Sub Nts 07-01-15 6.13 5,500,000(d) 5,500,000 HCA Sr Nts 03-15-14 5.75 3,425,000 3,384,814 Sr Unsecured 12-01-09 5.50 3,410,000 3,395,201 01-15-15 6.38 6,370,000 6,539,939 IASIS Healthcare LLC/Capital Sr Sub Nts 06-15-14 8.75 7,500,000 8,081,250 LifeCare Holdings Sr Sub Nts 08-15-13 9.25 5,070,000(d) 4,993,950 MedCath Holdings Sr Nts 07-15-12 9.88 5,610,000 6,227,100 Select Medical 02-01-15 7.63 6,095,000 5,927,388 Tenet Healthcare Sr Nts 07-01-14 9.88 335,000 356,775 02-01-15 9.25 1,080,000(d) 1,115,100 Triad Hospitals Sr Nts 05-15-12 7.00 9,955,000 10,303,424 US Oncology 08-15-12 9.00 3,050,000 3,324,500 08-15-14 10.75 2,215,000 2,502,950 US Oncology Holdings Sr Nts 03-15-15 8.62 6,280,000(d,h) 6,280,000 Vanguard Health Holding I LLC Sr Disc Nts (Zero coupon through 10-01-09, thereafter 11.25%) 10-01-15 10.69 4,665,000(f) 3,463,763 Vanguard Health Holding II LLC Sr Sub Nts 10-01-14 9.00 8,150,000 8,863,124 Total 96,303,697 Home Construction (1.6%) Meritage Homes 03-15-15 6.25 4,930,000 4,615,713 Standard Pacific Sr Nts 08-15-10 6.50 860,000 853,550 Sr Sub Nts 04-15-12 9.25 1,250,000 1,371,875 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 177 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Home Construction (cont.) Stanley-Martin Communities LLC Sr Sub Nts 08-15-15 9.75% $2,820,000(d) $2,848,200 WCI Communities 03-15-15 6.63 6,795,000 6,200,437 William Lyon Homes Sr Nts 12-15-12 7.63 985,000 940,675 02-15-14 7.50 3,430,000 3,241,350 Total 20,071,800 Independent Energy (3.1%) Chesapeake Energy Sr Nts 09-15-13 7.50 800,000 860,000 06-15-14 7.50 2,177,000 2,351,160 08-15-14 7.00 7,341,000 7,744,755 06-15-15 6.38 3,060,000 3,121,200 01-15-16 6.88 1,760,000 1,823,800 Encore Acquisition Sr Sub Nts 04-15-14 6.25 2,300,000 2,288,500 07-15-15 6.00 5,000,000(d) 4,893,750 Hilcorp Energy I/Finance Sr Nts 09-01-10 10.50 6,660,000(d) 7,342,650 Newfield Exploration Sr Sub Nts 08-15-12 8.38 4,163,000 4,527,263 09-01-14 6.63 3,970,000 4,158,575 Total 39,111,653 Lodging (0.8%) Vail Resorts Sr Sub Nts 02-15-14 6.75 10,290,000 10,521,525 Media Cable (6.8%) Cablevision Systems Sr Nts Series B 04-15-12 8.00 2,235,000 2,221,031 CCO Holdings LLC/Capital Sr Nts 12-15-10 7.54 3,520,000(d,h) 3,484,800 11-15-13 8.75 8,885,000 8,818,363 Charter Communications Holdings LLC/Capital Sr Disc Nts 01-15-10 11.75 3,270,000 2,779,500 Charter Communications Operating LLC/Capital Sr Nts 04-30-12 8.00 9,580,000(d) 9,699,749 CSC Holdings Sr Nts 04-15-12 7.00 5,100,000(d) 4,870,500 Sr Sub Deb 05-15-16 10.50 2,175,000 2,354,438 DIRECTV Holdings LLC/Finance Sr Nts 03-15-13 8.38 9,970,000 10,942,074 06-15-15 6.38 5,000,000(d) 4,987,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Cable (cont.) Echostar DBS 10-01-14 6.63% $4,045,000 $4,009,606 Sr Nts 10-01-11 6.38 6,345,000 6,305,344 Insight Midwest LP/Capital Sr Nts 11-01-10 10.50 2,370,000 2,506,275 Kabel Deutschland 07-01-14 10.63 6,350,000(c,d) 7,096,125 Mediacom LLC/Capital Sr Nts 01-15-13 9.50 5,260,000 5,352,050 Videotron Ltee 01-15-14 6.88 8,570,000(c) 8,805,675 Total 84,233,030 Media Non Cable (9.2%) CanWest Media Series B 04-15-13 7.63 3,910,000(c) 4,183,700 Corus Entertainment Sr Sub Nts 03-01-12 8.75 7,925,000(c) 8,519,375 Dex Media 11-15-13 8.00 8,515,000 9,047,188 (Zero coupon through 11-15-08, thereafter 9.00%) 11-15-13 10.11 3,200,000(f) 2,600,000 Dex Media West LLC/Finance Sr Sub Nts Series B 08-15-13 9.88 5,345,000 6,046,531 Emmis Operating Sr Sub Nts 05-15-12 6.88 11,345,000 11,344,999 Inmarsat Finance 06-30-12 7.63 2,815,000(c) 2,959,269 Intelsat Bermuda Sr Nts 01-15-12 8.70 1,550,000(c,d,h) 1,577,125 Lamar Media 01-01-13 7.25 5,775,000 6,078,188 Sr Sub Nts 08-15-15 6.63 3,475,000(d) 3,544,500 Liberty Media Sr Nts 05-15-13 5.70 18,240,000 16,879,605 LodgeNet Entertainment Sr Sub Deb 06-15-13 9.50 2,920,000 3,197,400 Medianews Group Sr Sub Nts 04-01-14 6.38 3,700,000 3,552,000 PanAmSat 08-15-14 9.00 1,580,000 1,662,950 Quebecor Media Sr Nts 07-15-11 11.13 4,455,000(c) 4,900,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Non Cable (cont.) Rainbow Natl Services LLC Sr Nts 09-01-12 8.75% $8,115,000(d) $8,835,206 Sr Sub Deb 09-01-14 10.38 3,775,000(d) 4,303,500 RH Donnelley Sr Nts 01-15-13 6.88 8,430,000 8,577,525 Sinclair Broadcast Group 03-15-12 8.00 1,840,000 1,897,500 Sun Media 02-15-13 7.63 3,830,000(c) 4,045,438 Susquehanna Media Sr Sub Nts 04-15-13 7.38 1,295,000 1,358,131 Total 115,110,630 Metals (0.4%) Earle M Jorgensen Secured 06-01-12 9.75 4,390,000 4,796,075 Oil Field Services (0.8%) Grant Prideco Sr Unsecured 08-15-15 6.13 1,485,000(d) 1,503,563 Key Energy Services Series C 03-01-08 8.38 2,335,000 2,416,725 Sr Nts 05-01-13 6.38 5,505,000 5,505,000 Offshore Logistics 06-15-13 6.13 775,000 755,625 Total 10,180,913 Other Financial Institutions (2.5%) Cardtronics Sr Sub Nts 08-15-13 9.25 4,215,000(d) 4,288,763 Dow Jones CDX HY 06-29-10 8.25 11,880,000(d) 12,065,624 Residential Capital 06-30-10 6.38 10,140,000(d) 10,351,115 Triad Acquisition 05-01-13 11.13 4,060,000(d) 4,222,400 Total 30,927,902 Other Industry (0.3%) JohnsonDiversey Series B 05-15-12 9.63 2,735,000 2,796,538 Kinetek Sr Nts Series D 11-15-06 10.75 782,000 750,720 Total 3,547,258 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 178 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Packaging (2.4%) Crown European Holdings Secured 03-01-11 9.50% $6,305,000(c) $6,951,263 03-01-13 10.88 3,700,000(c) 4,366,000 Graham Packaging 10-15-12 8.50 4,755,000 4,897,650 Owens-Illinois Glass Container 05-15-11 7.75 1,985,000 2,104,100 05-15-13 8.25 6,660,000 7,126,200 Secured 11-15-12 8.75 3,970,000 4,327,300 Total 29,772,513 Paper (3.9%) Boise Cascade LLC 10-15-14 7.13 5,065,000 4,925,713 Cascades Sr Nts 02-15-13 7.25 5,760,000(c) 5,846,400 Crown Paper Sr Sub Nts 09-01-05 11.00 4,785,000(b,i,j) -- Domtar 12-01-13 5.38 7,500,000(c) 6,738,585 08-15-15 7.13 5,215,000(c) 5,199,277 JSG Funding Sr Nts 10-01-12 9.63 6,640,000(c) 6,789,400 Sr Sub Nts 04-01-15 7.75 5,650,000(c) 4,972,000 NewPage Secured 05-01-12 10.00 1,585,000(d) 1,592,925 Sr Sub Nts 05-01-13 12.00 9,160,000(d) 8,701,999 Norampac Sr Nts 06-01-13 6.75 4,018,000(c) 4,088,315 Total 48,854,614 Pharmaceuticals (1.2%) CDRV Investors Sr Disc Nts (Zero coupon through 01-01-10, thereafter 9.63%) 01-01-15 10.41 5,300,000(f) 3,074,000 VWR Intl Sr Sub Nts 04-15-14 8.00 1,870,000 1,855,975 Warner Chilcott 02-01-15 8.75 10,225,000(d) 10,122,750 Total 15,052,725 Railroads (0.2%) TFM Sr Nts 05-01-12 9.38 1,890,000(c,d) 2,041,200 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Retailers (3.4%) Duane Reade Sr Sub Nts 08-01-11 9.75% $3,960,000 $3,128,400 Flooring America Series B 10-15-07 9.25 1,109,000(b,i,j) -- General Nutrition Centers 01-15-11 8.63 4,890,000 4,792,200 Sr Sub Nts 12-01-10 8.50 5,635,000 4,986,975 Movie Gallery Sr Unsecured 05-01-12 11.00 2,755,000(d) 2,799,769 Rite Aid 12-15-08 6.13 2,285,000(d) 2,147,900 Toys "R" Us 04-15-13 7.88 2,890,000 2,586,550 Term Loan B 08-21-06 8.88 14,000,000(i) 13,999,999 United Auto Group 03-15-12 9.63 7,070,000 7,591,413 Total 42,033,206 Technology (1.0%) Sanmina-SCI 03-01-13 6.75 2,795,000 2,669,225 SunGard 01-15-14 4.88 6,665,000 5,865,200 Sr Sub Nts 08-15-15 10.25 1,570,000(d) 1,640,650 Syniverse Technologies Sr Sub Nts 08-15-13 7.75 2,260,000(d) 2,305,200 Total 12,480,275 Transportation Services (1.1%) Quality Distribution LLC/Capital 01-15-12 8.10 14,055,000(d,h) 13,492,800 Wireless (4.4%) Alamosa Delaware 07-31-10 11.00 2,755,000 3,120,038 Sr Nts 01-31-12 8.50 1,590,000 1,725,150 American Cellular Sr Nts Series B 08-01-11 10.00 1,960,000 2,087,400 American Tower Sr Nts 10-15-12 7.13 5,035,000 5,274,163 Centennial Communications/Cellular Operating LLC Sr Nts 02-01-14 8.13 3,360,000 3,570,000 Dobson Cellular Systems Secured 11-01-12 9.88 6,890,000 7,578,999 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wireless (cont.) Rogers Communications Secured 12-15-10 6.54% $1,605,000(c,h) $1,673,213 12-15-12 7.25 1,765,000(c) 1,892,963 Sr Sub Nts 12-15-12 8.00 6,780,000(c) 7,254,599 Rural Cellular Secured 03-15-12 8.25 5,070,000 5,323,500 Sr Sub Nts Series B 05-15-08 9.63 2,330,000 2,341,650 SBA Telecommunications/Communications Sr Disc Nts (Zero coupon through 12-15-07, thereafter 9.75%) 12-15-11 8.54 7,195,000(f) 6,601,413 UbiquiTel Operating Sr Nts 03-01-11 9.88 3,380,000 3,768,700 US Unwired Secured Series B 06-15-12 10.00 2,175,000 2,523,000 Total 54,734,788 Wirelines (5.0%) Cincinnati Bell 07-15-13 7.25 5,350,000 5,737,875 02-15-15 7.00 3,740,000 3,665,200 Sr Sub Nts 01-15-14 8.38 2,055,000 2,075,550 Citizens Communications Sr Nts 01-15-13 6.25 8,870,000 8,570,638 GCI Sr Nts 02-15-14 7.25 11,520,000 11,260,799 Qwest Sr Nts 06-15-15 7.63 6,470,000(d) 6,631,750 Qwest Term Loan B 06-30-10 6.95 10,555,000 10,528,612 Qwest Services Secured 12-15-10 13.50 7,963,000 9,177,358 Valor Telecommunications Enterprises LLC/Finance Sr Nts 02-15-15 7.75 4,795,000(d) 4,711,088 Total 62,358,870 Total Bonds (Cost: $1,149,649,004) $1,161,462,796 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 179 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Common Stock (--%) Issuer Shares Value(a) Link Energy LLC Unit 494,265(b) $64,254 Total Common Stock (Cost: $3,913,363) $64,254 Preferred Stocks & Other (0.7%) Issuer Shares Value(a) GNC 12.00% Pay-in-kind Series A 2,105(k) $1,578,750 Pegasus Satellite 12.75% Cm Pay-in-kind Series B --(b,i,k) 5 SGW Holding 12.50% Cm Pay-in-kind Series B 20,650(b,i,j,k) -- Cv Series A 9,677(b,i,j) -- Warrants 250(b,i,j) -- Varde Fund V LP 5,000,000(b,e,i) 4,317,600 Wayland Investment LLC 6,000,000(b,e,i) 3,053,100 Total Preferred Stocks & Other (Cost: $9,307,887) $8,949,455 Short-Term Securities (3.9%) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper HSBC Finance 09-01-05 3.56% $24,400,000 $24,397,588 Morgan Stanley & Co 09-21-05 3.57 10,000,000 9,979,233 Natl Australia Funding 09-01-05 3.49 3,100,000(l) 3,099,699 Nieuw Amsterdam 10-03-05 3.61 10,000,000(l) 9,967,000 Sedna Finance 09-19-05 3.54 1,300,000 1,297,578 Total Short-Term Securities (Cost: $48,745,927) $48,741,098 Total Investments in Securities (Cost: $1,211,616,181)(m) $1,219,217,603 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 10.1% of net assets. (d) 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 Aug. 31, 2005, the value of these securities amounted to $282,162,432 or 22.6% of net assets. (e) The share amount for Limited Liability Companies (LLC) or Limited Partnerships (LP) represents capital contributions. (f) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the annualized effective yield from the date of acquisition to maturity. (g) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $4,219,341. (h) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (i) 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 Aug. 31, 2005, is as follows: Security Acquisition Cost dates Crown Paper 11.00% Sr Sub Nts 2005 12-22-98 thru 03-14-00 $3,902,511 Flooring America 9.25% Series B 2007 10-09-97 thru 12-17-02 1,236,852 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 06-15-01 450 SGW Holding 12.50% Cm Pay-in kind Series B 08-12-97 thru 04-15-03 271,392 Cv Series A 08-12-97 100,002 Warrants 08-12-97 78,900 Toys "R" Us 8.88% Term Loan B 2006 08-24-05 13,920,472 Varde Fund V LP 04-27-00 thru 06-19-00 --* Wayland Investment LLC 05-19-00 6,671,880 * The original cost for this position in the prior year was $5,000,000. During the current year, $5,000,000 was returned to the fund in the form of return of capital. -------------------------------------------------------------------------------- 180 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Notes to Investments in Securities (continued) (j) Negligible market value. (k) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (l) 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 Aug. 31, 2005, the value of these securities amounted to $13,066,699 or 1.0% of net assets. (m) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $1,207,499,117 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 34,919,203 Unrealized depreciation (23,200,717) ----------- Net unrealized appreciation $ 11,718,486 ------------ 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/investments. -------------------------------------------------------------------------------- 181 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Income Opportunities Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (94.6%) Issuer Coupon Principal Value(a) rate amount Asset-Backed (1.2%) Metris Master Trust Series 2001-2 Cl C 11-20-09 5.51% $175,000(b,d) $175,000 Series 2004-2 Cl D 10-20-10 6.86 275,000(b,d) 279,125 Series 2005-1A Cl D 03-21-11 5.51 75,000(b,d) 75,000 Total 529,125 Aerospace & Defense (4.1%) Communications & Power Inds Sr Sub Nts 02-01-12 8.00 270,000 278,775 CPI Holdco Sr Nts 02-01-15 9.67 200,000(b) 198,328 DRS Technologies Sr Sub Nts 11-01-13 6.88 220,000 222,750 L-3 Communications 06-15-12 7.63 150,000 159,000 Sr Sub Nts 01-15-15 5.88 225,000 222,188 10-15-15 6.38 100,000(d) 101,500 Moog Sr Sub Nts 01-15-15 6.25 110,000 110,000 Standard Aero Holdings 09-01-14 8.25 140,000 140,000 TransDigm 07-15-11 8.38 355,000 376,300 Total 1,808,841 Automotive (4.2%) ArvinMeritor 02-15-09 6.80 100,000 98,500 GMAC 09-15-11 6.88 750,000 710,237 11-01-31 8.00 100,000 93,014 Lear Series B 05-15-09 8.11 220,000 227,700 08-01-14 5.75 270,000 239,963 Tenneco Automotive 11-15-14 8.63 150,000 155,625 TRW Automotive Sr Nts 02-15-13 9.38 310,000 344,100 Total 1,869,139 Brokerage (0.6%) LaBranche & Co Sr Nts 05-15-12 11.00 225,000 248,625 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Building Materials (1.7%) Ainsworth Lumber 10-01-12 7.25% $225,000(c) $210,375 Compression Polymers Holdings Sr Nts 07-01-13 10.50 65,000(d) 65,325 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 470,000 493,500 Total 769,200 Chemicals (4.6%) BCP Crystal US Holdings Sr Sub Nts 06-15-14 9.63 126,000 142,853 Equistar Chemicals LP/Funding Sr Nts 05-01-11 10.63 150,000 166,500 Georgia Gulf Sr Nts 12-15-13 7.13 365,000 378,688 INVISTA 05-01-12 9.25 380,000(d) 416,099 MacDermid 07-15-11 9.13 275,000 295,625 Nell Sr Nts 08-15-15 8.38 110,000(c,d) 111,238 PQ 02-15-13 7.50 385,000(d) 386,925 Resolution Performance Products LLC/Capital Secured 04-15-10 9.50 150,000 155,250 Total 2,053,178 Construction Machinery (3.3%) Case New Holland 08-01-11 9.25 145,000 154,425 Columbus McKinnon Sr Sub Nts 11-01-13 8.88 50,000(d,e) 50,625 Gardner Denver 05-01-13 8.00 255,000(d) 270,300 NationsRent Companies Secured 10-15-10 9.50 435,000 476,325 Neff Rental LLC/Finance Secured 06-15-12 11.25 60,000(d) 63,900 United Rentals North America 02-15-12 6.50 445,000 434,431 Total 1,450,006 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Consumer Cyclical Services (0.2%) Da-Lite Screen Sr Nts 05-15-11 9.50% $100,000 $106,250 Consumer Products (1.4%) ACCO Brands Sr Sub Nts 08-15-15 7.63 130,000(d) 130,325 Sealy Mattress Sr Sub Nts 06-15-14 8.25 215,000 229,513 Visant 10-01-12 7.63 255,000 262,012 Total 621,850 Diversified Manufacturing (1.2%) ALH Finance LLC Sr Sub Nts 01-15-13 8.50 125,000 120,938 Ispat Inland ULC Secured 04-01-14 9.75 55,000(c) 64,350 TriMas 06-15-12 9.88 95,000 81,225 Valmont Inds 05-01-14 6.88 245,000 250,206 Total 516,719 Electric (7.8%) Aquila Sr Nts 11-15-09 7.63 80,000 83,000 02-01-11 9.95 50,000 55,625 CMS Energy Sr Nts 02-01-12 6.30 180,000 183,600 DPL Sr Nts 09-01-11 6.88 54,000 59,130 IPALCO Enterprises Secured 11-14-08 8.38 65,000 69,713 11-14-11 8.63 345,000 388,125 Midwest Generation LLC Series B 01-02-16 8.56 359,536 395,489 NRG Energy 12-15-13 8.00 95,000 102,600 Pacificorp 1st Mtge 06-15-35 5.25 250,000 251,521 Potomac Edison 1st Mtge 11-15-14 5.35 310,000(d) 321,188 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 182 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) Reliant Energy Secured 07-15-13 9.50% $185,000 $205,813 Sierra Pacific Power 04-15-12 6.25 75,000 77,250 Southern California Edison 1st Mtge 07-15-35 5.35 375,000 382,938 Tenaska Alabama Partners LP Secured 06-30-21 7.00 300,000(d) 312,957 Utilicorp Canada Finance 06-15-11 7.75 570,000(c) 595,649 Total 3,484,598 Entertainment (0.7%) Loews Cineplex 08-01-14 9.00 125,000(d) 122,813 Speedway Motorsports Sr Sub Nts 06-01-13 6.75 200,000 207,000 Total 329,813 Environmental (1.6%) Allied Waste North America Secured 04-15-11 6.38 75,000 72,281 Secured Series B 02-15-11 5.75 85,000 79,369 Series B 09-01-12 9.25 235,000 256,738 Clean Harbors Secured 07-15-12 11.25 260,000(d) 291,200 Total 699,588 Food and Beverage (3.0%) American Seafoods Group LLC 04-15-10 10.13 250,000 268,125 American Seafoods Group LLC/Finance Sr Disc Nts (Zero coupon through 11-01-08, thereafter 11.50%) 11-01-11 9.83 175,000(f) 130,813 Burns Philp Capital Property 11-15-10 9.50 140,000(c) 153,300 Sr Sub Nts 02-15-11 10.75 400,000(c) 446,000 Cott Beverages 12-15-11 8.00 325,000 342,875 Total 1,341,113 Gaming (7.9%) Boyd Gaming Sr Sub Nts 12-15-12 7.75 245,000 260,925 04-15-14 6.75 50,000 51,063 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gaming (cont.) Caesars Entertainment Sr Nts 04-15-13 7.00% $245,000 $273,855 Sr Sub Nts 03-15-10 7.88 50,000 54,813 CCM Merger 08-01-13 8.00 270,000(d) 275,399 Circus & Eldorado Jt Venture/Silver Legacy Capital 1st Mtge 03-01-12 10.13 200,000 211,000 MGM MIRAGE 09-15-10 8.50 170,000 186,575 Sr Nts 12-15-11 6.38 100,000 100,875 09-01-12 6.75 225,000 230,625 07-15-15 6.63 100,000(d,e) 101,000 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 115,000 116,438 MTR Gaming Group Series B 04-01-10 9.75 165,000 179,231 Penn Natl Gaming Sr Sub Nts 12-01-11 6.88 50,000 50,500 River Rock Entertainment Authority Sr Nts 11-01-11 9.75 285,000 312,787 Riviera Holdings 06-15-10 11.00 75,000 81,750 Seneca Gaming Sr Nts 05-01-12 7.25 190,000 197,600 Station Casinos Sr Nts 04-01-12 6.00 100,000 100,750 Sr Sub Nts 03-01-16 6.88 260,000(d,e) 267,150 Virgin River Casino Secured 1-15-12 9.00 230,000(d) 242,650 Wheeling Island Gaming 12-15-09 10.13 210,000 222,338 Total 3,517,324 Gas Pipelines (6.0%) ANR Pipeline 03-15-10 8.88 300,000 327,287 Colorado Interstate Gas Sr Nts 03-15-15 5.95 185,000(d) 183,613 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 185,000 198,044 Energy Transfer Partners LP 02-01-15 5.95 145,000 148,768 Sr Nts 08-01-12 5.65 250,000(d) 252,818 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gas Pipelines (cont.) Southern Natural Gas 09-15-08 6.13% $200,000 $202,029 03-15-10 8.88 50,000 54,548 03-01-32 8.00 175,000 202,807 Southern Star Central Secured 08-01-10 8.50 330,000 356,399 Transcontinental Gas Pipe Line 12-01-26 7.25 150,000 168,000 Series B 08-15-11 7.00 75,000 80,625 Sr Nts Series B 07-15-12 8.88 100,000 117,500 Williams Companies 03-15-32 8.75 120,000 145,800 Series A 01-15-31 7.50 200,000 217,500 Total 2,655,738 Health Care (5.1%) Community Health Systems Sr Sub Nts 12-15-12 6.50 55,000 55,619 Coventry Health Care Sr Nts 01-15-12 5.88 215,000 220,375 DaVita Sr Nts 03-15-13 6.63 340,000(d) 345,099 Fisher Scientific Intl Sr Sub Nts 07-01-15 6.13 175,000(d) 175,000 HCA Sr Nts 02-01-11 7.88 75,000 82,255 05-01-12 6.95 50,000 52,830 03-15-14 5.75 385,000 380,482 Sr Unsecured 12-01-09 5.50 40,000 39,826 MedCath Holdings Sr Nts 07-15-12 9.88 180,000 199,800 Select Medical 02-01-15 7.63 195,000 189,638 Tenet Healthcare Sr Nts 07-01-14 9.88 40,000 42,600 Triad Hospitals Sr Nts 05-15-12 7.00 155,000 160,425 Sr Sub Nts 11-15-13 7.00 155,000 159,069 US Oncology 08-15-12 9.00 160,000 174,400 Total 2,277,418 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 183 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Home Construction (2.9%) DR Horton Sr Nts 02-15-15 5.25% $115,000 $110,471 Sr Sub Nts 09-15-10 9.75 100,000 116,937 KB HOME Sr Sub Nts 02-01-10 7.75 100,000 105,441 Meritage Homes 03-15-15 6.25 205,000 191,931 Standard Pacific Sr Nts 08-15-10 6.50 150,000 148,875 05-15-11 6.88 75,000 75,000 Stanley-Martin Communities LLC Sr Sub Nts 08-15-15 9.75 90,000(d) 90,900 WCI Communities 05-01-12 9.13 100,000 105,000 03-15-15 6.63 140,000 127,750 William Lyon Homes 04-01-13 10.75 100,000 110,000 Sr Nts 12-15-12 7.63 100,000 95,500 Total 1,277,805 Independent Energy (2.5%) Chesapeake Energy Sr Nts 09-15-13 7.50 70,000 75,250 06-15-14 7.50 15,000 16,200 08-15-14 7.00 230,000 242,650 06-15-15 6.38 35,000 35,700 Encore Acquisition Sr Sub Nts 04-15-14 6.25 500,000 497,500 Hilcorp Energy I/Finance Sr Nts 09-01-10 10.50 100,000(d) 110,250 Newfield Exploration Sr Nts 03-01-11 7.63 35,000 38,150 Sr Sub Nts 08-15-12 8.38 100,000 108,750 Total 1,124,450 Lodging (1.1%) ITT 11-15-15 7.38 125,000 136,875 Vail Resorts Sr Sub Nts 02-15-14 6.75 345,000 352,763 Total 489,638 Media Cable (4.0%) Charter Communications Holdings LLC/Capital Sr Nts 04-30-14 8.38 145,000(d) 146,088 Sr Nts 04-30-12 8.00 200,000(d) 202,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Cable (cont.) CSC Holdings Sr Nts 07-15-08 7.25% $75,000 $75,844 Sr Nts Series B 07-15-09 8.13 125,000 128,125 04-01-11 7.63 145,000 145,363 DIRECTV Holdings LLC Sr Nts 06-15-15 6.38 310,000(d) 309,224 Echostar DBS 10-01-14 6.63 210,000 208,163 Sr Nts 10-01-11 6.38 60,000 59,625 Kabel Deutschland 07-01-14 10.63 215,000(c,d) 240,262 Mediacom LLC/Capital Sr Nts 01-15-13 9.50 40,000 40,700 Videotron Ltee 01-15-14 6.88 245,000(c) 251,737 Total 1,807,631 Media Non Cable (9.5%) CanWest Media Series B 04-15-13 7.63 100,000(c) 107,000 Corus Entertainment Sr Sub Nts 03-01-12 8.75 325,000(c) 349,375 Dex Media East LLC/Finance 11-15-12 12.13 50,000 59,125 Sr Nts 11-15-11 5.88 50,000 49,125 Sr Sub Nts Series B 08-15-13 9.88 445,000 503,405 Emmis Operating Sr Sub Nts 05-15-12 6.88 460,000 459,999 Entercom Radio LLC/Capital 03-01-14 7.63 160,000 167,000 Lamar Media 01-01-13 7.25 310,000 326,275 Sr Sub Nts 08-15-15 6.63 110,000(d) 112,200 Liberty Media Sr Nts 05-15-13 5.70 440,000 407,183 LodgeNet Entertainment Sr Sub Deb 06-15-13 9.50 35,000 38,325 PanAmSat 08-15-14 9.00 25,000 26,313 Radio One Series B 07-01-11 8.88 160,000 171,000 Rainbow Natl Services LLC Sr Nts 09-01-12 8.75 130,000(d) 141,538 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Non Cable (cont.) RH Donnelley 12-15-12 10.88% $250,000 $289,063 Salem Communications 12-15-10 7.75 474,000 495,922 Sun Media 02-15-13 7.63 200,000(c) 211,250 Susquehanna Media Sr Sub Nts 04-15-13 7.38 310,000 325,113 Total 4,239,211 Metals (0.2%) Earle M Jorgensen Secured 06-01-12 9.75 50,000 54,625 Peabody Energy Series B 03-15-13 6.88 50,000 52,063 Total 106,688 Oil Field Services (1.2%) Grant Prideco Sr Unsecured 08-15-15 6.13 40,000(d) 40,500 Key Energy Services Series C 03-01-08 8.38 100,000 103,500 Sr Nts 05-01-13 6.38 45,000 45,000 Offshore Logistics 06-15-13 6.13 250,000 243,750 Pride Intl Sr Nts 07-15-14 7.38 95,000 103,075 Total 535,825 Other Financial Institutions (1.7%) Cardtronics Sr Sub Nts 08-15-13 9.25 245,000(d) 249,288 Residential Capital 06-30-10 6.38 430,000(d) 438,952 Triad Acquisition 05-01-13 11.13 55,000(d) 57,200 Total 745,440 Other Industry (0.3%) JohnsonDiversey Series B 05-15-12 9.63 140,000 143,150 Packaging (3.1%) Crown European Holdings Secured 03-01-11 9.50 25,000(c) 27,563 03-01-13 10.88 455,000(c) 536,899 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 184 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Packaging (cont.) Owens-Illinois Glass Container 05-15-11 7.75% $280,000 $296,800 05-15-13 8.25 90,000 96,300 Secured 11-15-12 8.75 150,000 163,500 Silgan Holdings Sr Sub Nts 11-15-13 6.75 250,000 255,313 Total 1,376,375 Paper (3.3%) Boise Cascade LLC 10-15-14 7.13 145,000 141,013 Cascades Sr Nts 02-15-13 7.25 125,000(c) 126,875 Domtar 12-01-13 5.38 250,000(c) 224,620 08-15-15 7.13 180,000(c) 179,457 Georgia-Pacific 02-01-10 8.88 250,000 279,999 JSG Funding Sr Nts 10-01-12 9.63 335,000(c) 342,537 NewPage Secured 05-01-12 10.00 80,000(d) 80,400 Norampac Sr Nts 06-01-13 6.75 75,000(c) 76,313 Total 1,451,214 Pharmaceuticals (0.6%) Athena Neurosciences Finance LLC 02-21-08 7.25 100,000 95,750 VWR Intl Sr Nts 04-15-12 6.88 170,000 169,575 Total 265,325 Railroads (0.6%) TFM Sr Nts 05-01-12 9.38 245,000(c,d) 264,600 Retailers (1.5%) General Nutrition Centers 01-15-11 8.63 135,000 132,300 Rite Aid 12-15-28 6.88 175,000 132,125 Toys "R" Us 04-15-13 7.88 55,000 49,225 10-15-18 7.38 110,000 88,825 United Auto Group 03-15-12 9.63 270,000 289,913 Total 692,388 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Technology (1.3%) Flextronics Intl Sr Sub Nts 11-15-14 6.25% $260,000(c) $258,375 Saniminia-SCI 01-15-10 10.38 75,000 83,250 SunGard 01-15-14 4.88 180,000 158,400 Syniverse Technologies Sr Sub Nts 08-15-13 7.75 75,000(d) 76,500 Total 576,525 Transportation Services (0.2%) Interpool 08-01-07 7.20 100,000 102,250 Wireless (2.2%) American Cellular Sr Nts Series B 08-01-11 10.00 135,000 143,775 Nextel Communications Sr Nts Series E 10-31-13 6.88 265,000 283,835 Rogers Communications Secured 12-15-10 6.54 40,000(b,c) 41,700 05-01-11 9.63 125,000(c) 145,781 12-15-12 7.25 150,000(c) 160,875 03-01-14 6.38 150,000(c) 152,625 Sr Sub Nts 12-15-12 8.00 40,000(c) 42,800 Total 971,391 Wirelines (3.8%) Cincinnati Bell 07-15-13 7.25 200,000 214,500 Citizens Communications 05-15-11 9.25 100,000 110,750 GCI Sr Nts 02-15-14 7.25 300,000 293,250 MCI Sr Nts 05-01-09 7.69 80,000 83,200 05-01-14 8.74 35,000 39,200 Qwest 11-15-08 5.63 25,000 24,688 03-15-12 8.88 705,000 770,212 Sr Nts 06-15-13 6.67 80,000(b,d) 83,800 Valor Telecommunications Enterprises LLC/Finance Sr Nts 02-15-15 7.75 70,000(d) 68,775 Total 1,688,375 Total Bonds (Cost: $41,604,483) $42,136,806 Short-Term Securities (3.8%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (1.6%) Federal Natl Mtge Assn Disc Nt 09-14-05 3.42% $700,000 $699,069 Commercial Paper (2.2%) Alpine Securitization 09-01-05 3.56 1,000,000(g) 999,901 Total Short-Term Securities (Cost: $1,699,136) $1,698,970 Total Investments in Securities (Cost: $43,303,619)(h) $43,835,776 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 185 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. At Aug. 31, 2005, the value of foreign securities represented 11.9% of net assets. (d) 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 Aug. 31, 2005, the value of these securities amounted to $7,729,226 or 17.3% of net assets. (e) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $418,950. (f) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the annualized effective yield from the date of acquisition to maturity. (g) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $999,901 or 2.2% of net assets. (h) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $43,316,957 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 652,500 Unrealized depreciation (133,681) -------- Net unrealized appreciation $ 518,819 --------- 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/investments. -------------------------------------------------------------------------------- 186 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - International Opportunity Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.1%)(c) Issuer Shares Value(a) Australia (1.9%) Metals & Mining (1.5%) BHP Billiton 925,623 $14,506,015 Newcrest Mining 252,107 3,271,912 Total 17,777,927 Real Estate (0.4%) Lend Lease 453,238 4,529,394 Austria (1.0%) Building Products (0.5%) Wienerberger 154,827 6,382,481 Commercial Banks (0.5%) Erste Bank der Oesterreichischen Sparkassen 108,014 5,998,522 Brazil (0.9%) Metals & Mining Cia Vale do Rio Doce ADR 346,800 10,404,000 Canada (0.6%) Metals & Mining Cameco 135,000 6,806,876 China (0.6%) Oil & Gas PetroChina Cl H 8,308,000 6,735,003 Czechoslovakia Federated Republic (0.5%) Pharmaceuticals Zentiva GDR 159,541(b,d) 6,209,368 Denmark (1.3%) Marine AP Moller - Maersk 1,385 14,980,842 Finland (1.6%) Electric Utilities (0.8%) Fortum 457,200 8,905,585 Oil & Gas (0.8%) Neste Oil 311,988(b) 10,487,658 France (10.0%) Beverages (0.7%) Pernod-Ricard 45,317 7,876,485 Construction & Engineering (0.7%) VINCI 91,744 8,160,977 Construction Materials (0.4%) Imerys 71,906 5,303,639 Diversified Telecommunication Services (0.5%) France Telecom 177,711 5,372,501 Electrical Equipment (0.8%) Schneider Electric 117,117 9,242,286 Health Care Equipment & Supplies (0.6%) Essilor Intl 92,919 7,269,528 Common Stocks (continued) Issuer Shares Value(a) France (cont.) Insurance (1.7%) AXA 753,891 $20,135,850 IT Services (0.7%) Atos Origin 113,259(b) 8,617,625 Office Electronics (0.8%) Neopost 103,866 9,626,371 Oil & Gas (2.5%) Total 111,318 29,360,358 Pharmaceuticals (0.6%) Sanofi-Aventis 87,597 7,500,794 Germany (7.6%) Auto Components (1.0%) Continental 147,382 11,701,311 Automobiles (0.5%) DaimlerChrysler 117,701 6,086,206 Capital Markets (0.3%) Deutsche Postbank 64,622 3,561,565 Computers & Peripherals (0.7%) Wincor Nixdorf 93,637 8,759,910 Diversified Telecommunication Services (0.8%) Deutsche Telekom 508,083 9,687,881 Electric Utilities (1.4%) E.ON 157,904 15,119,921 Health Care Equipment & Supplies (0.5%) Fresenius Medical Care 67,303 6,122,946 Health Care Providers & Services (0.8%) Celesio 105,738 9,249,429 Machinery (0.7%) MAN 161,946 8,185,878 Thrifts & Mortgage Finance (0.9%) Hypo Real Estate Holding 222,352 10,968,063 Greece (0.5%) Commercial Banks EFG Eurobank Ergasias 213,810 6,446,494 Hong Kong (2.9%) Real Estate (2.4%) Cheung Kong Holdings 610,000 6,663,017 New World Development 4,033,400 5,181,553 Sun Hung Kai Properties 1,010,000 10,278,230 Swire Pacific Cl A 690,000 6,585,254 Total 28,708,054 Specialty Retail (0.5%) Esprit Holdings 815,000 6,037,103 Common Stocks (continued) Issuer Shares Value(a) Hungary (0.3%) Commercial Banks OTP Bank 96,001 $3,821,459 Ireland (0.8%) Construction Materials CRH 333,919 9,089,769 Italy (3.9%) Diversified Telecommunication Services (0.4%) FastWeb 122,568(b) 5,298,375 Energy Equipment & Services (0.6%) Saipem 423,874 7,156,824 Oil & Gas (2.9%) Eni 1,120,435 33,218,061 Japan (20.7%) Automobiles (1.8%) Honda Motor 134,500 7,242,453 Toyota Motor 332,300 13,614,256 Total 20,856,709 Beverages (0.4%) Asahi Breweries 369,300 4,566,704 Building Products (0.5%) Asahi Glass 529,000 5,460,077 Capital Markets (1.0%) Nikko Cordial 804,000 3,984,577 Nomura Holdings 423,500 5,829,738 Tokai Tokyo Securities 734,000 2,404,307 Total 12,218,622 Chemicals (1.0%) Showa Denko 1,361,000 4,111,354 Sumitomo Chemical 1,336,000 7,464,420 Total 11,575,774 Commercial Banks (2.7%) Bank of Yokohama 1,130,000 7,297,944 Mitsubishi Tokyo Financial Group 1,323 13,656,030 Mizuho Financial Group 1,058 5,921,247 Sumitomo Mitsui Financial Group 550 4,513,218 Total 31,388,439 Commercial Services & Supplies (0.4%) Toppan Printing 486,000 4,866,254 Computers & Peripherals (0.3%) NEC 591,000 3,185,547 Construction & Engineering (0.9%) Nishimatsu Construction 1,709,000 6,564,136 Okumura 703,000 4,375,434 Total 10,939,570 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 187 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - International Opportunity Fund Common Stocks (continued) Issuer Shares Value(a) Japan (cont.) Consumer Finance (0.6%) ACOM 100,670 $6,662,016 Diversified Telecommunication Services (0.3%) Nippon Telegraph & Telephone 803 3,504,476 Electric Utilities (0.1%) Tokyo Electric Power 65,900 1,622,819 Electronic Equipment & Instruments (0.5%) Hoya 27,200 3,566,443 Keyence 9,650 2,280,865 Total 5,847,308 Household Durables (1.1%) Daito Trust Construction 177,900 7,453,530 Pioneer 197,700 3,082,671 Victor Company of Japan 421,000 2,664,344 Total 13,200,545 Insurance (0.5%) T&D Holdings 96,500 5,523,482 Internet Software & Services (0.4%) eAccess 7,229 5,306,189 Machinery (0.9%) Amada 580,000 4,506,924 Kurita Water Inds 225,700 4,036,969 Takuma 342,000 2,471,781 Total 11,015,674 Metals & Mining (1.5%) Mitsui Mining & Smelting 1,268,000 6,317,897 Nippon Steel 2,404,000 7,071,494 Nisshin Steel 1,414,000 4,110,589 Total 17,499,980 Multiline Retail (0.5%) Daiei 38,450(b) 722,390 Marui 311,000 5,114,643 Total 5,837,033 Office Electronics (0.8%) Canon 147,800 7,486,009 Ricoh 155,000 2,415,574 Total 9,901,583 Oil & Gas (0.6%) Nippon Oil 932,000 7,532,380 Pharmaceuticals (0.8%) Astellas Pharma 159,700 5,710,877 Chugai Pharmaceutical 228,600 4,316,561 Total 10,027,438 Real Estate (1.1%) Mitsui Fudosan 509,000 6,593,638 TOC 729,750 2,964,161 Tokyu 782,000 3,689,117 Total 13,246,916 Common Stocks (continued) Issuer Shares Value(a) Japan (cont.) Software (0.4%) Nintendo 46,700 $4,924,771 Specialty Retail (0.5%) Komeri 189,800 6,143,882 Textiles, Apparel & Luxury Goods (0.4%) ONWARD Kashiyama 334,000 5,016,957 Transportation Infrastructure (0.4%) Mitsubishi Logistics 416,000 4,517,026 Wireless Telecommunication Services (0.3%) NTT DoCoMo 2,013 3,248,220 Mexico (1.2%) Food & Staples Retailing (0.7%) Wal-Mart de Mexico Series V 1,936,225 8,437,393 Media (0.5%) Grupo Televisa ADR 87,091 5,469,315 Netherlands (2.3%) Diversified Financial Services (1.1%) ING Groep 452,310 13,198,460 Food Products (1.2%) Royal Numico 342,001(b) 14,207,774 Singapore (1.0%) Commercial Banks (0.4%) DBS Group Holdings 521,000 4,855,998 Real Estate (0.6%) City Developments 1,382,000 7,020,943 South Africa (0.9%) Metals & Mining Anglo American 405,191 10,282,338 South Korea (2.7%) Commercial Banks (1.1%) Kookmin Bank 137,690 6,990,816 Shinhan Financial Group 188,060 5,585,435 Total 12,576,251 Metals & Mining (0.2%) POSCO 11,874 2,470,215 Semiconductors & Semiconductor Equipment (1.4%) Samsung Electronics 31,220 16,600,708 Spain (3.0%) Commercial Banks (2.3%) Banco Bilbao Vizcaya Argentaria 681,969 11,376,330 Banco Santander Central Hispano 1,293,258 15,878,203 Total 27,254,533 IT Services (0.7%) Indra Sistemas 386,656 7,846,528 Common Stocks (continued) Issuer Shares Value(a) Sweden (1.5%) Communications Equipment (0.5%) Telefonaktiebolaget LM Ericsson Cl B 1,861,633 $6,501,531 Tobacco (1.0%) Swedish Match 907,400 11,562,495 Switzerland (8.9%) Capital Markets (1.8%) UBS 261,795 21,474,621 Chemicals (0.9%) Syngenta 100,648(b) 10,727,253 Food Products (1.4%) Nestle 60,124 16,903,724 Health Care Equipment & Supplies (0.9%) Nobel Biocare Holding 48,635 10,632,813 Metals & Mining (0.7%) Xstrata 335,012 7,877,177 Pharmaceuticals (2.7%) Roche Holding 230,187 31,941,809 Textiles, Apparel & Luxury Goods (0.5%) Swatch Group Cl B 40,498 5,627,580 Taiwan (1.5%) Commercial Banks (0.6%) Chinatrust Financial Holding 6,952,538 6,657,400 Semiconductors & Semiconductor Equipment (0.9%) Taiwan Semiconductor Mfg 6,536,402 11,007,195 Thailand (0.3%) Commercial Banks Bangkok Bank 1,242,100 3,366,861 United Kingdom (19.8%) Aerospace & Defense (0.7%) Rolls-Royce Group 1,407,836(b) 8,589,465 Commercial Banks (3.7%) Barclays 907,910 9,083,978 HSBC Holdings 644,357 10,394,925 Standard Chartered Bank 1,139,471 24,421,479 Total 43,900,382 Electric Utilities (0.5%) British Energy Group 648,287(b) 5,602,209 Food & Staples Retailing (2.6%) Tesco 3,652,123 21,523,128 Wm Morrison Supermarkets 2,810,545 9,166,119 Total 30,689,247 Hotels, Restaurants & Leisure (1.7%) Carnival 236,908 12,288,072 Enterprise Inns 547,272 8,165,035 Total 20,453,107 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 188 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - International Opportunity Fund Common Stocks (continued) Issuer Shares Value(a) United Kingdom (cont.) Household Products (0.6%) Reckitt Benckiser 214,111 $6,644,035 Insurance (1.9%) Britannic Group 697,093 7,806,900 Legal & General Group 2,601,095 5,236,522 Prudential 1,091,290 9,997,416 Total 23,040,838 Oil & Gas (4.1%) BG Group 2,118,257 19,168,607 BP 1,267,788 14,489,339 Royal Dutch Shell Cl A 482,976 15,752,921 Total 49,410,867 Pharmaceuticals (1.0%) GlaxoSmithKline 486,271 11,785,470 Semiconductors & Semiconductor Equipment (0.6%) ARM Holdings 3,214,358 6,686,929 Common Stocks (continued) Issuer Shares Value(a) United Kingdom (cont.) Wireless Telecommunication Services (2.4%) O2 3,247,510 $8,991,544 Vodafone Group 7,018,398 19,213,019 Total 28,204,563 Total Common Stocks (Cost: $974,665,366) $1,162,047,737 Preferred Stock & Other (1.1%)(c) Issuer Shares Value(a) Germany (1.1%) Porsche 16,782 $13,085,073 Singapore (--%) City Development Warrants 138,200(b,f) 497,270 Total Preferred Stock & Other (Cost: $9,629,382) $13,582,343 Short-Term Security (0.9%) Issuer Effective Amount Value(a) Yield payable at maturity Commercial Paper Alpine Securitization 09-01-05 3.56% $11,100,000(e) $11,098,902 Total Short-Term Security (Cost: $11,100,000) $11,098,902 Total Investments in Securities (Cost: $995,394,748)(g) $1,186,728,982 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) 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 Aug. 31, 2005, the value of these securities amounted to $6,209,368 or 0.5% of net assets. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $11,098,902 or 0.9% of net assets. (f) 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 Aug. 31, 2005, is as follows: Security Acquisition Cost date City Development Warrants 05-04-04 $-- (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $1,001,508,614 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $195,763,999 Unrealized depreciation (10,543,631) Net unrealized appreciation $185,220,368 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/investments. -------------------------------------------------------------------------------- 189 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Large Cap Equity Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.6%) Issuer Shares Value(a) Aerospace & Defense (3.1%) Boeing 212,396 $14,234,781 Empresa Brasileira de Aeronautica ADR 161,855(c) 5,804,120 General Dynamics 21,380 2,449,934 Goodrich 167,030 7,653,315 Honeywell Intl 348,182 13,328,407 Lockheed Martin 226,556 14,100,845 Northrop Grumman 135,790 7,616,461 United Technologies 256,113 12,805,650 Total 77,993,513 Auto Components (--%) Lear 19,081 719,354 Automobiles (0.2%) Ford Motor 135,585 1,351,782 General Motors 71,387(d) 2,440,722 Harley-Davidson 20,809 1,025,051 Total 4,817,555 Beverages (1.0%) Coca-Cola 30,301 1,333,244 Coca-Cola Enterprises 71,049 1,587,945 PepsiCo 401,200 22,005,820 Total 24,927,009 Biotechnology (1.7%) Amgen 275,847(b) 22,040,176 Biogen Idec 130,235(b) 5,489,405 Charles River Laboratories Intl 17,603(b) 894,584 Genentech 95,361(b) 8,958,213 Gilead Sciences 100,770(b) 4,333,110 MedImmune 60,712(b) 1,817,110 Total 43,532,598 Building Products (0.2%) American Standard Companies 46,321 2,112,238 Masco 75,315 2,310,664 Total 4,422,902 Capital Markets (2.7%) Bank of New York 180,467 5,516,876 E*TRADE Financial 176,195(b) 2,819,120 Franklin Resources 122,073 9,819,552 Investors Financial Services 243,157 8,539,674 Legg Mason 18,914 1,977,080 Lehman Brothers Holdings 82,741 8,742,414 Merrill Lynch & Co 91,326 5,220,194 Morgan Stanley 318,794 16,217,052 Natl Financial Partners 15,418 676,850 State Street 146,180 7,064,879 Total 66,593,691 Common Stocks (continued) Issuer Shares Value(a) Chemicals (1.1%) Dow Chemical 328,894 $14,208,222 Eastman Chemical 30,921 1,483,280 EI du Pont de Nemours & Co 70,797 2,801,437 Lyondell Chemical 78,252 2,018,902 Monsanto 88,060 5,621,750 RPM Intl 45,918 870,146 Total 27,003,737 Commercial Banks (4.4%) Bank of America 1,037,695 44,652,015 Commerce Bancorp 174,618(d) 5,888,119 Fifth Third Bancorp 43,227 1,790,030 ICICI Bank ADR 61,620(c) 1,440,676 PNC Financial Services Group 158,556 8,915,604 Regions Financial 39,108 1,279,614 US Bancorp 269,512 7,875,141 Wachovia 331,484 16,448,236 Wells Fargo & Co 370,828 22,108,765 Western Alliance Bancorp 500(b) 14,750 Total 110,412,950 Commercial Services & Supplies (0.6%) Apollo Group Cl A 11,710(b) 921,109 Avery Dennison 34,077 1,821,075 Cendant 499,946 10,168,901 Waste Management 43,383 1,189,996 Total 14,101,081 Communications Equipment (2.2%) CIENA 400,994(b) 902,237 Cisco Systems 1,331,729(b) 23,465,065 Corning 202,863(b) 4,049,145 Motorola 313,044 6,849,403 Nokia ADR 1,098,333(c) 17,320,711 QUALCOMM 89,889 3,569,492 Total 56,156,053 Computers & Peripherals (3.2%) Dell 797,850(b) 28,403,459 EMC 1,235,067(b) 15,882,962 Hewlett-Packard 658,985 18,293,424 Intl Business Machines 232,287 18,726,978 Total 81,306,823 Consumer Finance (1.1%) Capital One Financial 162,791 13,387,932 First Marblehead 156,367(b,d) 4,523,697 MBNA 342,908 8,641,282 Total 26,552,911 Containers & Packaging (0.1%) Temple-Inland 96,567 3,716,864 Common Stocks (continued) Issuer Shares Value(a) Diversified Financial Services (6.1%) Citigroup 971,360 $42,516,426 Consumer Discretionary Select Sector SPDR Fund 321,153(d) 10,758,626 Contax Participacoes ADR 173,600(b,c) 113,014 Energy Select Sector SPDR Fund 353,229(d) 17,880,452 Health Care Select Sector SPDR Fund 242,356 7,663,297 Industrial Select Sector SPDR Fund 443,512(d) 13,207,787 iShares Dow Jones US Healthcare Sector Index Fund 1 63 Jer Investors Trust 52,027(b) 939,608 JPMorgan Chase & Co 666,690 22,594,124 Materials Select Sector SPDR Trust 564,765(d) 15,525,390 streetTRACKS Gold Trust 100,469(b) 4,358,345 Utilities Select Sector SPDR Fund 560,728(d) 18,212,445 Total 153,769,577 Diversified Telecommunication Services (10.0%) ALLTEL 104,162 6,457,002 BellSouth 316,339 8,316,552 Brasil Telecom Participacoes ADR 51,700(c) 1,884,465 Chunghwa Telecom ADR 323,483(c,d) 6,227,048 Citizens Communications 65,775 897,171 France Telecom 108,944(c) 3,293,559 MCI 824,087 21,129,591 SBC Communications 719,396 17,323,056 Sprint Nextel 5,634,019 146,090,113 Tele Norte Leste Participacoes ADR 240,500(c) 3,617,120 Telewest Global 1,312,384(b,c) 29,134,925 Verizon Communications 269,794 8,824,962 Total 253,195,564 Electric Utilities (1.2%) Entergy 71,861 5,383,108 Exelon 187,497 10,104,212 FPL Group 63,448 2,733,974 PPL 91,358 2,919,802 Southern 197,695 6,800,708 TXU 17,077 1,656,811 Xcel Energy 83,150 1,599,806 Total 31,198,421 Electrical Equipment (0.1%) Emerson Electric 30,604 2,059,037 Electronic Equipment & Instruments (0.2%) Flextronics Intl 332,270(b,c) 4,339,446 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 190 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Common Stocks (continued) Issuer Shares Value(a) Energy Equipment & Services (1.2%) Cooper Cameron 31,274(b) $2,256,419 Halliburton 178,637 11,070,135 Nabors Inds 13,245(b,c) 887,415 Schlumberger 82,125 7,081,639 Transocean 82,054(b) 4,844,468 Weatherford Intl 52,115(b) 3,528,707 Total 29,668,783 Food & Staples Retailing (1.0%) CVS 219,965 6,460,372 Rite Aid 419,200(b) 1,710,336 Safeway 35,100 832,923 Wal-Mart Stores 375,996 16,904,780 Total 25,908,411 Food Products (0.8%) General Mills 84,985 3,919,508 Kellogg 382,428 17,335,461 Total 21,254,969 Gas Utilities (0.1%) ONEOK 82,195 2,794,630 Health Care Equipment & Supplies (1.9%) Alcon 14,912(c) 1,760,362 Baxter Intl 512,718 20,677,916 Boston Scientific 198,870(b) 5,345,626 Guidant 136,997 9,677,468 Hospira 76,728(b) 3,056,844 Medtronic 119,572 6,815,604 Total 47,333,820 Health Care Providers & Services (2.9%) Aetna 55,600 4,429,652 AmerisourceBergen 26,344 1,967,106 Cardinal Health 273,923 16,328,550 Caremark Rx 32,244(b) 1,506,762 CIGNA 28,363 3,270,821 HCA 329,087 16,223,989 HealthSouth 141,385(b) 749,341 Magellan Health Services 112,023(b) 3,971,215 McKesson 33,396 1,558,591 Medco Health Solutions 123,633(b) 6,091,398 UnitedHealth Group 247,029 12,721,994 WellPoint 52,714(b) 3,914,015 Total 72,733,434 Hotels, Restaurants & Leisure (0.3%) Carnival Unit 38,990 1,923,767 McDonald's 189,666 6,154,661 Total 8,078,428 Household Durables (0.3%) Fortune Brands 11,386 990,354 Harman Intl Inds 3,093 319,816 Leggett & Platt 35,886 868,800 Tempur-Pedic Intl 275,326(b,d) 4,424,489 Total 6,603,459 Common Stocks (continued) Issuer Shares Value(a) Household Products (2.6%) Colgate-Palmolive 118,267 $6,209,018 Procter & Gamble 541,006 30,015,013 Spectrum Brands 1,061,963(b) 29,894,258 Total 66,118,289 Industrial Conglomerates (2.5%) 3M 17,455 1,241,923 General Electric 1,017,112 34,185,135 Tyco Intl 941,711(c) 26,207,817 Total 61,634,875 Insurance (3.8%) ACE 390,185(c) 17,328,116 AFLAC 78,342 3,385,941 Allstate 34,354 1,931,038 American Intl Group 764,411 45,253,132 Assurant 35,525 1,326,148 Chubb 104,029 9,046,362 Endurance Specialty Holdings 49,718(c) 1,824,651 First American 45,584 1,896,750 Hartford Financial Services Group 128,507 9,387,436 State Auto Financial 104,098 3,171,866 Total 94,551,440 Internet & Catalog Retail (0.2%) eBay 121,971(b) 4,938,606 Internet Software & Services (0.8%) Google Cl A 61,381(b) 17,554,966 Yahoo! 98,159(b) 3,272,621 Total 20,827,587 IT Services (0.6%) Accenture Cl A 101,620(b,c) 2,479,528 Affiliated Computer Services Cl A 108,745(b) 5,649,302 Automatic Data Processing 20,638 882,275 First Data 12,429 516,425 Infosys Technologies ADR 13,582(c) 961,470 Ness Technologies 98,103(b,c) 850,553 Paychex 53,322 1,819,880 Satyam Computer Services ADR 27,410(c) 750,212 Total 13,909,645 Leisure Equipment & Products (0.1%) Mattel 86,769 1,564,445 Machinery (0.5%) Caterpillar 102,033 5,661,811 Illinois Tool Works 37,671 3,174,912 Ingersoll-Rand Cl A 20,063(c) 1,597,416 ITT Inds 14,789 1,613,776 Total 12,047,915 Media (7.7%) Comcast Cl A 575,821(b) 17,706,496 Comcast Special Cl A 176,589(b) 5,329,456 Common Stocks (continued) Issuer Shares Value(a) Media (cont.) EchoStar Communications Cl A 54,364 $1,627,115 Grupo Televisa ADR 12,719(c) 798,753 Liberty Global Cl A 210,881(b) 10,702,211 Liberty Media Cl A 1,152,241(b) 9,575,123 News Corp Cl A 584,264 9,470,919 NTL 1,138,226(b) 72,709,876 Time Warner 884,077 15,842,660 Tribune 98,094 3,685,392 Viacom Cl B 479,046 16,282,774 Vivendi Universal ADR 822,960(c) 25,964,387 Walt Disney 195,638 4,928,121 Total 194,623,283 Metals & Mining (1.3%) Agnico-Eagle Mines 65,018(c) 850,435 Alcan 53,313(c) 1,761,995 Alcoa 132,671 3,554,256 Barrick Gold 55,779(c) 1,462,525 Coeur d'Alene Mines 1,279,365(b) 4,669,682 Glamis Gold 77,714(b,c) 1,478,120 Harmony Gold Mining ADR 271,783(c) 2,057,397 Kinross Gold 178,101(b,c) 1,125,598 Newmont Mining 309,346 12,243,916 PAN American Silver 134,400(b,c) 2,095,296 Stillwater Mining 77,252(b) 620,334 Total 31,919,554 Multi-Utilities & Unregulated Power (0.5%) Dominion Resources 129,630 9,914,102 Duke Energy 67,922 1,969,059 Total 11,883,161 Multiline Retail (1.1%) Dollar General 26,594 506,882 Federated Dept Stores 60,134 4,148,043 JC Penney 139,253 6,771,873 Kohl's 128,843(b) 6,757,815 Target 175,628 9,440,006 Total 27,624,619 Office Electronics (0.1%) Xerox 172,334(b) 2,310,999 Oil & Gas (7.6%) Anadarko Petroleum 179,217 16,285,448 Apache 24,598 1,761,709 BP ADR 118,881(c) 8,129,083 Burlington Resources 82,748 6,105,975 Chevron 490,295 30,104,112 ConocoPhillips 508,005 33,497,849 Devon Energy 139,808 8,496,132 EnCana 18,850(c) 927,232 Exxon Mobil 1,126,305 67,465,669 Marathon Oil 52,190 3,356,339 Newfield Exploration 87,389(b) 4,126,509 Occidental Petroleum 29,325 2,434,855 Royal Dutch Shell Cl A ADR 36,611(c) 2,378,251 Valero Energy 68,445 7,289,393 Total 192,358,556 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 191 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Common Stocks (continued) Issuer Shares Value(a) Paper & Forest Products (0.4%) Bowater 85,166 $2,642,701 Intl Paper 126,327 3,897,188 Weyerhaeuser 41,006 2,666,210 Total 9,206,099 Personal Products (1.6%) Avon Products 312,470 10,255,265 Gillette 560,910 30,216,222 Total 40,471,487 Pharmaceuticals (6.0%) Abbott Laboratories 269,161 12,147,236 AstraZeneca 31,023(c) 1,424,335 Bristol-Myers Squibb 294,908 7,216,399 Eli Lilly & Co 61,250 3,369,975 GlaxoSmithKline ADR 96,201(c) 4,686,913 Johnson & Johnson 412,398 26,141,909 Merck & Co 127,934 3,611,577 Novartis ADR 307,602(c) 14,995,598 Pfizer 1,610,146 41,010,418 Roche Holding 112,058(c) 15,549,684 Schering-Plough 477,781 10,229,291 Wyeth 298,415 13,664,423 Total 154,047,758 Real Estate Investment Trust (0.5%) Apartment Investment & Management Cl A 53,572 2,137,523 Equity Office Properties Trust 168,057 5,596,298 HomeBanc 634,867 5,059,890 Total 12,793,711 Road & Rail (0.1%) Norfolk Southern 41,035 1,461,256 Semiconductors & Semiconductor Equipment (3.3%) Analog Devices 118,687 4,326,141 Applied Materials 112,740 2,064,269 Broadcom Cl A 179,263(b) 7,797,941 Credence Systems 75,197(b) 666,997 Cypress Semiconductor 266,707(b) 4,168,630 Freescale Semiconductor Cl A 289,706(b) 6,918,179 Freescale Semiconductor Cl B 234,094(b) 5,636,984 Intel 1,155,828 29,727,897 Linear Technology 77,272 2,930,927 Maxim Integrated Products 61 2,602 MEMC Electronic Materials 488,562(b) 8,237,155 Texas Instruments 319,700 10,447,796 Total 82,925,518 Common Stocks (continued) Issuer Shares Value(a) Software (2.7%) Adobe Systems 118,585 $3,206,538 BMC Software 40,756(b) 815,120 Cadence Design Systems 199,290(b) 3,190,633 Compuware 152,296(b) 1,379,802 Electronic Arts 62,535(b) 3,582,005 Macromedia 67,159(b) 2,481,525 Mercury Interactive 104,857(b) 3,845,106 Microsoft 1,006,411 27,575,661 Novell 144,536(b) 951,047 Oracle 762,775(b) 9,893,192 Siebel Systems 499,099 4,117,567 Symantec 255,176(b) 5,353,592 TIBCO Software 57,770(b) 441,363 Total 66,833,151 Specialty Retail (0.9%) AutoZone 4,766(b) 450,387 Bed Bath & Beyond 23,455(b) 951,100 Best Buy 79,393 3,783,870 Circuit City Stores 20,108 339,624 Gap 79,124 1,504,147 Home Depot 265,948 10,723,024 Lowe's Companies 56,053 3,604,768 Staples 54,137 1,188,849 Total 22,545,769 Textiles, Apparel & Luxury Goods (0.1%) Nike Cl B 16,650 1,313,852 Thrifts & Mortgage Finance (2.1%) BankAtlantic Bancorp Cl A 12,521 213,483 Countrywide Financial 570,011 19,260,671 Fannie Mae 370,369 18,903,634 Freddie Mac 212,849 12,851,823 Washington Mutual 56,600 2,353,428 Total 53,583,039 Tobacco (1.5%) Altria Group 527,252 37,276,716 Wireless Telecommunication Services (1.2%) Hutchison Telecommunications Intl ADR 102,867(b,c) 1,867,036 KT Freetel 36,500(c) 884,260 LG Telecom 181,420(b,c) 979,036 Millicom Intl Cellular 101,865(b,c) 1,956,827 NeuStar Cl A 188,350(b) 5,181,509 O2 1,060,231(c) 2,935,515 Orascom Telecom GDR 178,294(c,d) 8,244,314 Telesp Celular Participacoes ADR 200,515(c) 832,137 Turkcell Iletisim Hizmetleri ADR 130,441(c) 1,751,823 Vodafone Group ADR 175,898(c) 4,793,221 Total 29,425,678 Total Common Stocks (Cost: $2,299,487,510) $2,449,392,028 Short-Term Securities (6.1%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (2.4%) Federal Home Loan Bank 09-09-05 3.41% $25,000,000 $24,978,687 Federal Natl Mtge Assn Disc Nts 09-07-05 3.25 20,000,000 19,987,362 09-14-05 3.31 14,600,000 14,581,206 Total 59,547,255 Commercial Paper (3.7%) Fairway Finance 10-03-05 3.62 15,000,000(f) 14,950,363 Falcon Asset Securitization 09-14-05 3.51 10,000,000(f) 9,986,350 HSBC Finance 09-01-05 3.56 4,400,000 4,399,565 Jupiter Securitization 09-29-05 3.60 10,000,000(f) 9,971,080 Nieuw Amsterdam 09-12-05 3.51 10,000,000(f) 9,988,300 10-03-05 3.61 10,000,000(f) 9,967,000 Thunder Bay Funding LLC 09-01-05 3.47 15,000,000 (f) 14,998,554 Windmill Funding 09-01-05 3.42 20,000,000(f) 19,998,100 Total 94,259,312 Total Short-Term Securities (Cost: $153,821,315) $153,806,567 Total Investments in Securities (Cost: $2,453,308,825)(g) $2,603,198,595 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 192 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 9.5% of net assets. (d) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 3.4% of net assets. See Note 6 to the financial statements. 2.7% of net assets is the Fund's cash equivalent position. (f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $89,859,747 or 3.6% of net assets. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $2,466,772,565 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $202,510,414 Unrealized depreciation (66,084,384) ----------- Net unrealized appreciation $136,426,030 ------------ 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/investments. -------------------------------------------------------------------------------- 193 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Large Cap Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (95.3%) Issuer Shares Value(a) Aerospace & Defense (4.3%) Boeing 900 $60,318 Empresa Brasileira de Aeronautica ADR 1,907(c) 68,385 General Dynamics 373 42,742 Goodrich 696 31,891 Honeywell Intl 2,768 105,959 Lockheed Martin 1,554 96,721 Northrop Grumman 2,371 132,989 United Technologies 1,882 94,100 Total 633,105 Auto Components (0.1%) Lear 333 12,554 Automobiles (0.1%) General Motors 525 17,950 Beverages (1.3%) Coca-Cola 529 23,276 Coca-Cola Enterprises 1,240 27,714 PepsiCo 2,505 137,399 Total 188,389 Biotechnology (0.1%) Biogen Idec 421(b) 17,745 Building Products (0.5%) American Standard Companies 809 36,890 Masco 1,315 40,345 Total 77,235 Capital Markets (4.5%) Bank of New York 3,151 96,326 E*TRADE Financial 1,003(b) 16,048 Franklin Resources 695 55,906 Investors Financial Services 1,662 58,369 Legg Mason 330 34,495 Lehman Brothers Holdings 828 87,486 Merrill Lynch & Co 1,594 91,113 Morgan Stanley 3,407 173,315 State Street 1,022 49,393 Total 662,451 Chemicals (1.8%) Dow Chemical 4,530 195,696 Eastman Chemical 540 25,904 Lyondell Chemical 1,366 35,243 RPM Intl 802 15,198 Total 272,041 Commercial Banks (7.4%) Bank of America 10,934 470,490 Commerce Bancorp 1,021 34,428 PNC Financial Services Group 1,323 74,392 Regions Financial 683 22,348 US Bancorp 4,705 137,480 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) Wachovia 3,095 $153,574 Wells Fargo & Co 3,487 207,895 Total 1,100,607 Commercial Services & Supplies (0.5%) Avery Dennison 595 31,797 Cendant 2,288 46,538 Total 78,335 Communications Equipment (1.3%) Cisco Systems 3,977(b) 70,075 Corning 748(b) 14,930 Motorola 1,925 42,119 Nokia ADR 4,253(c) 67,070 Total 194,194 Computers & Peripherals (2.9%) Dell 2,565(b) 91,314 EMC 4,013(b) 51,607 Hewlett-Packard 5,121 142,159 Intl Business Machines 1,718 138,505 Total 423,585 Consumer Finance (1.4%) Capital One Financial 1,312 107,898 First Marblehead 450(b) 13,019 MBNA 3,398 85,630 Total 206,547 Containers & Packaging (0.4%) Temple-Inland 1,686 64,894 Diversified Financial Services (5.0%) Citigroup 10,863 475,474 Contax Participacoes ADR 250(b,c) 163 JPMorgan Chase & Co 7,814 264,816 Total 740,453 Diversified Telecommunication Services (5.9%) ALLTEL 376 23,308 BellSouth 5,523 145,200 Chunghwa Telecom ADR 2,808(c) 54,054 Citizens Communications 1,148 15,659 MCI 4,049 103,816 SBC Communications 8,173 196,806 Sprint Nextel 6,981 181,017 Tele Norte Leste Participacoes ADR 350(c) 5,264 Telewest Global 1,024(b,c) 22,733 Verizon Communications 3,814 124,756 Total 872,613 Electric Utilities (3.0%) Entergy 1,255 94,012 Exelon 2,442 131,600 FPL Group 1,108 47,744 Common Stocks (continued) Issuer Shares Value(a) Electric Utilities (cont.) PPL 1,594 $50,944 Southern 2,497 85,897 Xcel Energy 1,452 27,936 Total 438,133 Electronic Equipment & Instruments (0.2%) Flextronics Intl 2,547(b,c) 33,264 Energy Equipment & Services (1.7%) Cooper Cameron 546(b) 39,394 Halliburton 1,225 75,913 Schlumberger 317 27,335 Transocean 933(b) 55,084 Weatherford Intl 910(b) 61,616 Total 259,342 Food & Staples Retailing (0.9%) CVS 1,217 35,743 Wal-Mart Stores 2,100 94,416 Total 130,159 Food Products (0.9%) General Mills 1,484 68,442 Kellogg 1,399 63,417 Total 131,859 Gas Utilities (0.3%) ONEOK 1,435 48,790 Health Care Equipment & Supplies (1.1%) Baxter Intl 1,898 76,547 Boston Scientific 524(b) 14,085 Guidant 544 38,428 Hospira 817(b) 32,549 Total 161,609 Health Care Providers & Services (1.2%) Cardinal Health 676 40,296 CIGNA 495 57,083 HCA 1,264 62,316 Medco Health Solutions 469(b) 23,108 Total 182,803 Hotels, Restaurants & Leisure (0.4%) McDonald's 1,735 56,301 Household Durables (0.1%) Leggett & Platt 627 15,180 Tempur-Pedic Intl 414(b) 6,653 Total 21,833 Household Products (1.9%) Colgate-Palmolive 1,358 71,295 Procter & Gamble 2,173 120,558 Spectrum Brands 3,414(b) 96,104 Total 287,957 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 194 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Industrial Conglomerates (1.9%) General Electric 3,525 $118,475 Tyco Intl 5,978(c) 166,368 Total 284,843 Insurance (5.3%) ACE 3,669(c) 162,939 AFLAC 371 16,035 Allstate 600 33,726 American Intl Group 5,184 306,892 Assurant 620 23,145 Chubb 1,273 110,700 Endurance Specialty Holdings 868(c) 31,856 First American 796 33,122 Hartford Financial Services Group 897 65,526 Total 783,941 Internet Software & Services (0.1%) Google Cl A 40(b) 11,440 IT Services (0.7%) Accenture Cl A 949(b,c) 23,156 Affiliated Computer Services Cl A 1,582(b) 82,185 Total 105,341 Leisure Equipment & Products (0.2%) Mattel 1,515 27,315 Machinery (0.9%) Caterpillar 932 51,716 Illinois Tool Works 310 26,127 Ingersoll-Rand Cl A 350(c) 27,867 ITT Inds 258 28,153 Total 133,863 Media (6.5%) Comcast Cl A 2,214(b) 68,081 Comcast Special Cl A 3,083(b) 93,045 EchoStar Communications Cl A 949 28,404 Liberty Global Cl A 1,045(b) 53,034 Liberty Media Cl A 14,162(b) 117,686 News Corp Cl A 1,313 21,284 NTL 2,126(b) 135,809 Time Warner 5,276 94,546 Tribune 1,713 64,357 Viacom Cl B 4,455 151,425 Vivendi Universal ADR 1,459(c) 46,031 Walt Disney 3,416 86,049 Total 959,751 Metals & Mining (0.4%) Alcan 931(c) 30,770 Alcoa 1,199 32,121 Total 62,891 Multi-Utilities & Unregulated Power (0.9%) Dominion Resources 1,833 140,188 Common Stocks (continued) Issuer Shares Value(a) Multiline Retail (1.0%) Federated Dept Stores 474 $32,697 JC Penney 732 35,597 Target 1,352 72,670 Total 140,964 Office Electronics (0.1%) Xerox 1,067(b) 14,308 Oil & Gas (12.1%) Anadarko Petroleum 2,141 194,553 BP ADR 2,076(c) 141,957 Chevron 4,515 277,221 ConocoPhillips 5,528 364,516 Devon Energy 1,120 68,062 Exxon Mobil 10,264 614,813 Newfield Exploration 1,526(b) 72,058 Royal Dutch Shell Cl A ADR 639(c) 41,509 Total 1,774,689 Paper & Forest Products (1.1%) Bowater 1,487 46,142 Intl Paper 2,206 68,055 Weyerhaeuser 716 46,554 Total 160,751 Personal Products (1.1%) Avon Products 2,792 91,634 Gillette 1,427 76,872 Total 168,506 Pharmaceuticals (3.5%) Bristol-Myers Squibb 1,702 41,648 GlaxoSmithKline ADR 431(c) 20,998 Johnson & Johnson 714 45,260 Merck & Co 1,768 49,911 Novartis ADR 1,071(c) 52,211 Pfizer 8,044 204,881 Schering-Plough 2,722 58,278 Wyeth 848 38,830 Total 512,017 Real Estate Investment Trust (1.0%) Apartment Investment & Management Cl A 935 37,307 Equity Office Properties Trust 2,934 97,701 HomeBanc 1,649 13,143 Total 148,151 Semiconductors & Semiconductor Equipment (1.9%) Broadcom Cl A 632(b) 27,492 Credence Systems 1,296(b) 11,496 Cypress Semiconductor 4,656(b) 72,773 Freescale Semiconductor Cl A 1,035(b) 24,716 Freescale Semiconductor Cl B 343(b) 8,259 Intel 2,485 63,914 MEMC Electronic Materials 3,050(b) 51,423 Texas Instruments 879 28,726 Total 288,799 Common Stocks (continued) Issuer Shares Value(a) Software (1.2%) Cadence Design Systems 3,479(b) $55,698 Microsoft 3,227 88,419 Siebel Systems 1,690 13,943 Symantec 620(b) 13,008 TIBCO Software 1,015(b) 7,755 Total 178,823 Specialty Retail (0.6%) Gap 1,085 20,626 Home Depot 1,868 75,318 Total 95,944 Thrifts & Mortgage Finance (3.1%) Countrywide Financial 4,655 157,292 Fannie Mae 3,162 161,389 Freddie Mac 1,759 106,208 Washington Mutual 693 28,815 Total 453,704 Tobacco (2.1%) Altria Group 4,398 310,939 Wireless Telecommunication Services (0.4%) Vodafone Group ADR 1,997(c) 54,418 Total Common Stocks (Cost: $13,478,870) $14,126,334 Total Investments in Securities (Cost: $13,478,870)(d) $14,126,334 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 195 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Value Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 7.1% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $13,569,045 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 942,828 Unrealized depreciation (385,539) -------- Net unrealized appreciation $ 557,289 --------- 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/investments. -------------------------------------------------------------------------------- 196 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Mid Cap Growth Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.3%) Issuer Shares Value(a) Biotechnology (8.0%) Biogen Idec 52,016(b) $2,192,474 Gilead Sciences 62,586(b) 2,691,198 Invitrogen 60,944(b) 5,163,785 MedImmune 118,573(b) 3,548,890 OSI Pharmaceuticals 31,342(b) 1,028,018 Techne 102,844(b) 5,859,023 Total 20,483,388 Capital Markets (5.3%) Investors Financial Services 73,695 2,588,168 Legg Mason 71,907 7,516,439 T Rowe Price Group 53,502 3,370,626 Total 13,475,233 Chemicals (2.1%) Sigma-Aldrich 86,800 5,416,320 Commercial Services & Supplies (5.1%) Cintas 95,974 3,958,928 Robert Half Intl 195,344 6,579,185 Strayer Education 25,739 2,597,580 Total 13,135,693 Communications Equipment (0.9%) Juniper Networks 100,182(b) 2,278,139 Computers & Peripherals (1.0%) Network Appliance 107,132(b) 2,543,314 Construction Materials (1.9%) Martin Marietta Materials 65,300 4,722,496 Electrical Equipment (1.7%) American Power Conversion 166,181 4,348,957 Energy Equipment & Services (6.0%) BJ Services 52,132 3,288,487 ENSCO Intl 110,306 4,507,103 Nabors Inds 51,887(b,c) 3,476,429 Noble 49,841 3,553,663 Tidewater 9,890 440,501 Total 15,266,183 Food & Staples Retailing (3.9%) Whole Foods Market 77,345 9,997,615 Health Care Equipment & Supplies (7.1%) Biomet 94,308 3,479,022 Diagnostic Products 146,457 7,908,677 Kinetic Concepts 67,897(b) 3,720,756 St. Jude Medical 65,115(b) 2,988,779 Total 18,097,234 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (9.1%) Dendrite Intl 249,712(b) $4,522,284 Express Scripts 76,810(b) 4,444,227 Health Management Associates Cl A 213,207 5,185,195 Lincare Holdings 115,804(b) 4,903,141 Omnicare 83,108 4,367,325 Total 23,422,172 Hotels, Restaurants & Leisure (4.4%) Brinker Intl 67,792(b) 2,518,473 CBRL Group 22,978 830,884 Cheesecake Factory 148,214(b) 4,693,938 Panera Bread Cl A 22,211(b) 1,238,041 Starbucks 17,958(b) 880,660 Station Casinos 17,826 1,191,133 Total 11,353,129 Household Durables (0.7%) Pulte Homes 21,276 1,833,991 Internet Software & Services (0.8%) Digital River 50,423(b) 1,915,066 IT Services (7.6%) Acxiom 220,309 4,366,524 Fiserv 144,269(b) 6,473,350 Paychex 165,119 5,635,511 VeriFone Holdings 131,348(b) 2,883,089 Total 19,358,474 Machinery (0.9%) Danaher 41,480 2,221,669 Media (3.6%) Catalina Marketing 159,380 3,815,557 Univision Communications Cl A 112,694(b) 3,031,469 Westwood One 113,900 2,315,587 Total 9,162,613 Oil & Gas (7.1%) Denbury Resources 34,781(b) 1,573,145 EOG Resources 80,769 5,155,484 Murphy Oil 63,626 3,477,161 Newfield Exploration 73,432(b) 3,467,459 Pogo Producing 58,826 3,294,256 XTO Energy 31,032 1,235,074 Total 18,202,579 Semiconductors & Semiconductor Equipment (5.6%) Broadcom Cl A 60,956(b) 2,651,586 KLA-Tencor 39,454 2,002,685 Maxim Integrated Products 65,216 2,781,462 Microchip Technology 140,676 4,377,837 Novellus Systems 92,548(b) 2,481,212 Total 14,294,782 Common Stocks (continued) Issuer Shares Value(a) Software (6.6%) Advent Software 120,384(b) $3,317,783 BMC Software 207,118(b) 4,142,360 Fair Isaac 140,864 5,757,112 Kronos 28,289(b) 1,225,762 NAVTEQ 52,639(b) 2,449,819 Total 16,892,836 Specialty Retail (4.6%) Advance Auto Parts 39,226(b) 2,390,040 Build-A-Bear Workshop 34,052(b) 755,273 Chico's FAS 41,746(b) 1,449,004 Williams-Sonoma 174,776(b) 7,034,734 Total 11,629,051 Textiles, Apparel & Luxury Goods (1.9%) Coach 143,414(b) 4,759,911 Trading Companies & Distributors (2.4%) Fastenal 99,264 6,013,413 Total Common Stocks (Cost: $199,410,911) $250,824,258 Short-Term Securities (1.9%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (1.0%) Federal Home Loan Bank Disc Nt 09-16-05 3.42% $1,400,000 $1,397,875 Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43 1,100,000 1,097,910 Total 2,495,785 Commercial Paper (0.9%) General Electric Capital 09-01-05 3.56 2,300,000 2,299,773 Total Short-Term Securities (Cost: $4,796,022) $4,795,558 Total Investments in Securities (Cost: $204,206,933)(d) $255,619,816 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 197 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Growth Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 1.4% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $204,838,360 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $55,086,610 Unrealized depreciation (4,305,154) ---------- Net unrealized appreciation $50,781,456 ----------- 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/investments. -------------------------------------------------------------------------------- 198 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Mid Cap Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.6%) Issuer Shares Value(a) Aerospace & Defense (1.0%) Goodrich 1,514 $69,371 Airlines (1.3%) AMR 4,177(b) 52,588 Continental Airlines Cl B 1,626(b) 21,740 Northwest Airlines 3,310(b) 16,649 Total 90,977 Auto Components (0.6%) Ballard Power Systems 1,508(b,c) 8,505 Johnson Controls 417 25,012 Lear 276 10,405 Total 43,922 Building Products (2.5%) American Standard Companies 1,427 65,071 YORK Intl 1,974 113,268 Total 178,339 Capital Markets (0.9%) AMVESCAP 1,350(c) 8,930 Mellon Financial 1,670 54,191 Total 63,121 Chemicals (4.6%) Agrium 1,312(c) 28,208 Cabot 1,024 33,792 Eastman Chemical 1,612 77,327 Imperial Chemical Inds ADR 1,667(c) 34,807 Lubrizol 808 33,411 Monsanto 970 61,925 Mosaic 1,667(b) 26,922 PPG Inds 546 34,387 Total 330,779 Commercial Banks (4.8%) AmSouth Bancorporation 3,110 81,855 Comerica 1,417 85,714 Hibernia Cl A 1,049 33,306 Huntington Bancshares 1,417 33,994 KeyCorp 1,873 62,034 North Fork Bancorporation 1,721 47,310 Total 344,213 Commercial Services & Supplies (1.7%) Dun & Bradstreet 308(b) 19,610 Pitney Bowes 594 25,691 Ritchie Bros Auctioneers 700(c) 29,337 RR Donnelley & Sons 1,292 48,269 Total 122,907 Communications Equipment (0.3%) Tellabs 2,800(b) 24,892 Computers & Peripherals (0.5%) Diebold 672 32,256 Common Stocks (continued) Issuer Shares Value(a) Construction & Engineering (2.0%) Fluor 1,149 $71,134 Insituform Technologies Cl A 404(b) 8,363 McDermott Intl 1,792(b) 61,914 Total 141,411 Construction Materials (0.1%) CEMEX ADR 175(c) 8,342 Consumer Finance (0.8%) Capital One Financial 657 54,032 Containers & Packaging (0.5%) Temple-Inland 839 32,293 Diversified Telecommunication Services (2.0%) CenturyTel 1,832 65,769 MCI 1,253 32,127 Qwest Communications Intl 11,250(b) 43,875 Total 141,771 Electric Utilities (3.5%) Consolidated Edison 1,100 51,601 DPL 1,315 35,492 DTE Energy 839 38,401 Pinnacle West Capital 2,490 111,876 Xcel Energy 734 14,122 Total 251,492 Electrical Equipment (2.2%) Cooper Inds Cl A 1,100 73,084 Energy Conversion Devices 291(b) 10,101 FuelCell Energy 700(b) 7,973 Plug Power 1,060(b) 7,812 Rockwell Automation 1,123 58,441 Total 157,411 Electronic Equipment & Instruments (0.7%) Agilent Technologies 1,024(b) 32,932 Solectron 3,421(b) 14,026 Total 46,958 Energy Equipment & Services (9.4%) BJ Services 1,721 108,561 Cooper Cameron 1,232(b) 88,889 GlobalSantaFe 4,700 220,335 Nabors Inds 1,060(b,c) 71,020 Smith Intl 1,948 67,674 Weatherford Intl 1,612(b) 109,149 Total 665,628 Food Products (2.3%) Archer-Daniels-Midland 3,594 80,901 Del Monte Foods 2,790(b) 30,160 Tyson Foods Cl A 2,950 52,451 Total 163,512 Gas Utilities (1.6%) NiSource 4,600 111,044 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (1.7%) CIGNA 230 $26,524 Service Corp Intl 3,847 32,661 Tenet Healthcare 4,830(b) 58,829 Total 118,014 Hotels, Restaurants & Leisure (1.8%) Royal Caribbean Cruises 2,130 90,994 Starwood Hotels & Resorts Worldwide Unit 594 34,630 Total 125,624 Household Durables (2.9%) Centex 368 24,932 DR Horton 594 21,930 KB HOME 94 6,971 Lennar Cl A 373 23,163 Mohawk Inds 335(b) 28,602 Stanley Works 824 37,698 Whirlpool 795 60,461 Total 203,757 Industrial Conglomerates (0.5%) Textron 484 34,509 Insurance (12.5%) ACE 3,484(c) 154,724 Aon 5,230 156,482 Bristol West Holdings 1,852 32,317 Everest Re Group 839(c) 77,683 Jefferson-Pilot 1,082 53,808 Lincoln Natl 824 40,862 Loews 1,253 109,876 Torchmark 1,105 58,278 Willis Group Holdings 1,253(c) 43,855 XL Capital Cl A 2,340(c) 162,631 Total 890,516 IT Services (1.7%) Computer Sciences 1,024(b) 45,619 Electronic Data Systems 3,316 74,279 Total 119,898 Leisure Equipment & Products (1.1%) Eastman Kodak 1,812 44,158 Hasbro 1,484 30,719 Total 74,877 Machinery (5.1%) AGCO 3,361(b) 69,001 Crane 594 17,588 Cummins 687 59,405 Dover 1,812 73,748 Eaton 367 23,459 Ingersoll-Rand Cl A 1,100(c) 87,583 Manitowoc 687 32,014 Total 362,798 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 199 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Media (1.3%) Dex Media 1,035 $26,393 Interpublic Group of Companies 3,030(b) 36,753 Tribune 808 30,357 Total 93,503 Metals & Mining (2.6%) Compass Minerals Intl 1,430 35,192 Freeport-McMoRan Copper & Gold Cl B 2,130 89,822 Phelps Dodge 577 62,045 Total 187,059 Multi-Utilities & Unregulated Power (3.2%) CMS Energy 1,427(b) 22,975 Constellation Energy Group 434 25,498 Energy East 2,500 65,550 Public Service Enterprise Group 1,802 116,318 Total 230,341 Multiline Retail (1.6%) Family Dollar Stores 1,822 36,221 Federated Dept Stores 618 42,640 JC Penney 687 33,409 Total 112,270 Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (6.7%) Amerada Hess 450 $57,195 El Paso 1,461 16,948 Kerr-McGee 308 27,113 Pioneer Natural Resources 3,050 150,669 Suncor Energy 2,130(c) 126,224 Sunoco 1,024 74,445 Valero Energy 213 22,685 Total 475,279 Paper & Forest Products (1.7%) Abitibi-Consolidated 1,954(c) 8,480 Bowater 1,893 58,740 Georgia-Pacific 531 17,040 MeadWestvaco 1,253 36,299 Total 120,559 Real Estate Investment Trust (3.2%) Boston Properties 279 19,851 Crescent Real Estate Equities 3,050 59,872 Equity Residential 1,954 73,803 Rayonier 1,413 76,654 Total 230,180 Road & Rail (1.3%) CSX 2,080 91,374 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (1.8%) Intersil Cl A 1,751 $36,771 Natl Semiconductor 3,563 88,826 Total 125,597 Software (0.7%) BMC Software 2,600(b) 52,000 Specialty Retail (1.2%) AnnTaylor Stores 1,974(b) 50,535 AutoZone 186(b) 17,577 RadioShack 687 17,216 Total 85,328 Textiles, Apparel & Luxury Goods (1.3%) Liz Claiborne 1,623 66,591 VF 467 27,698 Total 94,289 Tobacco (0.6%) Reynolds American 467 39,200 Total Common Stocks (Cost: $6,474,960) $6,941,643 Total Investments in Securities (Cost: $6,474,960)(d) $6,941,643 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 11.9% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $6,475,065 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $522,500 Unrealized depreciation (55,922) ------- Net unrealized appreciation $466,578 -------- 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/investments. -------------------------------------------------------------------------------- 200 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - New Dimensions Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.5%) Issuer Shares Value(a) Aerospace & Defense (7.0%) Boeing 1,082,624 $72,557,460 Lockheed Martin 459,049 28,571,210 United Technologies 1,038,375 51,918,750 Total 153,047,420 Beverages (1.4%) PepsiCo 563,855 30,927,447 Biotechnology (2.9%) Amgen 640,062(b) 51,140,954 Genzyme 111,442(b) 7,931,327 Gilead Sciences 128,841(b) 5,540,163 Total 64,612,444 Building Products (0.7%) American Standard Companies 341,598 15,576,869 Capital Markets (2.8%) Charles Schwab 4,475,605 60,554,936 Chemicals (1.1%) EI du Pont de Nemours & Co 585,201 23,156,404 Commercial Banks (3.0%) Bank of America 517,448 22,265,787 Commerce Bancorp 791,704(e) 26,696,260 US Bancorp 567,938 16,595,148 Total 65,557,195 Commercial Services & Supplies (0.2%) ITT Educational Services 74,820(b) 3,803,849 Communications Equipment (5.1%) Cisco Systems 2,087,296(b) 36,778,156 Motorola 2,901,558 63,486,088 Nokia ADR 822,683(c) 12,973,711 Total 113,237,955 Computers & Peripherals (8.7%) Apple Computer 1,078,900(b) 50,632,777 Dell 931,464(b) 33,160,118 EMC 3,405,154(b) 43,790,280 NCR 1,427,962(b) 48,864,860 SanDisk 404,851(b) 15,720,364 Total 192,168,399 Diversified Financial Services (1.6%) CapitalSource 798,720(b,e) 15,814,656 Citigroup 428,267 18,745,247 Total 34,559,903 Diversified Telecommunication Services (1.2%) Sprint Nextel 1,007,163 26,115,737 Common Stocks (continued) Issuer Shares Value(a) Energy Equipment & Services (2.6%) GlobalSantaFe 321,761 $15,084,156 Halliburton 214,225 13,275,523 Schlumberger 138,515 11,944,148 Transocean 299,413(b) 17,677,344 Total 57,981,171 Food & Staples Retailing (2.1%) CVS 312,203 9,169,402 Safeway 1,384,536 32,855,040 Whole Foods Market 33,378 4,314,440 Total 46,338,882 Health Care Equipment & Supplies (3.4%) Alcon 110,934(c) 13,095,759 Medtronic 864,661 49,285,676 St. Jude Medical 260,924(b) 11,976,412 Total 74,357,847 Health Care Providers & Services (3.7%) Caremark Rx 616,053(b) 28,788,157 UnitedHealth Group 1,019,368 52,497,452 Total 81,285,609 Hotels, Restaurants & Leisure (2.0%) Carnival Unit 409,176 20,188,744 Royal Caribbean Cruises 443,678 18,953,924 Starbucks 104,678(b) 5,133,409 Total 44,276,077 Household Durables (3.0%) DR Horton 372,653 13,758,349 Pulte Homes 617,761 53,250,998 Total 67,009,347 Household Products (3.4%) Procter & Gamble 1,336,822 74,166,885 Industrial Conglomerates (2.1%) General Electric 1,389,623 46,705,229 Internet & Catalog Retail (1.2%) Amazon.com 39,321(b) 1,679,007 eBay 616,777(b) 24,973,300 Total 26,652,307 Internet Software & Services (2.6%) Google Cl A 57,703(b) 16,503,058 Yahoo! 1,245,077(b) 41,510,867 Total 58,013,925 IT Services (0.9%) Fiserv 260,259(b) 11,677,821 Infosys Technologies ADR 110,409(c) 7,815,853 Total 19,493,674 Common Stocks (continued) Issuer Shares Value(a) Media (3.2%) Comcast Special Cl A 2,093,041(b) $63,167,977 DreamWorks Animation SKG Cl A 285,546(b) 7,429,907 Total 70,597,884 Multi-Utilities & Unregulated Power (1.0%) Dominion Resources 296,733 22,694,140 Multiline Retail (3.5%) Federated Dept Stores 403,671 27,845,226 Nordstrom 521,366 17,507,470 Target 606,777 32,614,264 Total 77,966,960 Office Electronics (0.8%) Xerox 1,314,322(b) 17,625,058 Oil & Gas (9.2%) Apache 524,877 37,591,691 Burlington Resources 100,690 7,429,915 Chesapeake Energy 677,608 21,419,189 ConocoPhillips 940,673 62,027,977 Exxon Mobil 939,868 56,298,093 Murphy Oil 141,197 7,716,416 Suncor Energy 121,036(c) 7,172,593 Total 199,655,874 Pharmaceuticals (6.5%) Abbott Laboratories 228,591 10,316,312 Eli Lilly & Co 120,523 6,631,175 Johnson & Johnson 977,697 61,976,214 Merck & Co 110,633 3,123,170 Novartis ADR 120,896(c) 5,893,680 Pfizer 973,481 24,794,561 Schering-Plough 843,913 18,068,177 Sepracor 233,077(b) 11,700,465 Total 142,503,754 Semiconductors & Semiconductor Equipment (3.1%) Intel 1,923,197 49,464,627 Texas Instruments 558,896 18,264,721 Total 67,729,348 Software (5.2%) Amdocs 404,090(b,c) 11,860,042 Autodesk 301,755 13,035,816 Microsoft 2,863,729 78,466,174 Symantec 543,991(b) 11,412,931 Total 114,774,963 Specialty Retail (2.7%) Advance Auto Parts 541,705(b) 33,006,086 Lowe's Companies 397,879 25,587,598 Total 58,593,684 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 201 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - New Dimensions Fund Common Stocks (continued) Issuer Shares Value(a) Tobacco (0.6%) Altria Group 200,703 $14,189,702 Total Common Stocks (Cost: $2,007,517,562) $2,165,930,878 Short-Term Securities (3.5%)(f) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (--%) Federal Home Loan Bank 09-02-05 3.39% $1,000,000 $999,812 Short-Term Securities (continued) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper (3.5%) Barton Capital 09-09-05 3.51% $10,000,000(d) $9,991,225 General Electric Capital 09-01-05 3.56 28,100,000 28,097,221 Jupiter Securitization 09-08-05 3.51 10,000,000(d) 9,992,200 Old Line Funding 09-01-05 3.56 28,500,000(d) 28,497,182 Total 76,577,828 Total Short-Term Securities (Cost: $77,585,284) $77,577,640 Total Investments in Securities (Cost: $2,085,102,846)(g) $2,243,508,518 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 2.7% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $48,480,607 or 2.2% of net assets. (e) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 1.5% of net assets. See Note 6 to the financial statements. 2.0% of net assets is the Fund's cash equivalent position. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $2,092,065,153 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $216,794,917 Unrealized depreciation (65,351,552) ----------- Net unrealized appreciation $151,443,365 ------------ 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/investments. -------------------------------------------------------------------------------- 202 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - S&P 500 Index Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.8%) Issuer Shares Value(a) Aerospace & Defense (2.2%) Boeing 26,796 $1,795,867 General Dynamics 6,496 744,377 Goodrich 3,908 179,065 Honeywell Intl 27,667 1,059,092 L-3 Communications Holdings 3,845 314,829 Lockheed Martin 13,104 815,593 Northrop Grumman 11,650 653,449 Raytheon 14,663 575,083 Rockwell Collins 5,782 278,288 United Technologies 33,202 1,660,099 Total 8,075,742 Air Freight & Logistics (0.9%) FedEx 9,794 797,623 Ryder System 2,087 73,233 United Parcel Service Cl B 36,133 2,561,469 Total 3,432,325 Airlines (0.1%) Southwest Airlines 23,924 318,668 Auto Components (0.2%) Cooper Tire & Rubber 2,079 35,135 Dana 4,869 65,537 Delphi 18,203 101,027 Goodyear Tire & Rubber 5,705(b) 95,844 Johnson Controls 6,226 373,435 Visteon 4,169 41,190 Total 712,168 Automobiles (0.5%) Ford Motor 59,687 595,079 General Motors 18,342 627,114 Harley-Davidson 9,236 454,965 Total 1,677,158 Beverages (2.3%) Anheuser-Busch Companies 25,177 1,115,593 Brown-Forman Cl B 2,924 165,586 Coca-Cola 73,404 3,229,775 Coca-Cola Enterprises 11,440 255,684 Constellation Brands Cl A 7,130(b) 196,218 Molson Coors Brewing Cl B 2,545 163,160 Pepsi Bottling Group 6,354 187,316 PepsiCo 54,308 2,978,794 Total 8,292,126 Biotechnology (1.5%) Amgen 40,140(b) 3,207,186 Applera-Applied Biosystems Group 6,402(e) 137,643 Biogen Idec 11,174(b) 470,984 Chiron 4,806(b) 175,131 Genzyme 8,182(b) 582,313 Gilead Sciences 14,650(b) 629,950 MedImmune 8,040(b) 240,637 Total 5,443,844 Common Stocks (continued) Issuer Shares Value(a) Building Products (0.2%) American Standard Companies 5,797 $264,343 Masco 14,069 431,637 Total 695,980 Capital Markets (2.8%) Bank of New York 25,244 771,709 Bear Stearns Companies 3,687 370,544 Charles Schwab 36,956 500,015 E*TRADE Financial 11,950(b) 191,200 Federated Investors Cl B 3,080 95,665 Franklin Resources 6,425 516,827 Goldman Sachs Group 14,335 1,593,765 Janus Capital Group 7,363 104,039 Lehman Brothers Holdings 8,974 948,193 Mellon Financial 13,730 445,539 Merrill Lynch & Co 30,657 1,752,354 Morgan Stanley 35,537 1,807,766 Northern Trust 6,597 328,794 State Street 10,732 518,678 T Rowe Price Group 4,010 252,630 Total 10,197,718 Chemicals (1.5%) Air Products & Chemicals 7,435 411,899 Dow Chemical 31,173 1,346,673 Eastman Chemical 2,607 125,058 Ecolab 7,124 235,092 EI du Pont de Nemours & Co 32,302 1,278,190 Engelhard 3,917 111,439 Hercules 3,665(b) 46,729 Intl Flavors & Fragrances 2,866 103,463 Monsanto 8,696 555,153 PPG Inds 5,563 350,358 Praxair 10,488 506,570 Rohm & Haas 6,259 271,703 Sigma-Aldrich 2,238 139,651 Total 5,481,978 Commercial Banks (5.5%) AmSouth Bancorporation 11,448 301,311 Bank of America 130,434 5,612,575 BB&T 17,725 719,103 Comerica 5,477 331,304 Compass Bancshares 4,020 188,176 Fifth Third Bancorp 16,926 700,906 First Horizon Natl 4,026 157,336 Huntington Bancshares 7,532 180,693 KeyCorp 13,225 438,012 M&T Bank 3,170 337,985 Marshall & Ilsley 6,910 302,451 Natl City 19,275 706,043 North Fork Bancorporation 15,486 425,696 PNC Financial Services Group 9,194 516,979 Regions Financial 15,043 492,207 SunTrust Banks 11,019 774,415 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) Synovus Financial 10,087 $290,203 US Bancorp 59,439 1,736,808 Wachovia 51,130 2,537,071 Wells Fargo & Co 54,723 3,262,585 Zions Bancorporation 2,908 203,153 Total 20,215,012 Commercial Services & Supplies (0.9%) Allied Waste Inds 8,782(b) 70,080 Apollo Group Cl A 5,303(b) 417,134 Avery Dennison 3,294 176,031 Cendant 34,106 693,717 Cintas 4,853 200,186 Equifax 4,210 139,098 H&R Block 10,722 288,958 Monster Worldwide 3,923(b) 122,555 Pitney Bowes 7,456 322,472 Robert Half Intl 5,177 174,361 RR Donnelley & Sons 6,918 258,456 Waste Management 18,420 505,261 Total 3,368,309 Communications Equipment (2.7%) ADC Telecommunications 3,761(b) 78,755 Andrew 5,269(b) 60,752 Avaya 15,469(b) 157,784 CIENA 18,615(b) 41,884 Cisco Systems 207,276(b) 3,652,204 Comverse Technology 6,498(b) 167,518 Corning 47,004(b) 938,200 JDS Uniphase 46,973(b) 74,687 Lucent Technologies 143,688(b) 442,559 Motorola 79,539 1,740,313 QUALCOMM 52,982 2,103,915 Scientific-Atlanta 4,940 189,004 Tellabs 14,543(b) 129,287 Total 9,776,862 Computers & Peripherals (3.6%) Apple Computer 26,724(b) 1,254,157 Dell 78,521(b) 2,795,348 EMC 77,926(b) 1,002,128 Gateway 9,637(b) 29,296 Hewlett-Packard 93,613 2,598,697 Intl Business Machines 52,328(d) 4,218,684 Lexmark Intl Cl A 3,851(b) 242,536 NCR 6,054(b) 207,168 Network Appliance 11,879(b) 282,007 QLogic 2,944(b) 101,745 Sun Microsystems 110,471(b) 419,790 Total 13,151,556 Construction & Engineering (--%) Fluor 2,809 173,905 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 203 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Common Stocks (continued) Issuer Shares Value(a) Construction Materials (0.1%) Vulcan Materials 3,317 $238,326 Consumer Finance (1.3%) American Express 37,984 2,098,236 Capital One Financial 9,350 768,944 MBNA 41,118 1,036,174 Providian Financial 9,544(b) 177,518 SLM 13,607 676,948 Total 4,757,820 Containers & Packaging (0.2%) Ball 3,568 133,836 Bemis 3,478 90,950 Pactiv 4,838(b) 93,906 Sealed Air 2,710(b) 137,533 Temple-Inland 3,670 141,257 Total 597,482 Distributors (0.1%) Genuine Parts 5,656 259,158 Diversified Financial Services (3.4%) CIT Group 6,825 309,036 Citigroup 168,721 7,384,918 JPMorgan Chase & Co 114,125 3,867,696 Moody's 8,960 440,026 Principal Financial Group 9,528 436,382 Total 12,438,058 Diversified Telecommunication Services (3.1%) ALLTEL 12,339 764,895 AT&T 25,984 511,365 BellSouth 59,387 1,561,284 CenturyTel 4,255 152,755 Citizens Communications 11,048 150,695 Qwest Communications Intl 54,232(b) 211,505 SBC Communications 107,132 2,579,738 Sprint Nextel 95,375 2,473,074 Verizon Communications 89,753 2,935,820 Total 11,341,131 Electric Utilities (2.3%) Allegheny Energy 5,267(b) 158,853 Ameren 6,590 361,989 American Electric Power 12,455 463,077 CenterPoint Energy 9,426 133,943 Cinergy 6,437 283,485 Consolidated Edison 7,884 369,838 DTE Energy 5,645 258,372 Edison Intl 10,571 476,012 Entergy 6,872 514,782 Exelon 21,704 1,169,628 FirstEnergy 10,696 545,817 FPL Group 12,714 547,846 PG&E 12,001 450,278 Pinnacle West Capital 3,187 143,192 PPL 12,316 393,619 Progress Energy 8,061 351,379 Southern 24,144 830,554 Common Stocks (continued) Issuer Shares Value(a) Electric Utilities (cont.) TECO Energy 6,715 $116,908 TXU 7,775 754,331 Xcel Energy 13,047 251,024 Total 8,574,927 Electrical Equipment (0.4%) American Power Conversion 5,877 153,801 Cooper Inds Cl A 3,015 200,317 Emerson Electric 13,512 909,087 Rockwell Automation 5,664 294,755 Total 1,557,960 Electronic Equipment & Instruments (0.3%) Agilent Technologies 14,023(b) 450,980 Jabil Circuit 5,975(b) 175,904 Molex 5,453 145,922 Sanmina-SCI 17,048(b) 86,433 Solectron 31,530(b) 129,273 Symbol Technologies 7,967 73,137 Tektronix 2,873 72,601 Total 1,134,250 Energy Equipment & Services (1.6%) Baker Hughes 10,991 645,721 BJ Services 5,254 331,422 Halliburton 16,407 1,016,742 Nabors Inds 4,825(b,c) 323,275 Natl Oilwell Varco 5,585(b) 358,613 Noble 4,402 313,863 Rowan Companies 3,510 130,572 Schlumberger 19,106 1,647,511 Transocean 10,579(b) 624,584 Weatherford Intl 4,485(b) 303,679 Total 5,695,982 Food & Staples Retailing (2.7%) Albertson's 11,942 240,392 Costco Wholesale 15,489 672,842 CVS 26,272 771,609 Kroger 23,634(b) 466,535 Safeway 14,533 344,868 SUPERVALU 4,409 153,433 SYSCO 20,527 685,191 Wal-Mart Stores 108,513 4,878,745 Walgreen 33,164 1,536,489 Total 9,750,104 Food Products (1.2%) Archer-Daniels-Midland 20,235 455,490 Campbell Soup 10,534(d) 309,700 ConAgra Foods 16,802 383,590 General Mills 11,994 553,162 Hershey 7,050 416,585 HJ Heinz 11,357 407,943 Kellogg 11,341 514,088 McCormick & Co 4,390 148,865 Sara Lee 25,535 485,165 Tyson Foods Cl A 11,470 203,937 WM Wrigley Jr 6,349 451,096 Total 4,329,621 Common Stocks (continued) Issuer Shares Value(a) Gas Utilities (0.1%) KeySpan 5,612 $214,210 Nicor 1,428 59,133 NiSource 8,813 212,746 Peoples Energy 1,238 51,464 Total 537,553 Health Care Equipment & Supplies (2.3%) Bausch & Lomb 1,738 131,723 Baxter Intl 20,134 812,004 Becton, Dickinson & Co 8,190 431,040 Biomet 8,173(d) 301,502 Boston Scientific 24,322(b) 653,775 CR Bard 3,412 219,494 Fisher Scientific Intl 3,895(b) 251,150 Guidant 10,539 744,475 Hospira 5,127(b) 204,260 Medtronic 39,229 2,236,052 Millipore 1,620(b) 103,599 PerkinElmer 4,206 87,064 St. Jude Medical 11,754(b) 539,509 Stryker 12,158 663,219 Thermo Electron 5,229(b) 145,889 Waters 3,806(b) 173,059 Zimmer Holdings 8,008(b) 658,017 Total 8,355,831 Health Care Providers & Services (2.7%) Aetna 9,424 750,810 AmerisourceBergen 3,414 254,923 Cardinal Health 13,893 828,162 Caremark Rx 14,715(b) 687,632 CIGNA 4,250 490,110 Express Scripts 4,820(b) 278,885 HCA 13,597 670,332 Health Management Associates Cl A 7,992 194,365 Humana 5,251(b) 252,888 IMS Health 7,345 199,784 Laboratory Corp of America Holdings 4,368(b) 215,430 Manor Care 2,574 101,596 McKesson 9,574 446,819 Medco Health Solutions 9,775(b) 481,614 Quest Diagnostics 5,910 295,382 Tenet Healthcare 15,199(b) 185,124 UnitedHealth Group 41,068 2,115,002 WellPoint 19,872(b) 1,475,496 Total 9,924,354 Hotels, Restaurants & Leisure (1.5%) Carnival Unit 17,087 843,073 Darden Restaurants 4,723 148,349 Harrah's Entertainment 5,892 409,848 Hilton Hotels 12,382 286,891 Intl Game Technology 11,146 308,967 Marriott Intl Cl A 6,434 406,693 McDonald's 41,110 1,334,019 Starbucks 12,641(b,d) 619,915 Starwood Hotels & Resorts Worldwide Unit 7,005 408,392 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 204 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Common Stocks (continued) Issuer Shares Value(a) Hotels, Restaurants & Leisure (cont.) Wendy's Intl 3,732 $175,926 Yum! Brands 9,396 445,182 Total 5,387,255 Household Durables (0.7%) Black & Decker 2,592 221,098 Centex 4,152 281,298 DR Horton 8,810 325,265 Fortune Brands 4,719 410,458 KB HOME 2,706 200,677 Leggett & Platt 6,147 148,819 Maytag 2,587 48,894 Newell Rubbermaid 8,930 209,230 Pulte Homes 3,850 331,870 Snap-On 1,871 66,421 Stanley Works 2,441 111,676 Whirlpool 2,169 164,952 Total 2,520,658 Household Products (1.8%) Clorox 4,999 287,792 Colgate-Palmolive 16,970 890,925 Kimberly-Clark 15,514 966,832 Procter & Gamble 80,254(d) 4,452,493 Total 6,598,042 Industrial Conglomerates (4.2%) 3M 24,956 1,775,619 General Electric 343,991(d) 11,561,538 Textron 4,373 311,795 Tyco Intl 65,498(c) 1,822,809 Total 15,471,761 Insurance (4.3%) ACE 9,324(c) 414,079 AFLAC 16,269 703,146 Allstate 21,676 1,218,407 Ambac Financial Group 3,510 240,716 American Intl Group 84,165 4,982,567 Aon 10,306 308,356 Chubb 6,336 550,979 Cincinnati Financial 5,410 221,702 Hartford Financial Services Group 9,623 702,960 Jefferson-Pilot 4,408 219,210 Lincoln Natl 5,630 279,192 Loews 5,178 454,059 Marsh & McLennan Companies 17,283 484,788 MBIA 4,391 254,546 MetLife 23,783 1,164,890 Progressive 6,443 621,170 Prudential Financial 16,932 1,089,913 Safeco 4,138 215,755 St. Paul Travelers Companies 21,853 939,898 Torchmark 3,375 177,998 UnumProvident 9,661 186,651 XL Capital Cl A 4,540(c) 315,530 Total 15,746,512 Common Stocks (continued) Issuer Shares Value(a) Internet & Catalog Retail (0.4%) eBay 39,398(b) $1,595,225 Internet Software & Services (0.4%) Yahoo! 42,560(b) 1,418,950 IT Services (1.0%) Affiliated Computer Services Cl A 4,100(b) 212,995 Automatic Data Processing 18,922 808,916 Computer Sciences 5,974(b) 266,142 Convergys 4,617(b) 65,654 Electronic Data Systems 16,830 376,992 First Data 25,256 1,049,386 Fiserv 6,201(b) 278,239 Paychex 11,539 393,826 Sabre Holdings Cl A 4,256 81,630 Unisys 10,993(b) 73,103 Total 3,606,883 Leisure Equipment & Products (0.2%) Brunswick 3,147 138,468 Eastman Kodak 9,313 226,958 Hasbro 5,435 112,505 Mattel 13,349 240,682 Total 718,613 Machinery (1.4%) Caterpillar 22,160 1,229,658 Cummins 1,413 122,182 Danaher 8,926 478,077 Deere & Co 7,996 522,778 Dover 6,605 268,824 Eaton 4,892 312,697 Illinois Tool Works 8,850 745,878 Ingersoll-Rand Cl A 5,469(c) 435,442 ITT Inds 2,991 326,378 Navistar Intl 2,139(b) 68,362 PACCAR 5,635 394,901 Pall 4,037 115,458 Parker Hannifin 3,900 251,316 Total 5,271,951 Media (3.6%) Clear Channel Communications 16,537 550,682 Comcast Cl A 71,528(b) 2,199,486 Dow Jones & Co 2,299 93,914 Gannett 8,059 586,050 Interpublic Group of Companies 13,713(b) 166,339 Knight-Ridder 2,258 144,693 McGraw-Hill Companies 12,152 585,969 Meredith 1,457 71,539 New York Times Cl A 4,720 150,710 News Corp Cl A 93,550 1,516,446 Omnicom Group 5,945 478,216 Time Warner 151,973 2,723,355 Tribune 9,671 363,339 Univision Communications Cl A 9,432(b) 253,721 Common Stocks (continued) Issuer Shares Value(a) Media (cont.) Viacom Cl B 52,296 $1,777,541 Walt Disney 66,209 1,667,805 Total 13,329,805 Metals & Mining (0.7%) Alcoa 28,283 757,702 Allegheny Technologies 2,916 80,540 Freeport-McMoRan Copper & Gold Cl B 5,832 245,935 Newmont Mining 14,459 572,287 Nucor 5,198 293,583 Phelps Dodge 3,140 337,644 United States Steel 3,703 155,230 Total 2,442,921 Multi-Utilities & Unregulated Power (0.9%) AES 21,183(b) 333,420 Calpine 18,435(b) 56,595 CMS Energy 7,096(b) 114,246 Constellation Energy Group 5,756 338,165 Dominion Resources 11,041 844,416 Duke Energy 30,059 871,410 Dynegy Cl A 10,772(b) 46,966 Public Service Enterprise Group 7,738 499,488 Sempra Energy 8,311 372,499 Total 3,477,205 Multiline Retail (1.1%) Big Lots 3,692(b) 43,603 Dillard's Cl A 2,320 52,223 Dollar General 9,786 186,521 Family Dollar Stores 5,412 107,591 Federated Dept Stores 8,554 590,049 JC Penney 8,538 415,203 Kohl's 10,582(b) 555,026 Nordstrom 7,968 267,565 Sears Holdings 3,320(b) 451,055 Target 28,655 1,540,206 Total 4,209,042 Office Electronics (0.1%) Xerox 31,080(b,d) 416,783 Oil & Gas (8.1%) Amerada Hess 2,784 353,846 Anadarko Petroleum 7,647 694,883 Apache 10,644 762,323 Ashland 2,179 132,461 Burlington Resources 12,502 922,523 Chevron 73,524 4,514,374 ConocoPhillips 45,158 2,977,719 Devon Energy 15,366 933,792 El Paso 20,903 242,475 EOG Resources 7,758 495,193 Exxon Mobil 206,468 12,367,433 Kerr-McGee 3,781 332,841 Kinder Morgan 3,521 336,150 Marathon Oil 11,800 758,858 Murphy Oil 5,325 291,011 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 205 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (cont.) Occidental Petroleum 12,921 $1,072,831 Sunoco 4,466 324,678 Valero Energy 8,330 887,145 Williams Companies 18,515 415,477 XTO Energy 11,706 465,899 Total 29,281,912 Paper & Forest Products (0.4%) Georgia-Pacific 8,436 270,711 Intl Paper 15,906 490,700 Louisiana-Pacific 3,600 91,044 MeadWestvaco 6,043 175,066 Weyerhaeuser 7,939 516,194 Total 1,543,715 Personal Products (0.6%) Alberto-Culver 2,770 118,972 Avon Products 15,306 502,343 Gillette 32,356 1,743,017 Total 2,364,332 Pharmaceuticals (6.6%) Abbott Laboratories 50,294 2,269,768 Allergan 4,230 389,372 Bristol-Myers Squibb 63,381 1,550,933 Eli Lilly & Co 36,748 2,021,875 Forest Laboratories 11,040(b) 490,176 Johnson & Johnson 96,445 6,113,649 King Pharmaceuticals 7,845(b) 115,322 Merck & Co 71,459 2,017,288 Mylan Laboratories 8,740 160,729 Pfizer 241,158(d) 6,142,294 Schering-Plough 47,845 1,024,361 Watson Pharmaceuticals 3,382(b) 116,611 Wyeth 43,413 1,987,881 Total 24,400,259 Real Estate Investment Trust (0.7%) Apartment Investment & Management Cl A 3,090 123,291 Archstone-Smith Trust 6,450 259,935 Equity Office Properties Trust 13,219 440,193 Equity Residential 9,299 351,223 Plum Creek Timber 5,969 219,361 ProLogis 6,055 263,453 Public Storage 3,350 226,192 Simon Property Group 7,129 542,302 Vornado Realty Trust 3,780 325,156 Total 2,751,106 Road & Rail (0.5%) Burlington Northern Santa Fe 12,209 647,321 CSX 7,026 308,652 Norfolk Southern 13,116 467,061 Union Pacific 8,532 582,480 Total 2,005,514 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (3.3%) Advanced Micro Devices 12,810(b) $266,064 Altera 12,049(b) 263,512 Analog Devices 12,003 437,509 Applied Materials 53,316 976,216 Applied Micro Circuits 9,938(b) 27,330 Broadcom Cl A 9,494(b) 412,989 Freescale Semiconductor Cl B 13,032(b) 313,811 Intel 200,217 5,149,580 KLA-Tencor 6,383 324,001 Linear Technology 9,928 376,569 LSI Logic 12,579(b) 121,262 Maxim Integrated Products 10,635 453,583 Micron Technology 19,939(b) 237,473 Natl Semiconductor 11,318 282,158 Novellus Systems 4,480(b) 120,109 NVIDIA 5,481(b) 168,157 PMC-Sierra 5,854(b) 49,642 Teradyne 6,354(b) 106,747 Texas Instruments 53,913 1,761,877 Xilinx 11,381 319,692 Total 12,168,281 Software (3.9%) Adobe Systems 15,856 428,746 Autodesk 7,412 320,198 BMC Software 7,181(b) 143,620 Citrix Systems 5,485(b) 130,543 Computer Associates Intl 17,262 465,384 Compuware 12,544(b) 113,649 Electronic Arts 9,944(b) 569,592 Intuit 6,016(b) 275,773 Mercury Interactive 2,807(b) 102,933 Microsoft 325,894(d) 8,929,496 Novell 12,354(b) 81,289 Oracle 143,290(b) 1,858,471 Parametric Technology 8,813(b) 53,407 Siebel Systems 16,754 138,221 Symantec 38,659(b) 811,066 Total 14,422,388 Specialty Retail (2.3%) AutoNation 7,240(b) 150,664 AutoZone 2,126(b) 200,907 Bed Bath & Beyond 9,585(b) 388,672 Best Buy 14,523 692,166 Circuit City Stores 6,204 104,786 Gap 24,580 467,266 Home Depot 69,617 2,806,957 Limited Brands 12,333 271,079 Lowe's Companies 25,055 1,611,287 Office Depot 10,239(b) 307,170 OfficeMax 2,291 67,699 RadioShack 4,398 110,214 Sherwin-Williams 4,057 188,083 Staples 23,892 524,668 Tiffany & Co 4,665 174,564 TJX Companies 15,258 319,045 Total 8,385,227 Common Stocks (continued) Issuer Shares Value(a) Textiles, Apparel & Luxury Goods (0.4%) Coach 12,230(b) $405,914 Jones Apparel Group 3,912 110,240 Liz Claiborne 3,522 144,508 Nike Cl B 7,411 584,801 Reebok Intl 1,823 102,635 VF 3,238 192,046 Total 1,540,144 Thrifts & Mortgage Finance (1.6%) Countrywide Financial 19,056 643,902 Fannie Mae 31,393 1,602,299 Freddie Mac 22,394 1,352,150 Golden West Financial 9,166 559,034 MGIC Investment 3,063 191,223 Sovereign Bancorp 11,826 275,782 Washington Mutual 28,453 1,183,076 Total 5,807,466 Tobacco (1.4%) Altria Group 67,171 4,748,990 Reynolds American 3,775 316,874 UST 5,365 228,334 Total 5,294,198 Trading Companies & Distributors (--%) WW Grainger 2,706 174,050 Total Common Stocks (Cost: $329,259,856) $362,856,106 Short-Term Securities (1.4%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies Federal Home Loan Bank Disc Nt 09-23-05 3.48% $2,600,000 $2,594,236 Federal Natl Mtge Assn Disc Nt 09-14-05 3.42 2,500,000 2,496,675 Total Short-Term Securities (Cost: $5,091,398) $5,090,911 Total Investments in Securities (Cost: $334,351,254)(f) $367,947,017 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 206 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 0.9% of net assets. (d) 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 E-Mini S&P 500 Index, Sept. 2005 83 (e) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (f) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $336,562,678 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 53,098,972 Unrealized depreciation (21,714,633) ----------- Net unrealized appreciation $ 31,384,339 ------------ 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/investments. -------------------------------------------------------------------------------- 207 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Select Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (79.1%) Issuer Shares Value(a) Aerospace & Defense (3.2%) Curtiss-Wright 1,000 $64,560 GenCorp 5,000(b) 94,250 Honeywell Intl 8,000 306,240 Kaman Cl A 3,000 71,970 Sequa Cl A 3,000(b) 205,500 Total 742,520 Auto Components (0.7%) Dana 6,000 80,760 Modine Mfg 2,500 87,900 Proliance Intl 589(b) 3,340 Total 172,000 Automobiles (0.2%) Coachmen Inds 4,000 53,880 Beverages (2.9%) Brown-Forman Cl A 3,000 177,720 Coca-Cola 6,000 264,000 Diageo ADR 2,500(c) 144,275 PepsiAmericas 1,000 25,220 Pernod-Ricard ADR 1,517(c) 65,791 Total 677,006 Building Products (0.9%) Griffon 7,000(b) 179,480 Water Pik Technologies 1,500(b) 29,550 Total 209,030 Chemicals (2.2%) Ferro 17,000 322,660 Hercules 5,000(b) 63,750 Sensient Technologies 7,000 131,390 Total 517,800 Commercial Services & Supplies (1.4%) Nashua 10,000(b) 68,500 Republic Services 2,000 72,460 Waste Management 7,000 192,010 Total 332,970 Computers & Peripherals (1.8%) Storage Technology 10,000(b) 369,500 UNOVA 2,000(b) 58,020 Total 427,520 Containers & Packaging (0.3%) Greif Cl A 1,000 58,850 Distributors (0.6%) Genuine Parts 3,000 137,460 Diversified Telecommunication Services (1.5%) CenturyTel 1,000 35,900 Cincinnati Bell 10,000(b) 43,300 Citizens Communications 5,000 68,200 Common Stocks (continued) Issuer Shares Value(a) Diversified Telecommunication Services (cont.) Qwest Communications Intl 7,500(b) $29,250 Sprint 7,000 181,510 Total 358,160 Electric Utilities (2.3%) Allegheny Energy 2,500(b) 75,400 DPL 8,000 215,920 Duquesne Light Holdings 1,500 27,225 El Paso Electric 1,000(b) 20,960 FPL Group 2,000 86,180 Northeast Utilities 1,000 19,920 NSTAR 2,000 59,120 Unisource Energy 1,000 33,280 Total 538,005 Electrical Equipment (3.4%) Cooper Inds Cl A 5,000 332,200 GrafTech Intl 5,000(b) 29,700 Thomas & Betts 12,000(b) 426,480 Total 788,380 Electronic Equipment & Instruments (0.1%) Paxar 1,000(b) 18,810 Energy Equipment & Services (0.2%) RPC 2,000 46,400 Food & Staples Retailing (1.0%) Albertson's 7,000 140,910 Safeway 4,000 94,920 Total 235,830 Food Products (5.4%) Archer-Daniels-Midland 5,000 112,550 Cadbury Schweppes ADR 3,000(c) 119,640 Campbell Soup 1,000 29,400 Corn Products Intl 2,000 45,040 Del Monte Foods 2,000(b) 21,620 Dreyer's Grand Ice Cream Holdings 3,500 286,195 General Mills 9,000 415,080 Hershey 500 29,545 HJ Heinz 2,000 71,840 WM Wrigley Jr 2,000 142,100 Total 1,273,010 Health Care Equipment & Supplies (0.7%) Conmed 2,000(b) 58,520 INAMED 400(b) 29,000 Sybron Dental Specialties 2,000(b) 77,540 Total 165,060 Health Care Providers & Services (3.7%) Beverly Enterprises 10,000(b) 125,500 Chemed 1,600 64,736 Henry Schein 2,000(b) 83,380 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (cont.) IMS Health 5,000 $136,000 Patterson Companies 2,000(b) 80,120 Priority Healthcare Cl B 10,000(b) 278,900 Renal Care Group 2,000(b) 94,180 Total 862,816 Hotels, Restaurants & Leisure (3.4%) Aztar 10,000(b) 334,000 Churchill Downs 4,000 157,160 Gaylord Entertainment 1,000(b) 42,600 Hilton Hotels 2,000 46,340 Kerzner Intl 500(b,c) 28,525 MGM Mirage 3,500(b) 147,910 Pinnacle Entertainment 2,000(b) 39,880 Total 796,415 Household Durables (3.7%) Cavalier Homes 12,000(b) 71,040 Cavco Inds 4,000(b) 134,120 Champion Enterprises 17,000(b) 226,610 Fleetwood Enterprises 10,000(b) 101,100 Palm Harbor Homes 5,000(b) 92,350 Skyline 6,000 236,220 Southern Energy Homes 2,000(b) 12,400 Total 873,840 Household Products (0.3%) Church & Dwight 750 28,620 Energizer Holdings 600(b) 38,940 Total 67,560 Industrial Conglomerates (1.0%) Tredegar 5,000 62,100 Tyco Intl 6,000(c) 166,980 Total 229,080 Internet & Catalog Retail (0.8%) Expedia 3,800(b) 84,588 IAC/InterActiveCorp 3,800(b) 93,290 Total 177,878 Internet Software & Services (0.9%) Yahoo! 6,400(b) 213,376 Machinery (5.0%) CIRCOR Intl 2,000 52,520 Clarcor 4,000 113,200 CNH Global 6,000(c) 130,020 Crane 5,000 148,050 Deere & Co 2,000 130,760 ITT Inds 4,500 491,040 Watts Water Technologies Cl A 3,000 101,580 Total 1,167,170 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 208 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Select Value Fund Common Stocks (continued) Issuer Shares Value(a) Media (18.1%) Cablevision Systems Cl A 18,000(b) $561,600 Comcast Cl A 2,000(b) 61,500 DIRECTV Group 3,500(b) 55,685 Discovery Holding Cl A 1,500(b) 22,710 Dow Jones & Co 1,000 40,850 EchoStar Communications Cl A 9,000 269,370 EW Scripps Cl A 6,000 300,000 Fisher Communications 3,500(b) 168,945 Gemstar-TV Guide Intl 32,000(b) 91,840 Gray Television 2,000 24,600 Grupo Televisa ADR 1,000(c) 62,800 Knight-Ridder 1,200 76,896 Liberty Global Cl A 4,000(b) 203,000 Liberty Media Cl A 15,000(b) 124,650 LIN TV Cl A 5,000(b) 75,550 Media General Cl A 1,800 118,422 New York Times Cl A 500 15,965 News Corp Cl A 16,120 261,305 Paxson Communications 2,000(b) 1,220 Reader's Digest Assn 2,000 32,520 Sinclair Broadcast Group Cl A 16,000 150,240 Time Warner 18,000 322,560 Tribune 8,000 300,560 Viacom Cl A 10,000 340,800 Vivendi Universal ADR 10,000(c) 315,500 Walt Disney 10,000 251,900 Young Broadcasting Cl A 7,000(b) 30,590 Total 4,281,578 Common Stocks (continued) Issuer Shares Value(a) Multi-Utilities & Unregulated Power (0.3%) Aquila 12,000(b) $48,240 Energy East 1,000 26,220 Total 74,460 Multiline Retail (1.3%) Neiman Marcus Group Cl A 3,000 296,700 Oil & Gas (2.9%) Chevron 5,858 359,695 ConocoPhillips 1,000 65,940 El Paso 3,000 34,800 Exxon Mobil 1,000 59,900 Royal Dutch Shell Cl A ADR 2,500(c) 162,400 Total 682,735 Pharmaceuticals (2.7%) Bristol-Myers Squibb 2,000 48,940 Eli Lilly & Co 5,000 275,100 Pfizer 12,000 305,640 Total 629,680 Semiconductors & Semiconductor Equipment (0.7%) Texas Instruments 5,000 163,400 Specialty Retail (1.1%) AutoNation 2,000(b) 41,620 CSK Auto 10,000(b) 167,500 Rent-A-Center 2,000(b) 40,400 Total 249,520 Thrifts & Mortgage Finance (1.6%) Commercial Federal 10,800 366,228 Common Stocks (continued) Issuer Shares Value(a) Trading Companies & Distributors (0.3%) GATX 2,000 $81,060 Wireless Telecommunication Services (2.5%) Telephone & Data Systems 1,500 61,275 Telephone & Data Systems Special Shares 1,500 57,750 US Cellular 8,700(b) 477,456 Total 596,481 Total Common Stocks (Cost: $17,074,240) $18,562,668 Short-Term Securities (21.3%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (18.7%) Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.45% $2,500,000 $2,495,222 Federal Natl Mtge Assn Disc Nt 09-14-05 3.42 1,900,000 1,897,473 Total 4,392,695 Commercial Paper (2.6%) General Electric Capital 09-01-05 3.56 600,000 599,941 Total Short-Term Securities (Cost: $4,993,115) $4,992,636 Total Investments in Securities (Cost: $22,067,355)(d) $23,555,304 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 5.1% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $22,067,355 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $2,040,036 Unrealized depreciation (552,087) -------- Net unrealized appreciation $1,487,949 ---------- 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/investments. -------------------------------------------------------------------------------- 209 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Short Duration U.S. Government Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (98.8%) Issuer Coupon Principal Value(a) rate amount U.S. Government Obligations & Agencies (47.5%) Federal Farm Credit Bank 07-17-06 2.13% $3,200,000 $3,148,288 10-02-06 2.38 3,000,000 2,949,354 04-05-07 2.15 6,600,000 6,410,513 06-19-07 6.75 2,565,000 2,684,319 10-10-08 4.25 4,040,000 4,063,105 Federal Home Loan Bank 03-13-06 2.50 3,750,000 3,722,843 05-15-06 3.00 5,000,000 4,968,310 05-15-06 5.38 3,500,000 3,534,038 05-22-06 2.88 31,040,000 30,809,993 09-15-06 3.50 6,035,000 6,004,312 04-18-08 4.13 8,290,000 8,307,607 Federal Home Loan Mtge Corp 01-30-07 3.00 2,500,000 2,460,578 12-20-07 3.53 450,000 444,990 10-15-08 5.13 4,010,000 4,131,796 Federal Natl Mtge Assn 02-15-06 5.50 3,650,000 3,677,583 04-13-06 2.15 4,650,000 4,598,915 03-02-07 3.00 3,855,000 3,799,288 05-15-07 3.88 5,000,000 4,989,100 11-17-08 3.88 150,000 148,601 U.S. Treasury 01-31-06 1.88 23,795,000 23,618,393 11-30-06 2.88 11,155,000 11,028,636 01-31-07 3.13 5,585,000 5,531,334 02-15-07 2.25 18,585,000 18,175,554 02-28-07 3.38 10,900,000 10,828,474 05-15-07 3.13 2,350,000 2,322,921 08-15-07 2.75 6,325,000(j) 6,196,773 08-15-07 3.25 17,035,000(j) 16,849,353 02-15-08 3.38 12,225,000 12,091,283 10-15-08 3.13 4,960,000 4,856,148 04-15-09 3.13 5,000,000 4,878,320 08-15-14 4.25 3,700,000 3,762,293 05-15-15 4.13 4,055,000 4,081,134 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 5,006,419(m) 5,000,454 Total 230,074,603 Asset-Backed (4.8%) AmeriCredit Automobile Receivables Trust Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 2,750,000(n) 2,719,492 Capital Auto Receivables Asset Trust Series 2005-1 Cl A4 07-15-09 4.05 2,500,000 2,503,800 Chase Funding Mtge Loan Series 2004-2 Cl 2A1 01-25-25 3.77 404,948(i) 404,948 Federal Natl Mtge Assn 11-25-33 2.91 530,356 528,533 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) Franklin Auto Trust Series 2004-2 Cl A4 (MBIA) 08-15-12 3.93% $5,000,000(n) $4,950,699 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 1,500,000 1,484,580 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 2,500,000 2,463,085 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 1,750,000 1,731,923 Residential Asset Securities Series 2002-KS1 Cl AI4 (AMBAC) 11-25-29 5.86 550,142(n) 548,943 Small Business Administration Participation Ctfs Series 2001-10B Cl 1 09-10-11 5.89 465,615 488,491 Series 2001-20H Cl 1 08-01-21 6.34 352,366 378,309 Student Loan Mtge Assn Series 2003-4 Cl 45A 03-15-33 2.16 5,200,000(d) 5,157,568 Total 23,360,371 Commercial Mortgage-Backed (2.2%)(f) Citigroup Commercial Mtge Trust Series 2005-C3 Cl A1 05-15-43 4.39 4,903,628 4,907,532 Federal Natl Mtge Assn #360800 01-01-09 5.74 909,521 944,516 Federal Natl Mtge Assn #381990 10-01-09 7.11 472,594 517,458 LB-UBS Commercial Mtge Trust Series 2004-C6 Cl A2 08-15-29 4.19 1,500,000 1,488,270 Morgan Stanley Capital I Series 2004-IQ8 Cl A2 06-15-40 3.96 2,769,212 2,744,591 Total 10,602,367 Mortgage-Backed (43.4%)(f,k) Bear Stearns Alternative Trust Series 2005-5 Cl 1A1 07-25-35 3.86 2,234,936(i) 2,237,618 Countrywide Alternative Loan Trust Series 2005-6CB Cl 1A1 04-25-35 7.50 1,167,821 1,224,070 Countrywide Home Loans Series 2005-R2 Cl 2A1 06-25-35 7.00 2,852,108(d) 3,024,126 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Home Loan Mtge Corp 01-15-18 5.00% $1,603,064 $1,620,913 Collateralized Mtge Obligation 06-15-16 7.00 1,711,887 1,801,911 08-15-22 3.50 397,164 396,262 12-15-28 5.50 1,180,000 1,211,759 Interest Only 02-15-14 7.40 1,274,922(e) 79,122 07-15-17 0.92 1,599,380(e) 164,739 08-01-20 8.00 2,079,438(e) 358,682 10-15-22 14.56 827,901(e) 47,334 03-15-25 0.00 2,228,607(e) 145,561 Interest Only/Inverse Floater 11-15-19 0.00 2,510,606(e,l) 214,733 Principal Only 08-01-20 4.60 2,079,438(g) 1,708,425 Federal Home Loan Mtge Corp #782436 10-01-34 4.99 1,523,720(h) 1,538,516 Federal Home Loan Mtge Corp #A18107 01-01-34 5.50 2,466,518 2,494,570 Federal Home Loan Mtge Corp #B10776 11-01-13 5.00 143,608 145,296 Federal Home Loan Mtge Corp #B16408 09-01-19 5.50 1,862,513 1,903,754 Federal Home Loan Mtge Corp #C73304 11-01-32 7.00 385,839 403,721 Federal Home Loan Mtge Corp #D95319 03-01-22 6.00 189,803 195,579 Federal Home Loan Mtge Corp #E00489 06-01-12 7.00 12,553 13,128 Federal Home Loan Mtge Corp #E00678 06-01-14 6.50 112,681 116,718 Federal Home Loan Mtge Corp #E81240 06-01-15 7.50 1,643,568 1,758,020 Federal Home Loan Mtge Corp #E92454 11-01-17 5.00 1,047,890 1,056,938 Federal Home Loan Mtge Corp #E93465 11-01-17 5.50 1,245,419 1,273,082 Federal Home Loan Mtge Corp #E95188 03-01-18 6.00 695,274 719,791 Federal Home Loan Mtge Corp #E96579 06-01-13 4.50 876,051 868,190 Federal Home Loan Mtge Corp #G01790 09-01-34 6.50 4,097,518 4,233,566 Federal Home Loan Mtge Corp #G10669 03-01-12 7.50 720,887 766,437 Federal Home Loan Mtge Corp #G11243 04-01-17 6.50 1,840,089 1,911,231 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 210 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Natl Mtge Assn 10-01-35 6.00% $11,400,000(b) $11,649,376 Collateralized Mtge Obligation 07-25-23 5.50 3,275,618 3,310,536 12-25-26 8.00 579,390 615,575 06-25-33 5.72 178,038(h) 179,781 04-25-34 5.50 2,397,201 2,440,212 05-25-34 3.50 34,543 34,398 Interest Only 12-25-12 13.29 1,065,315(e) 44,334 11-25-13 10.08 1,700,000(e) 128,890 12-25-22 8.27 599,979(e) 77,423 03-25-23 7.94 907,866(e) 138,159 12-25-31 1.19 777,049(e) 127,171 Federal Natl Mtge Assn #252211 01-01-29 6.00 148,850 152,817 Federal Natl Mtge Assn #252409 03-01-29 6.50 1,947,741 2,035,111 Federal Natl Mtge Assn #254369 06-01-12 6.00 1,613,019 1,673,583 Federal Natl Mtge Assn #254384 06-01-17 7.00 511,323 535,566 Federal Natl Mtge Assn #254723 05-01-23 5.50 4,648,314 4,730,643 Federal Natl Mtge Assn #254748 04-01-13 5.50 1,435,441 1,467,289 Federal Natl Mtge Assn #254757 05-01-13 5.00 1,400,926 1,414,736 Federal Natl Mtge Assn #254774 05-01-13 5.50 1,159,658 1,187,049 Federal Natl Mtge Assn #254864 08-01-13 4.50 1,769,832 1,765,134 Federal Natl Mtge Assn #255488 10-01-14 5.50 1,791,964 1,835,097 Federal Natl Mtge Assn #255501 09-01-14 6.00 1,689,585 1,753,576 Federal Natl Mtge Assn #313470 08-01-10 7.50 548,076 573,402 Federal Natl Mtge Assn #323133 04-01-13 5.50 61,501 62,853 Federal Natl Mtge Assn #323788 06-01-14 6.50 88,917 92,235 Federal Natl Mtge Assn #323980 04-01-14 6.00 317,670 328,057 Federal Natl Mtge Assn #357485 02-01-34 5.50 5,691,587 5,755,391 Federal Natl Mtge Assn #507182 07-01-14 6.00 129,537 133,794 Federal Natl Mtge Assn #512232 05-01-29 7.00 48,248 50,784 Federal Natl Mtge Assn #533431 01-01-15 6.50 61,139 63,416 Federal Natl Mtge Assn #535168 12-01-14 5.50 211,304 215,994 Federal Natl Mtge Assn #545818 07-01-17 6.00 1,795,190 1,860,401 Federal Natl Mtge Assn #545864 08-01-17 5.50 2,315,525 2,371,146 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Natl Mtge Assn #545910 08-01-17 6.00% $2,096,081 $2,170,380 Federal Natl Mtge Assn #555063 11-01-17 5.50 2,785,877 2,853,072 Federal Natl Mtge Assn #555343 08-01-17 6.00 829,706 857,009 Federal Natl Mtge Assn #555367 03-01-33 6.00 3,897,707 3,993,399 Federal Natl Mtge Assn #555375 04-01-33 6.00 190,437 196,361 Federal Natl Mtge Assn #555387 04-01-33 4.63 2,730,432(h) 2,772,699 Federal Natl Mtge Assn #555740 08-01-18 4.50 230,032 228,370 Federal Natl Mtge Assn #602630 10-01-31 7.00 257,123 269,776 Federal Natl Mtge Assn #626720 01-01-17 6.00 615,656 635,866 Federal Natl Mtge Assn #630992 09-01-31 7.00 1,109,883 1,177,138 Federal Natl Mtge Assn #630993 09-01-31 7.50 959,091 1,018,963 Federal Natl Mtge Assn #633672 06-01-17 6.00 443,775 459,482 Federal Natl Mtge Assn #636720 05-01-17 5.50 159,644 163,196 Federal Natl Mtge Assn #638210 05-01-32 6.50 184,434 192,509 Federal Natl Mtge Assn #648040 06-01-32 6.50 903,872 936,089 Federal Natl Mtge Assn #648349 06-01-17 6.00 1,566,452 1,623,323 Federal Natl Mtge Assn #648679 07-01-32 6.00 3,407,157 3,490,805 Federal Natl Mtge Assn #650501 06-01-17 6.50 3,220,823 3,338,878 Federal Natl Mtge Assn #654413 09-01-32 7.00 195,621 205,179 Federal Natl Mtge Assn #656562 02-01-33 7.00 398,149 419,802 Federal Natl Mtge Assn #665752 09-01-32 6.50 744,232 770,759 Federal Natl Mtge Assn #668412 02-01-18 5.50 796,036 814,737 Federal Natl Mtge Assn #670387 08-01-32 7.00 25,415 26,665 Federal Natl Mtge Assn #671054 01-01-33 7.00 34,017 35,679 Federal Natl Mtge Assn #671174 02-01-33 4.63 761,062(h) 758,478 Federal Natl Mtge Assn #675692 02-01-18 6.00 555,515 573,795 Federal Natl Mtge Assn #678940 02-01-18 5.50 1,183,062 1,211,032 Federal Natl Mtge Assn #679183 02-01-18 5.50 1,226,809 1,256,378 Federal Natl Mtge Assn #684588 03-01-33 6.50 342,839 356,601 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Natl Mtge Assn #688181 03-01-33 6.00% $2,031,023 $2,080,886 Federal Natl Mtge Assn #695838 04-01-18 5.50 336,351 344,461 Federal Natl Mtge Assn #696154 04-01-33 4.57 2,030,173(h) 2,019,170 Federal Natl Mtge Assn #696711 05-01-18 5.50 1,308,138 1,342,791 Federal Natl Mtge Assn #696714 05-01-18 5.50 755,326 775,330 Federal Natl Mtge Assn #701937 04-01-33 6.00 201,447 206,389 Federal Natl Mtge Assn #704610 06-01-33 5.50 4,465,939 4,516,002 Federal Natl Mtge Assn #705655 05-01-33 5.00 1,881,766 1,874,295 Federal Natl Mtge Assn #720378 06-01-18 4.50 1,845,791 1,833,056 Federal Natl Mtge Assn #722325 07-01-33 4.97 795,009(h) 793,389 Federal Natl Mtge Assn #723448 07-01-13 5.00 1,077,178 1,094,238 Federal Natl Mtge Assn #725232 03-01-34 5.00 4,361,895 4,344,578 Federal Natl Mtge Assn #725431 08-01-15 5.50 3,143,139 3,212,284 Federal Natl Mtge Assn #725558 06-01-34 4.58 1,978,891(h) 1,969,584 Federal Natl Mtge Assn #725737 08-01-34 4.53 1,054,651(h) 1,055,305 Federal Natl Mtge Assn #740843 11-01-18 5.00 163,971 165,250 Federal Natl Mtge Assn #744010 07-01-13 5.00 2,155,234 2,185,618 Federal Natl Mtge Assn #747536 11-01-33 5.00 2,471,057 2,461,247 Federal Natl Mtge Assn #754297 12-01-33 4.74 112,276(h) 112,040 Federal Natl Mtge Assn #755891 03-01-13 5.00 551,285 559,485 Federal Natl Mtge Assn #790382 09-01-34 4.85 1,538,710(h) 1,548,257 Federal Natl Mtge Assn #790759 09-01-34 4.84 2,354,861(h) 2,363,626 Federal Natl Mtge Assn #791447 10-01-34 6.00 961,578 984,418 Federal Natl Mtge Assn #797044 07-01-34 5.50 3,759,564 3,799,552 Federal Natl Mtge Assn #797168 02-01-35 4.65 2,135,348(h) 2,145,626 Federal Natl Mtge Assn #799769 11-01-34 5.07 1,540,708(h) 1,556,115 Federal Natl Mtge Assn #801344 10-01-34 5.07 1,628,183(h) 1,651,238 Federal Natl Mtge Assn #815264 05-01-35 5.25 2,321,178(h) 2,348,501 Federal Natl Mtge Assn #815463 02-01-35 5.50 1,204,787 1,217,601 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 211 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.42% $966,517(i) $985,876 Series 2005-AA3 Cl 3A1 05-25-35 5.42 2,211,357(i) 2,235,350 GMAC Mtge Corporation Loan Trust Series 2004-AR2 Cl 3A 08-19-34 4.42 1,649,997(h) 1,643,871 Govt Natl Mtge Assn Collateralized Mtge Obligation 10-16-13 4.54 162,925 163,355 10-16-27 5.00 125,000 127,106 04-16-31 6.00 2,182,618 2,196,622 03-20-34 4.50 1,663,089 1,665,994 Govt Natl Mtge Assn #485336 03-15-31 8.00 56,671 60,840 Govt Natl Mtge Assn #498182 05-15-16 6.00 1,118,283 1,160,204 Govt Natl Mtge Assn #605970 03-15-33 6.00 457,778 472,448 Govt Natl Mtge Assn #615738 03-15-18 7.00 1,272,818 1,338,812 Govt Natl Mtge Assn #615740 08-15-13 6.00 2,793,846 2,898,544 Govt Natl Mtge Assn #780758 04-15-13 7.00 276,590 290,647 Govt Natl Mtge Assn #781507 09-15-14 6.00 1,346,553 1,396,965 GSR Mtge Loan Trust Series 2005-AR2 Cl 2A1 04-25-35 4.89 1,899,934(h) 1,897,749 Harborview Mtge Loan Trust Series 2004-4 Cl 3A 06-19-34 2.98 2,004,661(h) 1,964,180 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Morgan Stanley Mtge Loan Trust Series 2004-10AR Cl 2A1 11-25-34 5.14% $815,937(h) $827,899 Series 2004-2AR Cl 3A 02-25-34 5.03 1,555,762(h) 1,555,653 Structured Adj Rate Mtge Loan Trust Series 2005-15 Cl 4A1 07-25-35 5.54 3,545,209(h) 3,539,670 Structured Asset Securities Series 2004-12H Cl 2A 04-25-34 5.55 1,285,401(h) 1,292,472 Vendee Mtge Trust Series 2003-1 Cl D 12-15-25 5.75 5,000,000 5,041,901 Series 2003-2 Cl C 07-15-20 5.00 2,400,000 2,404,812 Series 2003-2 Cl D 11-15-23 5.00 100,000 100,946 Washington Mutual Series 2002-AR15 Cl A5 12-25-32 4.38 840,033(h) 833,932 Series 2005-AR3 Cl A2 03-25-35 4.65 2,351,799(h) 2,389,381 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 2,300,000(b) 2,311,859 Series 2005-5 Cl 2A1 05-25-35 5.50 1,941,619 1,968,874 Series 2005-AR2 03-25-35 4.56 1,155,578(h) 1,147,131 Total 209,717,566 Supranational (1.0%) Intl Bank for Reconstruction & Development 11-04-05 5.00 5,000,000(c) 5,008,135 Total Bonds (Cost: $481,140,692) $478,763,042 Short-Term Securities (3.6%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (1.2%) Federal Natl Mtge Assn Disc Nt 09-14-05 3.42% $5,700,000 $5,692,419 Commercial Paper (2.4%) General Electric Capital 09-01-05 3.56 11,900,000 11,898,823 Total Short-Term Securities (Cost: $17,592,962) $17,591,242 Total Investments in Securities (Cost: $498,733,654)(o) $496,354,284 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $13,921,642. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 1.0% of net assets. (d) 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 Aug. 31, 2005, the value of these securities amounted to $8,181,694 or 1.7% of net assets. (e) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. -------------------------------------------------------------------------------- 212 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Notes to Investments in Securities (continued) (g) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (h) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (j) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Treasury Note, Dec. 2005, 2-year $18,800,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 2,300,000 U.S. Treasury Note, Dec. 2005, 5-year 7,500,000 (k) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-35 5.00% $ 1,300,000 09-14-05 $1,271,969 $ 1,291,062 09-01-35 5.50 10,000,000 09-14-05 9,982,500 10,100,000 09-01-35 6.50 2,900,000 09-14-05 2,993,004 2,996,063 (l) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or in a multiple of, a decline (increase) in the LIBOR (London InterBank Offering Rate) Index. Interest rate disclosed is the rate in effect on Aug. 31, 2005. (m) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (n) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation MBIA -- MBIA Insurance Corporation (o) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $499,150,773 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 1,103,464 Unrealized depreciation (3,899,953) ---------- Net unrealized depreciation $(2,796,489) ----------- 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/investments. -------------------------------------------------------------------------------- 213 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Small Cap Advantage Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.7%) Issuer Shares Value(a) Aerospace & Defense (2.0%) AAR 22,000(b) $387,200 Armor Holdings 22,000(b) 933,020 B/E Aerospace 5,400(b) 85,644 DRS Technologies 13,300 684,285 GenCorp 8,550(b) 161,168 Innovative Solutions & Support 11,500(b) 193,890 Kaman Cl A 12,500 299,875 Moog Cl A 24,706(b) 778,486 Teledyne Technologies 29,800(b) 1,151,174 Total 4,674,742 Air Freight & Logistics (0.2%) Forward Air 13,300 469,224 Hub Group Cl A 1,700(b) 54,825 Total 524,049 Airlines (0.3%) Continental Airlines Cl B 7,000(b) 93,590 ExpressJet Holdings 11,844(b) 112,636 SkyWest 22,900 542,959 Total 749,185 Auto Components (0.7%) American Axle & Mfg Holdings 22,300 578,907 ArvinMeritor 30,366 563,289 Bandag 2,513 108,813 Cooper Tire & Rubber 7,035 118,892 Modine Mfg 5,000 175,800 Superior Inds Intl 6,303 140,242 Total 1,685,943 Beverages (0.2%) Hansen Natural 10,800(b) 536,220 Biotechnology (3.5%) Albany Molecular Research 22,800(b) 380,304 Alkermes 6,000(b) 112,680 Applera - Celera Genomics Group 37,700(b,d) 442,598 Cepheid 38,000(b) 285,000 CV Therapeutics 29,000(b) 787,930 deCODE genetics 61,700(b,c) 599,107 Encysive Pharmaceuticals 43,300(b) 536,054 Exelixis 36,000(b) 269,640 Human Genome Sciences 29,300(b) 378,263 ICOS 8,000(b) 209,040 Incyte 65,100(b) 479,136 Lexicon Genetics 57,600(b) 256,320 Martek Biosciences 2,000(b) 102,000 Medarex 49,300(b) 495,465 Myriad Genetics 10,400(b) 205,608 Nabi Biopharmaceuticals 28,300(b) 381,201 Orchid Cellmark 18,000(b) 162,000 Pharmion 8,000(b) 198,800 Common Stocks (continued) Issuer Shares Value(a) Biotechnology (cont.) Regeneron Pharmaceuticals 22,000(b) $164,340 Savient Pharmaceuticals 25,400(b) 102,616 Serologicals 20,910(b) 497,449 Tanox 24,400(b) 321,836 United Therapeutics 10,300(b) 723,163 Vertex Pharmaceuticals 11,000(b) 202,400 Total 8,292,950 Building Products (0.9%) Ameron Intl 3,607 153,153 Lennox Intl 30,200 736,578 USG 6,897(b) 433,476 Water Pik Technologies 22,000(b) 433,400 YORK Intl 7,694 441,482 Total 2,198,089 Capital Markets (0.7%) Investment Technology Group 31,471(b) 863,879 Jefferies Group 12,400 489,552 Knight Capital Group Cl A 16,973(b) 142,913 MCG Capital 3,096 56,409 Waddell & Reed Financial Cl A 4,100 79,458 Total 1,632,211 Chemicals (1.2%) Albemarle 11,800 428,458 Cambrex 4,693 89,261 Chemtura 15,226 261,278 FMC 7,828(b) 445,883 HB Fuller 17,940 588,612 Hercules 39,900(b) 508,725 Kronos Worldwide 9 274 Octel 6,021(c) 103,441 Sensient Technologies 11,847 222,368 WR Grace & Co 14,175(b) 149,546 Total 2,797,846 Commercial Banks (5.2%) Amcore Financial 5,448 168,234 AmericanWest Bancorp 3,191(b) 72,914 BancorpSouth 49,852 1,121,171 Bank of Hawaii 17,000 862,750 Bank of the Ozarks 17,000 566,950 BOK Financial 14,000 657,860 Camden Natl 1,625 61,766 Cathay General Bancorp 13,500 454,545 Chemical Financial 5,314 173,343 Chittenden 6,519 175,752 Citizens Banking 4,275 129,490 City Holding 12,600 462,672 Colonial BancGroup 35,200 818,752 Community Trust Bancorp 3,430 110,240 East-West Bancorp 16,400 556,616 First BanCorp Puerto Rico 2,400(c) 44,304 First Citizens BancShares Cl A 671 110,715 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) First Community Bancshares 1,545 $45,361 First Financial Bancorp 3,862 69,516 First Midwest Bancorp 18,031 684,096 First Republic Bank 22,600 813,600 Greater Bay Bancorp 21,300 536,760 Hanmi Financial 36,800 675,280 Hudson United Bancorp 2,600 109,850 Irwin Financial 3,304 69,384 Old Natl Bancorp 3,012 67,499 Oriental Financial Group 5,917(c) 80,294 Prosperity Bancshares 17,000 496,740 Republic Bancorp 4,789 70,303 S&T Bancorp 3,092 117,898 Southwest Bancorp 3,216 74,322 Sterling Bancshares 20,000 299,800 Susquehanna Bancshares 2,815 70,938 Tompkins Trustco 1,449 61,322 Trustmark 9,446 260,332 UMB Financial 1,970 129,725 Wintrust Financial 15,900 819,486 Total 12,100,580 Commercial Services & Supplies (3.6%) Administaff 1,800 64,746 Banta 3,362 164,570 Brady Cl A 21,000 655,410 Bright Horizons Family Solutions 9,000(b) 353,880 FTI Consulting 26,523(b) 660,423 G&K Services Cl A 11,700 502,749 GEO Group 2,353(b) 65,649 IKON Office Solutions 7,800 78,702 Jackson Hewitt Tax Service 24,000 614,160 John H Harland 19,000 797,050 Korn/Ferry Intl 34,050(b) 674,871 Labor Ready 20,700(b) 470,304 NCO Group 4,000(b) 83,920 PHH 13,100(b) 396,144 Portfolio Recovery Associates 11,100(b) 443,667 Pre-Paid Legal Services 1,780 72,072 Resources Connection 22,000(b) 638,000 Sotheby's Holdings Cl A 27,000(b) 469,530 SOURCECORP 3,620(b) 74,174 United Stationers 5,412(b) 253,823 Viad 2,200 63,954 Waste Connections 24,000(b) 848,159 Total 8,445,957 Communications Equipment (2.7%) ADTRAN 16,000 413,120 ARRIS Group 78,900(b) 827,661 Black Box 6,574 282,485 CommScope 34,200(b) 639,540 Comtech Telecommunications 1,900(b) 66,690 Digi Intl 45,600(b) 483,816 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 214 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Communications Equipment (cont.) Ditech Communications 39,900(b) $293,664 Endwave 1,700(b) 52,734 F5 Networks 14,661(b) 605,353 Ixia 13,113(b) 235,509 NETGEAR 38,800(b) 860,196 Plantronics 14,390 469,114 Sycamore Networks 62,700(b) 234,498 Tekelec 27,000(b) 532,170 UTStarcom 29,800(b) 229,460 Westell Technologies Cl A 31,000(b) 115,630 Total 6,341,640 Computers & Peripherals (1.3%) Emulex 30,900(b) 665,895 Imation 10,497 442,029 Iomega 40,800(b) 130,152 Komag 21,900(b) 730,584 Maxtor 134,000(b) 651,240 Palm 15,900(b) 543,462 Total 3,163,362 Construction & Engineering (1.4%) Comfort Systems USA 54,800(b) 451,004 EMCOR Group 1,448(b) 79,843 Granite Construction 1,953 72,808 Perini 37,200(b) 721,308 Quanta Services 35,000(b) 420,000 Shaw Group 16,113(b) 339,984 URS 18,700(b) 704,616 Washington Group Intl 11,500(b) 607,660 Total 3,397,223 Construction Materials (1.0%) Eagle Materials 8,600 968,704 Headwaters 16,300(b) 627,550 Texas Inds 12,000 717,720 Total 2,313,974 Consumer Finance (1.4%) AmeriCredit 19,200(b) 478,848 CompuCredit 19,969(b) 835,902 Metris Companies 16,329(b) 238,730 MoneyGram Intl 42,600 884,376 WFS Financial 6,000(b) 401,520 World Acceptance 21,220(b) 543,020 Total 3,382,396 Containers & Packaging (0.5%) Crown Holdings 21,088(b) 356,176 Greif Cl A 1,200 70,620 Rock-Tenn Cl A 4,786 72,939 Silgan Holdings 12,200 734,684 Total 1,234,419 Distributors (0.3%) Building Material Holding 7,127 666,232 Handleman 6,417 89,774 Total 756,006 Common Stocks (continued) Issuer Shares Value(a) Diversified Financial Services (0.9%) iShares Russell 2000 Small Cap Index Fund 29,000(e) $1,925,310 NASDAQ Stock Market 9,400(b) 220,900 Total 2,146,210 Diversified Telecommunication Services (0.8%) Commonwealth Telephone Enterprises 18,500 744,440 General Communication Cl A 40,770(b) 439,501 Premiere Global Services 78,000(b) 711,360 Talk America Holdings 10,700(b) 98,119 Total 1,993,420 Electric Utilities (1.2%) Allete 3,000 135,750 Black Hills 1,557 64,849 CH Energy Group 972 46,753 Cleco 5,934 136,482 Duquesne Light Holdings 34,046 617,935 El Paso Electric 34,519(b) 723,518 Idacorp 28,276 868,073 Otter Tail 2,725 81,750 PNM Resources 2,860 84,599 Sierra Pacific Resources 5,000(b) 72,900 Total 2,832,609 Electrical Equipment (0.8%) Artesyn Technologies 57,100(b) 524,178 Energy Conversion Devices 6,000(b) 208,260 General Cable 11,609(b) 182,145 Genlyte Group 14,000(b) 688,940 Global Power Equipment Group 37,900(b) 295,620 Total 1,899,143 Electronic Equipment & Instruments (2.1%) Aeroflex 51,474(b) 478,193 Agilysys 10,900 195,655 Anixter Intl 9,700(b) 370,346 Benchmark Electronics 18,275(b) 531,985 Checkpoint Systems 14,000(b) 305,900 Itron 2,600(b) 120,302 Lexar Media 42,500(b) 266,050 Methode Electronics 12,000 147,840 Metrologic Instruments 17,600(b) 294,800 MTS Systems 10,800 445,176 Paxar 9,893(b) 186,087 RadiSys 42,500(b) 793,476 SYNNEX 9,997(b) 165,850 Technitrol 19,800 290,466 Trimble Navigation 8,000(b) 292,160 Total 4,884,286 Energy Equipment & Services (3.4%) Atwood Oceanics 8,000(b) 601,840 Cal Dive Intl 18,800(b) 1,174,248 Grey Wolf 118,200(b) 925,506 GulfMark Offshore 2,581(b) 76,888 Helmerich & Payne 3,000 178,260 Hydril 12,500(b) 856,250 Common Stocks (continued) Issuer Shares Value(a) Energy Equipment & Services (cont.) Lufkin Inds 1,700 $78,438 Maverick Tube 24,500(b) 780,325 NS Group 12,835(b) 534,193 Oil States Intl 37,400(b) 1,296,284 Parker Drilling 6,700(b) 54,069 Pioneer Drilling 5,900(b) 92,040 Superior Energy Services 9,536(b) 209,029 TODCO Cl A 17,000 590,240 Unit 12,900(b) 671,574 Total 8,119,184 Food & Staples Retailing (0.9%) 7-Eleven 20,300(b) 575,302 Central European Distribution 1,400(b) 58,450 Great Atlantic & Pacific Tea 4,700(b) 119,286 Longs Drug Stores 3,000 127,200 Nash Finch 20,125 845,249 Ruddick 6,410 149,802 Spartan Stores 7,200(b) 73,728 Weis Markets 3,294 124,250 Total 2,073,267 Food Products (1.3%) American Italian Pasta Cl A 3,824 42,179 Chiquita Brands Intl 18,400 463,680 Corn Products Intl 41,500 934,579 Farmer Brothers 1,872 39,200 Lancaster Colony 3,469 158,707 Lance 36,000 612,000 Ralcorp Holdings 14,900 660,815 Seaboard 145 186,180 Total 3,097,340 Gas Utilities (1.5%) Energen 19,272 738,503 Nicor 4,418 182,949 ONEOK 22,500 765,000 Peoples Energy 4,826 200,617 South Jersey Inds 29,200 860,232 UGI 22,178 613,222 WGL Holdings 4,638 152,451 Total 3,512,974 Health Care Equipment & Supplies (2.8%) Biosite 7,400(b) 442,446 EPIX Pharmaceuticals 44,900(b) 382,997 Gen-Probe 11,000(b) 500,720 Haemonetics 30,800(b) 1,368,752 Hologic 4,700(b) 226,681 Illumina 12,200(b) 148,840 Immucor 24,984(b) 591,371 Intermagnetics General 17,000(b) 496,570 Intuitive Surgical 3,503(b) 260,623 Invacare 1,300 54,080 Kyphon 2,000(b) 88,580 Mentor 5,000 263,000 Nektar Therapeutics 21,000(b) 358,680 Sybron Dental Specialties 22,000(b) 852,940 Thoratec 3,400(b) 55,658 Varian 10,000(b) 356,000 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 215 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Health Care Equipment & Supplies (cont.) Ventana Medical Systems 4,530(b) $183,420 Vital Signs 1,658 74,560 Total 6,705,918 Health Care Providers & Services (6.2%) Advisory Board 13,500(b) 705,105 Alliance Imaging 50,637(b) 467,380 Allscripts Healthcare Solutions 24,300(b) 432,054 Amedisys 18,300(b) 715,896 American Retirement 8,100(b) 147,825 AMERIGROUP 17,249(b) 589,226 Apria Healthcare Group 31,700(b) 1,085,092 Centene 33,467(b) 1,020,074 Chemed 1,600 64,736 Dendrite Intl 21,100(b) 382,121 Genesis HealthCare 17,700(b) 709,770 HealthExtras 50,500(b) 1,047,875 Horizon Health 2,200(b) 55,000 Kindred Healthcare 14,800(b) 452,880 LCA-Vision 2,800 114,940 LifePoint Hospitals 2,300(b) 104,604 Magellan Health Services 26,000(b) 921,700 Matria Healthcare 2,449(b) 88,776 MedCath 3,700(b) 91,797 Option Care 48,150 650,988 PSS World Medical 56,900(b) 824,481 Psychiatric Solutions 18,783(b) 897,827 Radiation Therapy Services 28,000(b) 752,080 RehabCare Group 4,836(b) 108,665 Sierra Health Services 10,100(b) 679,730 Stewart Enterprises Cl A 6,105 42,369 Sunrise Senior Living 2,308(b) 137,072 TriZetto Group 3,800(b) 59,622 United Surgical Partners Intl 2,000(b) 76,620 Ventiv Health 40,186(b) 912,222 Total 14,338,527 Hotels, Restaurants & Leisure (3.2%) Ameristar Casinos 29,846 685,563 Bluegreen 35,800(b) 631,512 Bob Evans Farms 7,753 187,545 Boyd Gaming 5,173 240,700 Domino's Pizza 31,900 733,699 Jack in the Box 22,332(b) 787,649 Lone Star Steakhouse & Saloon 17,300 456,547 Monarch Casino & Resort 32,000(b) 607,680 Panera Bread Cl A 10,700(b) 596,418 Penn Natl Gaming 18,470(b) 629,458 PF Chang's China Bistro 7,400(b) 378,732 Ryan's Restaurant Group 9,854(b) 126,230 Scientific Games Cl A 17,700(b) 533,478 SONIC 13,600(b) 416,024 Vail Resorts 19,200(b) 551,040 Total 7,562,275 Common Stocks (continued) Issuer Shares Value(a) Household Durables (2.0%) Beazer Homes USA 7,106 $443,699 Blyth 2,903 72,140 Brookfield Homes 10,100 517,120 Ethan Allen Interiors 6,448 207,755 Furniture Brands Intl 12,145 232,091 Jarden 30,650(b) 1,216,498 La-Z-Boy 11,370 163,614 M/I Homes 2,485 140,030 Meritage Homes 1,963(b) 153,683 Tupperware 25,941 568,626 WCI Communities 17,648(b) 532,440 Yankee Candle 14,000 384,580 Total 4,632,276 Household Products (0.5%) Central Garden & Pet 16,800(b) 832,272 Spectrum Brands 12,900(b) 363,135 Total 1,195,407 Industrial Conglomerates (0.4%) Standex Intl 2,809 74,832 Walter Inds 18,023 790,669 Total 865,501 Insurance (4.8%) Alfa 9,740 148,535 AmerUs Group 15,282 845,400 Commerce Group 3,892 226,981 Delphi Financial Group Cl A 29,293 1,379,701 FBL Financial Group Cl A 3,600 107,892 FPIC Insurance Group 13,000(b) 454,870 Horace Mann Educators 37,078 725,987 Infinity Property & Casualty 2,515 81,788 LandAmerica Financial Group 14,794 874,621 Navigators Group 11,800(b) 437,308 Odyssey Re Holdings 18,900(e) 477,225 Ohio Casualty 48,800 1,232,689 ProAssurance 27,500(b) 1,211,376 RLI 15,000 691,500 Safety Insurance Group 13,373 469,125 Selective Insurance Group 20,000 946,800 Stewart Information Services 3,721 178,868 Triad Guaranty 2,600(b) 109,798 United Fire & Casualty 3,725 153,507 Universal American Financial 9,086(b) 208,524 Total 10,962,495 Internet & Catalog Retail (0.4%) Blair 483 19,320 Coldwater Creek 4,232(b) 129,711 Insight Enterprises 7,179(b) 135,181 NetFlix 29,000(b) 625,239 NutriSystem 4,600(b) 100,786 Total 1,010,237 Common Stocks (continued) Issuer Shares Value(a) Internet Software & Services (1.9%) aQuantive 8,300(b) $149,898 CNET Networks 6,800(b) 90,984 Digital River 15,661(b) 594,805 Digitas 69,040(b) 809,148 EarthLink 25,900(b) 252,784 j2 Global Communications 21,418(b) 803,818 United Online 20,050 261,252 ValueClick 55,800(b) 805,751 Websense 15,366(b) 766,610 Total 4,535,050 IT Services (1.8%) Anteon Intl 13,000(b) 597,350 BISYS Group 6,385(b) 95,328 CACI Intl Cl A 6,900(b) 432,216 CSG Systems Intl 54,293(b) 1,107,034 MAXIMUS 9,615 362,101 Perot Systems Cl A 39,800(b) 573,120 SRA Intl Cl A 21,446(b) 719,942 TALX 11,000 392,260 Total 4,279,351 Leisure Equipment & Products (0.6%) Callaway Golf 12,029 179,352 JAKKS Pacific 6,531(b) 108,480 Nautilus 3,212 82,645 Oakley 4,800 83,952 RC2 11,000(b) 427,350 SCP Pool 16,825 615,795 Total 1,497,574 Machinery (2.6%) Badger Meter 950 41,610 Barnes Group 9,000 310,500 Cascade 2,895 131,375 CIRCOR Intl 20,000 525,200 Clarcor 22,800 645,240 Crane 3,400 100,674 EnPro Inds 12,000(b) 412,800 ESCO Technologies 3,400(b) 352,512 Gardner Denver 17,600(b) 736,032 JLG Inds 3,700 121,323 Joy Global 10,209 487,990 Kennametal 16,700 778,888 Lincoln Electric Holdings 3,872 145,897 Middleby 7,600(b) 499,472 Mueller Inds 3,998 104,788 Tecumseh Products Cl A 2,364 62,906 Wabtec 24,900 647,400 Total 6,104,607 Media (1.8%) Arbitron 11,000 462,000 Entercom Communications 14,000(b) 468,300 Entravision Communications Cl A 33,000(b) 268,620 Gray Television 26,200 322,260 Martha Stewart Living Omnimedia Cl A 2,837(b) 91,635 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 216 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Media (cont.) Mediacom Communications Cl A 43,000(b) $313,900 PRIMEDIA 34,693(b) 144,323 Radio One Cl D 55,000(b) 768,900 Reader's Digest Assn 4,582 74,503 Scholastic 11,800(b) 430,346 Valassis Communications 22,015(b) 868,052 Total 4,212,839 Metals & Mining (2.1%) AK Steel Holding 14,730(b) 116,367 Carpenter Technology 10,100 562,570 Century Aluminum 20,000(b) 484,000 Cleveland-Cliffs 9,627 684,287 Commercial Metals 7,637 228,575 Compass Minerals Intl 20,600 506,966 Metal Management 17,400 426,300 Oregon Steel Mills 27,163(b) 610,624 Quanex 11,410 701,830 Reliance Steel & Aluminum 13,000 624,000 Titanium Metals 1,800(b) 119,106 Total 5,064,625 Multi-Utilities & Unregulated Power (0.5%) Aquila 68,183(b) 274,096 NorthWestern Energy 26,000 810,680 Total 1,084,776 Oil & Gas (3.5%) ATP Oil & Gas 2,300(b) 72,818 Berry Petroleum Cl A 11,350 701,771 Carrizo Oil and Gas 25,300(b) 598,345 Cheniere Energy 6,748(b) 263,509 Cimarex Energy 24,494(b) 1,046,873 Energy Partners 28,106(b) 674,544 Frontier Oil 7,200 263,880 Holly 2,778 156,513 Houston Exploration 1,675(b) 98,658 Overseas Shipholding Group 8,578 524,545 Plains Exploration & Production 3,300(b) 122,265 Remington Oil & Gas 10,000(b) 385,300 Southwestern Energy 5,638(b) 326,440 St. Mary Land & Exploration 35,000 1,206,449 Swift Energy 13,800(b) 633,834 Tesoro 13,961 806,946 Vintage Petroleum 7,034 270,317 Total 8,153,007 Paper & Forest Products (0.3%) Potlatch 12,200 658,800 Schweitzer-Mauduit Intl 4,563 105,040 Total 763,840 Personal Products (0.4%) Chattem 14,200(b) 550,108 Nu Skin Enterprises Cl A 16,000 341,440 Playtex Products 7,900(b) 85,478 Revlon Cl A 15,700(b) 55,578 Total 1,032,604 Common Stocks (continued) Issuer Shares Value(a) Pharmaceuticals (0.7%) CNS 2,100 $55,251 First Horizon Pharmaceutical 37,800(b) 781,326 Kos Pharmaceuticals 3,000(b) 204,360 MGI PHARMA 7,000(b) 188,720 Perrigo 32,500 465,725 Total 1,695,382 Real Estate (0.3%) Jones Lang LaSalle 10,000(b) 493,300 Trammell Crow 4,839(b) 131,476 Total 624,776 Real Estate Investment Trust (3.4%) American Home Mortgage Investment 24,822 794,057 Anthracite Capital 15,492 182,961 Anworth Mtge Asset 17,575 155,890 Bedford Property Investors 4,989 114,996 Capstead Mtge 5,800 46,168 CBL & Associates Properties 13,500 572,670 EastGroup Properties 14,200 612,588 IMPAC Mtge Holdings 19,413 271,005 Innkeepers USA Trust 44,000 690,800 MFA Mtge Investments 34,856 234,929 New Century Financial 3,666 157,601 Novastar Financial 2,233 76,458 Omega Healthcare Investors 39,000 517,920 Pan Pacific Retail Properties 9,000 596,430 RAIT Investment Trust 26,063 779,023 Redwood Trust 14,952 752,235 Saxon Capital 6,700 84,889 Town & Country Trust 13,900 389,200 Universal Health Realty Income Trust 16,616 573,086 Ventas 15,400 479,710 Total 8,082,616 Road & Rail (1.1%) Amerco 2,774(b) 166,024 Arkansas Best 2,554 85,993 Dollar Thrifty Automotive Group 2,248(b) 68,024 Florida East Coast Inds 11,000 473,660 Genesee & Wyoming Cl A 15,700(b) 459,539 Landstar System 17,400 631,969 Old Dominion Freight Line 17,900(b) 572,442 Werner Enterprises 4,200 74,970 Total 2,532,621 Semiconductors & Semiconductor Equipment (4.4%) Atheros Communications 44,150(b) 459,160 Axcelis Technologies 26,000(b) 153,400 Cypress Semiconductor 20,000(b) 312,600 DSP Group 20,700(b) 527,229 Entegris 22,973(b) 240,527 ESS Technology 57,725(b) 220,510 FormFactor 20,800(b) 565,136 Genesis Microchip 2,400(b) 63,096 IXYS 14,000(b) 145,180 Microsemi 68,700(b) 1,654,982 MKS Instruments 21,000(b) 372,960 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (cont.) OmniVision Technologies 34,000(b) $498,440 ON Semiconductor 149,300(b) 858,475 Photronics 24,600(b) 510,942 Pixelworks 51,000(b) 375,870 PMC-Sierra 28,000(b) 237,440 PortalPlayer 20,000(b) 530,600 Silicon Image 23,600(b) 243,788 Silicon Storage Technology 87,300(b) 424,278 Skyworks Solutions 43,140(b) 325,276 Tessera Technologies 12,000(b) 398,160 Trident Microsystems 3,400(b) 119,408 Varian Semiconductor Equipment Associates 17,600(b) 797,456 Total 10,034,913 Software (3.5%) ANSYS 29,822(b) 1,125,781 Epicor Software 57,500(b) 767,050 FileNet 17,200(b) 457,004 Hyperion Solutions 6,100(b) 264,557 Informatica 49,400(b) 564,148 Internet Security Systems 19,500(b) 443,040 MICROS Systems 21,104(b) 941,027 Parametric Technology 122,700(b) 743,562 Progress Software 13,200(b) 404,712 Quality Systems 1,800 117,000 Take-Two Interactive Software 1(b) 12 THQ 1,900(b) 63,859 Transaction Systems Architects 34,300(b) 918,554 Ultimate Software Group 38,700(b) 706,275 VASCO Data Security Intl 78,300(b) 822,150 Total 8,338,731 Specialty Retail (3.0%) bebe stores 6,633 156,008 Blockbuster Cl A 11,000 72,270 Burlington Coat Factory Warehouse 7,205 276,384 Cato Cl A 24,625 477,725 Children's Place Retail Stores 12,000(b) 490,920 Finish Line Cl A 16,100 232,162 GameStop Cl B 2,700(b) 81,378 Genesco 13,900(b) 551,969 Group 1 Automotive 4,954(b) 146,638 Guitar Center 10,300(b) 591,220 Jos A Bank Clothiers 7,300(b) 288,715 Linens `N Things 9,035(b) 213,226 Lithia Motors Cl A 2,100 62,349 Men's Wearhouse 12,000(b) 365,760 Movie Gallery 4,505 81,045 Pantry 24,900(b) 893,660 Payless ShoeSource 5,872(b) 108,867 Pier 1 Imports 7,300 90,885 Sonic Automotive 27,539 645,790 Stage Stores 19,050(b) 529,781 Talbots 3,000 92,100 Zale 25,559(b) 713,096 Total 7,161,948 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 217 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Textiles, Apparel & Luxury Goods (1.8%) Brown Shoe 4,493 $160,849 Hartmarx 83,900(b) 745,032 K-Swiss Cl A 2,800 85,792 Kellwood 3,712 90,870 Phillips-Van Heusen 23,600 790,363 Quiksilver 38,000(b) 579,500 Russell 6,282 114,270 Steven Madden 2,700(b) 63,315 Stride Rite 7,044 90,868 Warnaco Group 31,400(b) 785,000 Wolverine World Wide 35,500 747,985 Total 4,253,844 Thrifts & Mortgage Finance (2.0%) Anchor BanCorp Wisconsin 2,526 76,967 BankAtlantic Bancorp Cl A 28,000 477,400 CharterMac LP 4,800 105,840 Commercial Federal 5,610 190,235 Doral Financial 9,300(c) 133,362 Downey Financial 8,029 508,878 FirstFed Financial 16,092(b) 926,094 Flagstar Bancorp 3,939 67,948 Fremont General 5,000 114,100 ITLA Capital 929(b) 49,934 Common Stocks (continued) Issuer Shares Value(a) Thrifts & Mortgage Finance (cont.) Ocwen Financial 83,500(b,e) $573,645 R-G Financial Cl B 3,683(c) 55,724 Sterling Financial 20,216 779,731 W Holding 7,800(c) 77,064 WSFS Financial 11,500 668,265 Total 4,805,187 Tobacco (0.1%) Universal 6,289 261,748 Trading Companies & Distributors (0.9%) GATX 24,053 974,869 United Rentals 4,783(b) 86,333 Watsco 2,500 121,900 WESCO Intl 24,912(b) 864,446 Total 2,047,548 Wireless Telecommunication Services (0.6%) Centennial Communications 13,700(b) 164,263 Leap Wireless Intl 13,000(b) 444,080 SBA Communications Cl A 20,187(b) 303,814 UbiquiTel 65,800(b) 570,486 Total 1,482,643 Total Common Stocks (Cost: $201,848,717) $230,108,091 Short-Term Securities (2.9%)(f) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency(2.1%) Federal Natl Mtge Assn Disc Nt 09-12-05 3.26% $5,000,000 $4,994,573 Commercial Paper (0.8%) Old Line Funding 09-01-05 3.56 2,000,000(g) 1,999,802 Total Short-Term Securities (Cost: $6,995,004) $6,994,375 Total Investments in Securities (Cost: $208,843,721)(h) $237,102,466 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 0.5% of net assets. (d) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (e) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 0.9% of net assets. See Note 6 to the financial statements. 2.1% of net assets is the Fund's cash equivalent position. (g) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $1,999,802 or 0.8% of net assets. (h) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $209,311,014 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $34,347,859 Unrealized depreciation (6,556,407) ---------- Net unrealized appreciation $27,791,452 ----------- 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/investments. -------------------------------------------------------------------------------- 218 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Small Cap Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (87.2%) Issuer Shares Value(a) Aerospace & Defense (0.5%) AAR 11,300(b) $198,880 Curtiss-Wright 8,300 535,848 DRS Technologies 5,700 293,265 Ducommun 13,640(b) 283,030 EDO 10,405 292,276 MTC Technologies 17,642(b) 602,651 Total 2,205,950 Air Freight & Logistics (--%) Forward Air 4,773 168,391 Airlines (1.3%) Air France-KLM ADR 56,650(c) 929,627 AirTran Holdings 51,695(b) 534,009 Alaska Air Group 39,000(b) 1,315,079 America West Holdings Cl B 62,000(b) 436,480 Continental Airlines Cl B 71,300(b) 953,281 ExpressJet Holdings 36,800(b) 349,968 Frontier Airlines 11,163(b) 121,119 SkyWest Airlines 38,600 915,206 Total 5,554,769 Auto Components (1.6%) American Axle & Mfg Holdings 13,481 349,967 Drew Inds 16,200(b) 726,570 Goodyear Tire & Rubber 44,300(b) 744,240 Lear 58,400 2,201,680 STRATTEC SECURITY 11,900(b) 615,468 Tenneco Automotive 26,003(b) 471,434 Visteon 159,000 1,570,920 Total 6,680,279 Automobiles (0.4%) Monaco Coach 19,000 292,030 Thor Inds 18,800 624,160 Winnebago Inds 19,100 581,977 Total 1,498,167 Beverages (0.2%) Boston Beer Cl A 31,300(b) 735,550 Biotechnology (0.2%) Albany Molecular Research 21,300(b) 355,284 Lexicon Genetics 30,300(b) 134,835 Medarex 20,679(b) 207,824 United Therapeutics 3,639(b) 255,494 Total 953,437 Building Products (2.0%) Aaon 22,600(b) 409,512 American Woodmark 15,688 588,300 ElkCorp 8,113 288,823 Lennox Intl 13,378 326,289 Royal Group Technologies 464,700(b,c) 4,568,002 Simpson Mfg 25,000 930,750 Common Stocks (continued) Issuer Shares Value(a) Building Products (continued) Trex 1,412(b) $34,043 Universal Forest Products 8,866 482,576 USG 12,700(b) 798,195 Total 8,426,490 Capital Markets (1.2%) Affiliated Managers Group 9,040(b) 656,394 Apollo Investment 21,876 420,675 Cohen & Steers 12,300 252,150 Gladstone Capital 4,900 115,248 Investment Technology Group 18,900(b) 518,805 Investors Financial Services 6,635 233,021 Knight Capital Group Cl A 247,637(b) 2,085,105 optionsXpress Holdings 5,902 101,219 SWS Group 11,800 192,222 Total 4,574,839 Chemicals (1.5%) Agrium 22,514(c) 484,051 Albemarle 16,435 596,755 American Vanguard 285 5,700 HB Fuller 9,000 295,290 Minerals Technologies 7,981 486,442 NL Inds 9,700 137,449 Penford 10,913 158,239 PolyOne 321,500(b) 2,182,984 Sensient Technologies 51,104 959,222 Terra Inds 71,300(b) 520,490 Wellman 27,000 187,650 Total 6,014,272 Commercial Banks (4.5%) Alabama Natl BanCorporation 8,950 587,926 Alliance Bankshares 5,841(b) 95,500 Bancorp 26,085(b) 434,837 Bank of Hawaii 44,600 2,263,449 Boston Private Financial Holdings 9,200 244,444 Cardinal Financial 22,254(b) 222,317 Central Pacific Financial 23,435 810,382 Citizens Banking 26,918 815,346 City Holding 10,400 381,888 Community Bancorp 2,600(b) 89,050 Community Banks 2,700 76,545 Cullen/Frost Bankers 45,100 2,204,037 First BanCorp Puerto Rico 28,100(c) 518,726 First Community Bancorp 7,500 354,000 First Financial Bancorp 17,700 318,600 First Midwest Bancorp 18,000 682,920 First Oak Brook Bancshares 4,297 130,543 First Republic Bank 12,650 455,400 Hanmi Financial 12,200 223,870 IBERIABANK 10,865 548,657 Independent Bank 8,300 251,324 Interchange Financial Services 3,268 57,419 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (continued) Irwin Financial 19,538 $410,298 Main Street Banks 16,301 436,704 MainSource Financial Group 6,600 120,186 Mercantile Bank 4,420 200,668 Midwest Banc Holdings 13,153 314,620 Millennium Bankshares 18,249(b) 140,700 National Penn Bancshares 2,900 76,415 Pacific Capital Bancorp 17,000 532,780 Placer Sierra Bancshares 9,191 245,675 Prosperity Bancshares 5,062 147,912 Provident Bankshares 10,400 355,160 Provident Financial Services 14,800 263,144 Republic Bancorp 36,800 540,224 Santander BanCorp 4,390(c) 113,877 Seacoast Banking Corporation of Florida 3,700 81,733 Signature Bank 13,488(b) 404,505 Southcoast Financial 7,050(b) 160,740 Sterling Bancorp 6,153 136,350 Sterling Bancshares 33,600 503,664 Sterling Financial 3,600 76,536 Sun Bancorp 3,109(b) 66,844 Susquehanna Bancshares 9,600 241,920 SVB Financial Group 5,200(b) 244,608 Texas United Bancshares 6,128 120,722 UMB Financial 444 29,237 Umpqua Holdings 14,600 355,510 United Community Banks 14,228 389,847 West Coast Bancorp 1,359 35,185 Total 18,512,944 Commercial Services & Supplies (1.9%) Brady Cl A 85,600 2,671,575 Central Parking 20,200 320,978 Ennis 5,200 90,480 FTI Consulting 16,800(b) 418,320 Healthcare Services Group 29,275 540,124 Heidrick & Struggles Intl 11,100(b) 366,522 ITT Educational Services 9,588(b) 487,454 John H Harland 16,900 708,955 LECG 7,696(b) 177,239 Resources Connection 5,113(b) 148,277 School Specialty 4,761(b) 228,100 TRC Companies 5,255(b) 78,825 Waste Connections 11,709(b) 413,796 West 33,262(b) 1,288,570 Total 7,939,215 Communications Equipment (2.1%) 3Com 1,131,000(b) 3,845,401 Anaren 12,600(b) 174,132 Audiovox Cl A 40,000(b) 723,200 Black Box 2,057 88,389 CommScope 36,700(b) 686,290 Comtech Telecommunications 2,500(b) 87,750 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 219 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Communications Equipment (continued) Digi Intl 10,800(b) $114,588 Ditech Communications 23,709(b) 174,498 Foundry Networks 86,100(b) 1,007,370 Powerwave Technologies 25,948(b) 271,935 Redback Networks 66,400(b) 600,256 Sycamore Networks 195,300(b) 730,422 Total 8,504,231 Computers & Peripherals (1.2%) Emulex 34,000(b) 732,700 Hutchinson Technology 40,980(b) 1,081,871 Imation 7,591 319,657 Intergraph 20,100(b) 820,281 Komag 10,500(b) 350,280 McDATA Cl A 42,762(b) 230,060 Mobility Electronics 23,466(b) 256,953 Neoware Systems 25,200(b) 275,688 Palm 4,512(b) 154,220 Rimage 23,200(b) 560,048 Total 4,781,758 Construction & Engineering (0.7%) Comfort Systems USA 27,767(b) 228,522 Dycom Inds 7,000(b) 124,040 Infrasource Services 13,047(b) 195,705 Insituform Technologies Cl A 105,700(b) 2,187,991 Modtech Holdings 14,140(b) 128,108 Total 2,864,366 Construction Materials (0.4%) Eagle Materials 2,800 315,392 Florida Rock Inds 18,075 1,023,045 Texas Inds 3,567 213,342 Total 1,551,779 Consumer Finance (0.4%) Advanta Cl B 9,800 282,730 CompuCredit 17,500(b) 732,550 Metris Companies 45,100(b) 659,362 Total 1,674,642 Containers & Packaging (0.8%) AptarGroup 11,300 561,949 Caraustar Inds 69,644(b) 808,567 Chesapeake 83,106 1,620,567 Rock-Tenn Cl A 12,300 187,452 Total 3,178,535 Distributors (0.2%) Earle M Jorgensen 34,104(b) 348,543 Handleman 11,900 166,481 Prestige Brands Holdings 17,798(b) 229,060 Total 744,084 Diversified Financial Services (0.4%) CapitalSource 6,101(b) 120,800 Financial Federal 13,952 544,826 iShares Russell 2000 Value Index Fund 13,440 892,819 Total 1,558,445 Common Stocks (continued) Issuer Shares Value(a) Diversified Telecommunication Services (0.4%) Alaska Communications Systems Group 17,496 $189,482 Cincinnati Bell 22,165(b) 95,974 Commonwealth Telephone Enterprises 16,300 655,913 Golden Telecom 12,300(c) 362,850 Iowa Telecommunications Services 7,871 146,479 Talk America Holdings 16,000(b) 146,720 Valor Communications Group 12,484 173,902 Total 1,771,320 Electric Utilities (2.2%) Black Hills 3,500 145,775 Central Vermont Public Service 2,874 54,893 CH Energy Group 6,200 298,220 Cleco 41,840 962,320 El Paso Electric 63,299(b) 1,326,747 MGE Energy 1,996 74,231 Otter Tail 7,300 219,000 Reliant Energy 324,000(b) 4,050,001 Sierra Pacific Resources 115,040(b) 1,677,283 Unisource Energy 471 15,675 Westar Energy 15,288 367,218 Total 9,191,363 Electrical Equipment (0.9%) AO Smith 11,500 323,610 Baldor Electric 9,252 228,247 Franklin Electric 7,130 301,243 General Cable 5,600(b) 87,864 GrafTech Intl 119,798(b) 711,600 LSI Inds 13,700 210,158 Regal-Beloit 18,200 607,334 Thomas & Betts 20,100(b) 714,353 Woodward Governor 7,200 587,160 Total 3,771,569 Electronic Equipment & Instruments (4.1%) Aeroflex 42,604(b) 395,791 Agilysys 30,500 547,475 Anixter Intl 23,270(b) 888,449 Bell Microproducts 31,700(b) 321,121 Coherent 8,600(b) 273,394 CTS 17,500 217,700 CyberOptics 12,093(b) 166,400 KEMET 11,400(b) 92,568 Littelfuse 71,500(b) 1,989,130 LoJack 14,621(b) 308,357 Methode Electronics 17,100 210,672 MTS Systems 6,449 265,828 Nu Horizons Electronics 49,100(b) 299,510 Plexus 151,200(b) 2,582,496 Rofin-Sinar Technologies 23,900(b) 863,985 ScanSource 6,124(b) 273,498 SYNNEX 970(b) 16,092 Tech Data 104,000(b) 3,807,439 Tektronix 36,400 919,828 TTM Technologies 41,100(b) 318,114 Common Stocks (continued) Issuer Shares Value(a) Electronic Equipment & Instruments (continued) Viisage Technology 40,778(b) $176,161 Vishay Intertechnology 165,200(b) 2,131,080 Total 17,065,088 Energy Equipment & Services (2.8%) Dril-Quip 4,000(b) 168,080 Ensign Energy Services 34,200(c) 1,077,755 Hydril 3,658(b) 250,573 Lone Star Technologies 2,500(b) 138,250 NS Group 10,300(b) 428,686 Oil States Intl 24,104(b) 835,445 Patterson-UTI Energy 13,600 462,672 RPC 30,550 708,760 SEACOR Holdings 4,400(b) 314,600 Superior Energy Services 26,500(b) 580,880 Superior Well Services 7,223(b) 158,906 TETRA Technologies 23,175(b) 660,488 Tidewater 83,600 3,723,543 Trican Well Service 16,600(b,c) 555,292 Unit 21,800(b) 1,134,908 W-H Energy Services 8,658(b) 280,952 Willbros Group 8,393(b,c) 145,031 Total 11,624,821 Food & Staples Retailing (0.2%) Longs Drug Stores 4,400 186,560 Weis Markets 20,500 773,260 Total 959,820 Food Products (0.8%) American Italian Pasta Cl A 86,109 949,782 Chiquita Brands Intl 29,800 750,960 Corn Products Intl 9,538 214,796 Gold Kist 30,400(b) 561,792 Hain Celestial Group 2,220(b) 41,891 Lancaster Colony 20,100 919,575 Total 3,438,796 Gas Utilities (0.5%) Nicor 3,600 149,076 Northwest Natural Gas 21,585 793,897 South Jersey Inds 7,616 224,367 Southern Union 1,705(b) 41,983 Southwest Gas 8,217 225,310 WGL Holdings 23,000 756,010 Total 2,190,643 Health Care Equipment & Supplies (1.0%) Abaxis 13,011(b) 149,236 Conceptus 18,263(b) 191,396 Greatbatch 9,100(b) 227,500 Haemonetics 36,500(b) 1,622,060 Intuitive Surgical 6,300(b) 468,720 Molecular Devices 6,000(b) 125,160 Nutraceutical Intl 32,200(b) 474,950 ThermoGenesis 30,782(b) 166,531 Viasys Healthcare 17,200(b) 463,196 Vital Signs 9,600 431,712 Total 4,320,461 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 220 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (2.1%) AMERIGROUP 22,500(b) $768,600 AMN Healthcare Services 12,527(b) 193,667 Cross Country Healthcare 20,200(b) 391,880 Genesis HealthCare 90,400(b) 3,625,041 Hooper Holmes 78,600 331,692 Horizon Health 13,500(b) 337,500 Kindred Healthcare 8,200(b) 250,920 Medical Staffing Network Holdings 5,422(b) 31,339 Molina Healthcare 21,500(b) 585,445 NDCHealth 16,615 312,528 PAREXEL Intl 13,241(b) 256,611 PSS World Medical 28,372(b) 411,110 Psychiatric Solutions 2,328(b) 111,278 Radiologix 54,111(b) 219,150 U.S. Physical Therapy 36,600(b) 691,008 United Surgical Partners Intl 3,488(b) 133,625 Total 8,651,394 Hotels, Restaurants & Leisure (3.0%) Aztar 16,274(b) 543,552 Bluegreen 15,600(b) 275,184 Buca 29,621(b) 162,916 California Pizza Kitchen 9,596(b) 283,946 CBRL Group 18,300 661,728 CEC Entertainment 33,295(b) 1,141,686 Dover Downs Gaming & Entertainment 44,400 591,408 Fox & Hound Restaurant Group 22,320(b) 263,153 IHOP 6,000 240,960 Jack in the Box 21,100(b) 744,197 Kerzner Intl 48,300(b,c) 2,755,514 La Quinta 91,700(b) 774,865 Lodgian 149,300(b) 1,563,170 Lone Star Steakhouse & Saloon 6,200 163,618 Multimedia Games 34,000(b) 343,060 O`Charley's 15,200(b) 249,128 Ruby Tuesday 30,700 678,470 Ryan's Restaurant Group 41,800(b) 535,458 Sunterra 42,000(b) 531,300 Total 12,503,313 Household Durables (2.4%) Beazer Homes USA 4,767 297,651 Blount Intl 4,100(b) 73,800 Blyth 4,800 119,280 Brookfield Homes 8,800 450,560 Champion Enterprises 77,649(b) 1,035,061 Department 56 16,100(b) 209,139 Ethan Allen Interiors 26,100 840,942 Fleetwood Enterprises 73,700(b) 745,107 Furniture Brands Intl 27,700 529,347 Helen of Troy 55,698(b,c) 1,267,687 Hooker Furniture 45,700 828,084 Oneida 28,929(b) 57,858 Stanley Furniture 30,200 809,662 Technical Olympic USA 27,350 797,526 Common Stocks (continued) Issuer Shares Value(a) Household Durables (continued) Tupperware 25,500 $558,960 WCI Communities 15,383(b) 464,105 Yankee Candle 23,300 640,051 Total 9,724,820 Industrial Conglomerates (0.1%) Alleghany 728(b) 216,762 Tredegar 18,800 233,496 Total 450,258 Insurance (4.8%) American Natl Insurance 11,000 1,221,220 American Physicians Capital 14,900(b) 658,729 AmerUs Group 17,600 973,632 Arch Capital Group 3,100(b,c) 134,695 Argonaut Group 24,200(b) 602,822 Aspen Insurance Holdings 41,979(c) 1,139,730 Assured Guaranty 37,900(c) 848,960 CNA Surety 27,300(b) 341,250 Commerce Group 2,000 116,640 Donegal Group Cl A 6,993 159,161 Endurance Specialty Holdings 22,800(c) 836,760 Erie Indemnity Cl A 3,900 203,346 FBL Financial Group Cl A 37,000 1,108,890 Horace Mann Educators 10,000 195,800 LandAmerica Financial Group 1,800 106,416 Natl Atlantic Holdings 10,715(b) 117,758 Navigators Group 6,562(b) 243,188 NYMAGIC 5,487 133,060 Ohio Casualty 33,800 853,788 Phoenix Companies 61,600 738,584 Presidential Life 8,400 147,756 ProAssurance 23,304(b) 1,026,541 ProCentury 26,163 261,630 PXRE Group 83,472(c) 1,944,062 Quanta Capital Holdings 69,000(b,c) 435,390 Reinsurance Group of America 3,000 128,730 Republic Companies Group 16,761(b) 228,788 RLI 28,346 1,306,750 Safety Insurance Group 13,800 484,104 Scottish Re Group 33,400(c) 803,604 StanCorp Financial Group 4,263 344,664 UICI 26,900 830,134 United Fire & Casualty 22,989 947,377 Total 19,623,959 Internet & Catalog Retail (0.2%) Insight Enterprises 37,463(b) 705,428 Internet Software & Services (0.5%) Autobytel 66,849(b) 334,245 EarthLink 55,800(b) 544,608 iPass 97,700(b) 545,166 United Online 49,500 644,985 Vignette 8,600(b) 130,634 Total 2,199,638 Common Stocks (continued) Issuer Shares Value(a) IT Services (1.5%) BearingPoint 24,283(b) $198,635 Ciber 32,700(b) 256,368 CSG Systems Intl 9,400(b) 191,666 eFunds 46,100(b) 898,950 Kanbay Intl 144(b) 3,210 Keane 26,800(b) 308,200 Lionbridge Technologies 105,594(b) 709,592 ManTech Intl Cl A 8,800(b) 272,888 MAXIMUS 26,246 988,424 Perot Systems Cl A 103,600(b) 1,491,840 SM&A 56,900(b) 505,272 Sykes Enterprises 52,000(b) 553,800 Total 6,378,845 Leisure Equipment & Products (1.4%) Arctic Cat 32,700 705,339 Brunswick 60,000 2,640,000 Callaway Golf 12,800 190,848 Head 139,000(b,c) 433,680 JAKKS Pacific 29,500(b) 489,995 K2 34,184(b) 425,591 Radica Games 28,100(c) 247,280 RC2 17,900(b) 695,415 Total 5,828,148 Machinery (5.6%) Actuant Cl A 10,658(b) 451,899 Commercial Vehicle Group 33,545(b) 695,388 Flowserve 103,700(b) 3,851,418 Gardner Denver 18,800(b) 786,216 Harsco 48,300 2,832,795 IDEX 66,200 2,879,700 Kaydon 100,700 2,911,237 Key Technology 52,000(b) 658,840 Lincoln Electric Holdings 25,100 945,768 Lydall 33,201(b) 291,173 Mueller Inds 19,359 507,399 Tennant 6,395 242,626 Terex 90,477(b) 4,413,469 Titan Intl 23,700 323,742 Wabash Natl 69,585 1,448,760 Total 23,240,430 Marine (0.8%) Kirby 70,200(b) 3,299,400 Media (1.4%) ADVO 13,655 447,065 Arbitron 4,400 184,800 Citadel Broadcasting 20,700(b) 279,450 Courier 10,950 404,165 Cumulus Media Cl A 14,300(b) 182,611 Entravision Communications Cl A 20,700(b) 168,498 Gray Television 25,200 309,960 Journal Register 17,916(b) 335,925 Liberty 4,600 220,754 LIN TV Cl A 14,500(b) 219,095 LodgeNet Entertainment 7,200(b) 108,720 RCN 5,400(b) 129,060 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 221 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Media (continued) Sinclair Broadcast Group Cl A 17,500 $164,325 Valassis Communications 65,800(b) 2,594,493 Total 5,748,921 Metals & Mining (3.6%) Agnico-Eagle Mines 25,900(c) 338,772 AK Steel Holding 211,200(b) 1,668,480 Apex Silver Mines 8,100(b) 106,272 Century Aluminum 90,100(b) 2,180,420 Commercial Metals 20,677 618,863 Eldorado Gold 51,900(b,c) 156,219 Gibraltar Inds 35,200 753,984 Glamis Gold 21,800(b,c) 414,636 Goldcorp 12,400(c) 223,944 Hecla Mining 66,200(b) 235,672 IPSCO 11,800(c) 757,442 Meridian Gold 26,900(b,c) 508,141 Minefinders 22,100(b,c) 81,770 Oregon Steel Mills 16,778(b) 377,169 Quanex 7,900 485,929 Reliance Steel & Aluminum 15,200 729,600 Roanoke Electric Steel 3,900 73,593 Ryerson Tull 34,100 700,414 Schnitzer Steel Inds Cl A 3,128 89,461 Steel Dynamics 13,600 428,808 Steel Technologies 27,000 632,070 Stillwater Mining 222,800(b) 1,789,084 USEC 129,400 1,523,038 Total 14,873,781 Multi-Utilities & Unregulated Power (0.2%) Avista 8,505 165,337 CMS Energy 36,800(b) 592,480 Total 757,817 Multiline Retail (1.7%) Big Lots 50,681(b) 598,543 Bon-Ton Stores 6,400 129,728 Conn's 16,500(b) 412,995 Dillard's Cl A 193,700 4,360,187 Dollar General 74,000 1,410,440 Tuesday Morning 5,826 168,604 Total 7,080,497 Oil & Gas (4.0%) Callon Petroleum 25,300(b) 467,544 Chesapeake Energy 95,700 3,025,077 Cimarex Energy 47,813(b) 2,043,528 Edge Petroleum 31,100(b) 612,359 Encore Acquisition 90,400(b) 3,049,191 Energy Partners 5,800(b) 139,200 Frontier Oil 6,164 225,911 Giant Inds 3,400(b) 167,450 Harvest Natural Resources 19,400(b) 197,686 Nordic American Tanker Shipping 12,700(c) 526,161 OMI 6,708 128,324 Parallel Petroleum 17,929(b) 231,822 Petroleum Development 3,127(b) 118,826 Range Resources 33,071 1,151,863 Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (continued) Remington Oil and Gas 16,200(b) $624,186 St. Mary Land & Exploration 34,000 1,171,980 Swift Energy 22,200(b) 1,019,646 Tesoro 4,400 254,320 TransMontaigne 15,300(b) 144,891 Whiting Petroleum 23,286(b) 1,008,750 Total 16,308,715 Paper & Forest Products (0.1%) Louisiana-Pacific 11,300 285,777 Personal Products (0.6%) Chattem 2,769(b) 107,271 Elizabeth Arden 31,724(b) 704,907 Inter Parfums 28,500 527,535 Nu Skin Enterprises Cl A 38,400 819,457 Playtex Products 43,110(b) 466,450 Total 2,625,620 Pharmaceuticals (0.7%) Alpharma Cl A 38,100 1,014,222 Endo Pharmaceuticals Holdings 17,900(b) 537,000 First Horizon Pharmaceutical 25,500(b) 527,085 Perrigo 45,000 644,850 Salix Pharmaceuticals 8,411(b) 171,416 Total 2,894,573 Real Estate (1.0%) MI Developments Cl A 100,500(c) 3,321,524 Wellsford Real Properties 50,300(b) 952,682 Total 4,274,206 Real Estate Investment Trust (4.1%) Acadia Realty Trust 11,834 209,462 Agree Realty 9,474 280,430 American Campus Communities 3,288 77,432 Arbor Realty Trust 25,100 713,844 Ashford Hospitality Trust 21,800 250,482 Bedford Property Investors 4,300 99,115 BioMed Realty Trust 15,441 381,856 Boykin Lodging 29,600(b) 389,536 Brandywine Realty Trust 18,105 577,550 Capital Automotive 36,852 1,321,881 Capital Trust Cl A 4,300 141,513 Commercial Net Lease Realty 42,304 844,811 Corporate Office Properties Trust 3,453 120,303 Correctional Properties Trust 14,200 415,492 Cousins Properties 20,600 624,386 CRIIMI MAE 3,900(b) 72,150 Digital Realty Trust 5,626 107,007 Entertainment Properties Trust 17,908 815,888 Equity Inns 54,200 696,470 Equity One 13,500 314,280 FelCor Lodging Trust 46,900(b) 715,225 Getty Realty 9,800 283,808 Hersha Hospitality Trust 8,377 84,775 Common Stocks (continued) Issuer Shares Value(a) Real Estate Investment Trust (continued) HomeBanc 14,300 $113,971 Innkeepers USA Trust 31,700 497,690 Investors Real Estate Trust 11,700 115,947 KKR Financial 6,136 143,521 LaSalle Hotel Properties 11,076 374,037 Lexington Corporate Properties Trust 16,112 370,576 LTC Properties 15,400 311,542 Luminent Mtge Capital 23,300 211,098 MFA Mtge Investments 45,809 308,753 Natl Health Investors 11,600 336,052 New Century Financial 8,400 361,116 Omega Healthcare Investors 59,632 791,913 Parkway Properties 12,325 595,791 Post Properties 5,445 202,010 Prentiss Properties Trust 14,463 555,958 RAIT Investment Trust 21,136 631,755 Redwood Trust 3,100 155,961 Senior Housing Properties Trust 25,700 488,300 Spirit Finance 7,188 76,624 Town & Country Trust 6,665 186,620 Trustreet Properties 8,600 141,814 U-Store-It Trust 11,990 246,514 Winston Hotels 7,400 80,364 Total 16,835,623 Road & Rail (0.4%) Covenant Transport Cl A 57,500(b) 722,775 Heartland Express 10,865 216,431 SCS Transportation 17,164(b) 275,482 Swift Transportation 12,800(b) 255,232 Total 1,469,920 Semiconductors & Semiconductor Equipment (2.2%) Brooks Automation 14,000(b) 198,800 Catalyst Semiconductor 128,300(b) 619,689 Cymer 17,800(b) 596,300 Entegris 43,800(b) 458,586 Fairchild Semiconductor Intl 36,995(b) 623,366 Integrated Device Technology 66,522(b) 711,785 Integrated Silicon Solution 182,800(b) 1,619,607 IXYS 21,100(b) 218,807 OmniVision Technologies 52,500(b) 769,650 Photronics 4,000(b) 83,080 Power Integrations 1,463(b) 32,362 Semitool 46,200(b) 372,834 SigmaTel 36,600(b) 708,210 Skyworks Solutions 40,818(b) 307,768 Tessera Technologies 18,439(b) 611,806 TriQuint Semiconductor 321,600(b) 1,241,376 Total 9,174,026 Software (1.9%) Atari 145,652(b) 184,978 Catapult Communications 34,400(b) 547,648 Citadel Security Software 41,855(b) 36,414 Epicor Software 19,690(b) 262,665 Hyperion Solutions 3,002(b) 130,197 InterVideo 39,100(b) 391,391 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 222 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Software (continued) Intervoice 33,200(b) $311,084 MapInfo 8,800(b) 99,616 Mentor Graphics 212,600(b) 1,813,478 Pervasive Software 137,700(b) 626,535 Reynolds & Reynolds Cl A 78,100 2,228,973 Take-Two Interactive Software 17,930(b) 426,734 Transaction Systems Architects 20,300(b) 543,634 Ulticom 9,500(b) 101,080 Ultimate Software Group 9,521(b) 173,758 Total 7,878,185 Specialty Retail (3.7%) Aaron Rents 28,937 640,955 AnnTaylor Stores 2,800(b) 71,680 Asbury Automotive Group 24,100(b) 411,146 Brookstone 73,879(b) 1,458,371 Buckle 21,900 859,794 Build-A-Bear Workshop 5,100(b) 113,118 Cato Cl A 46,400 900,160 Claire's Stores 28,000 657,440 Cost Plus 53,200(b) 1,144,332 Deb Shops 36,000 871,920 Dress Barn 15,478(b) 371,472 Finish Line Cl A 6,600 95,172 Gymboree 34,849(b) 535,629 Linens `N Things 29,800(b) 703,280 Lithia Motors Cl A 12,200 362,218 Men's Wearhouse 75,300(b) 2,295,144 Payless ShoeSource 20,100(b) 372,654 Pier 1 Imports 42,200 525,390 Select Comfort 13,895(b) 268,590 Sharper Image 16,953(b) 227,848 Sonic Automotive 21,100 494,795 Talbots 9,800 300,860 Too 29,100(b) 775,806 Trans World Entertainment 14,700(b) 109,662 United Auto Group 5,700 192,375 Zale 12,384(b) 345,514 Total 15,105,325 Textiles, Apparel & Luxury Goods (1.4%) Cherokee 3,600 120,024 Columbia Sportswear 4,800(b) 222,720 Cutter & Buck 33,500 462,300 Fossil 24,482(b) 538,359 K-Swiss Cl A 45,872 1,405,519 Kellwood 8,551 209,328 Kenneth Cole Productions Cl A 27,300 782,145 Polo Ralph Lauren 9,000 445,950 Steven Madden 11,000(b) 257,950 Stride Rite 60,000 774,000 Wolverine World Wide 17,900 377,153 Total 5,595,448 Common Stocks (continued) Issuer Shares Value(a) Thrifts & Mortgage Finance (2.1%) Accredited Home Lenders Holding 27,149(b) $1,087,589 Anchor BanCorp Wisconsin 8,200 249,854 Bank Mutual 26,000 284,700 BankAtlantic Bancorp Cl A 43,700 745,085 BankUnited Financial Cl A 19,449 458,996 Berkshire Hills Bancorp 8,429 271,835 Brookline Bancorp 22,169 342,289 Commercial Capital Bancorp 14,000 251,020 Corus Bankshares 10,700 622,633 Doral Financial 7,500(c) 107,550 Downey Financial 1,300 82,394 Federal Agricultural Mtge Cl C 8,200 191,552 Fidelity Bankshares 18,788 565,707 First Financial Holdings 4,100 127,141 First Niagara Financial Group 106,969 1,515,752 Flagstar Bancorp 5,700 98,325 KNBT Bancorp 11,100 185,925 NetBank 25,820 223,601 PFF Bancorp 35,658 1,060,112 TierOne 8,800 248,336 Total 8,720,396 Tobacco (0.1%) Vector Group 10,300 206,000 Trading Companies & Distributors (0.7%) Applied Industrial Technologies 15,109 542,564 GATX 23,700 960,561 Hughes Supply 28,557 903,829 Lawson Products 2,200 85,580 NuCO2 8,088(b) 202,524 Total 2,695,058 Transportation Infrastructure (0.2%) Sea Containers Cl A 61,000(c) 658,800 Wireless Telecommunication Services (0.3%) Alamosa Holdings 12,931(b) 223,706 Leap Wireless Intl 7,943(b) 271,333 Price Communications 25,000(b) 417,501 UbiquiTel 21,614(b) 187,393 Total 1,099,933 Total Common Stocks (Cost: $323,189,687) $359,350,278 Other (--%) Issuer Shares Value(a) Air France ADR Warrants 51,500(b,c,e) $20,600 Total Other (Cost: $--) $20,600 Short-Term Securities (12.8%) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper Alpine Securitization 09-01-05 3.56% $8,500,000(d) $8,499,159 Chariot Funding LLC 09-21-05 3.54 10,000,000(d) 9,979,409 CIESCO LLC 10-04-05 3.62 10,000,000(d) 9,965,906 Citibank Credit Card Dakota Nts 09-19-05 3.54 5,000,000(d) 4,990,685 General Electric Capital 09-01-05 3.56 4,400,000 4,399,565 Morgan Stanley & Co 09-01-05 3.57 6,100,000 6,099,395 Thunder Bay Funding LLC 09-01-05 3.55 8,800,000(d) 8,799,132 Total Short-Term Securities (Cost: $52,738,472) $52,733,251 Total Investments in Securities (Cost: $375,928,159)(f) $412,104,129 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 223 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 6.5% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $42,234,291 or 10.2% of net assets. (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 Aug. 31, 2005, is as follows: Security Acquisition Cost dates Air France ADR Warrants 05-05-04 $-- (f) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $376,897,534 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 48,913,082 Unrealized depreciation (13,706,487) ----------- Net unrealized appreciation $ 35,206,595 ------------ 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/investments. -------------------------------------------------------------------------------- 224 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Strategy Aggressive Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (96.5%) Issuer Shares Value(a) Aerospace & Defense (2.6%) Precision Castparts 82,500 $7,976,100 Rockwell Collins 210,100 10,112,113 Total 18,088,213 Air Freight & Logistics (2.2%) CH Robinson Worldwide 123,000 7,595,250 UTI Worldwide 104,000(c) 7,847,840 Total 15,443,090 Biotechnology (8.3%) Amylin Pharmaceuticals 222,100(b,d) 7,273,775 Genzyme 178,900(b) 12,732,313 Gilead Sciences 408,300(b) 17,556,900 Invitrogen 161,355(b) 13,671,609 OSI Pharmaceuticals 159,000(b) 5,215,200 Total 56,449,797 Capital Markets (1.4%) Green Hill & Co LLC 96,900 3,897,318 Investors Financial Services 169,300 5,945,816 Total 9,843,134 Chemicals (1.5%) Rohm & Haas 229,400 9,958,254 Commercial Services & Supplies (5.3%) ChoicePoint 84,300(b) 3,618,999 Cintas 113,200 4,669,500 Corporate Executive Board 159,702 12,899,131 ITT Educational Services 68,000(b) 3,457,120 Manpower 263,939 11,893,091 Total 36,537,841 Communications Equipment (1.3%) Juniper Networks 394,312(b) 8,966,655 Computers & Peripherals (4.7%) NCR 234,600(b) 8,028,012 Network Appliance 651,700(b) 15,471,358 SanDisk 229,737(b) 8,920,688 Total 32,420,058 Diversified Financial Services (1.3%) CapitalSource 450,460(b,d) 8,919,108 Energy Equipment & Services (4.6%) BJ Services 75,600 4,768,848 Nabors Inds 129,500(b,c) 8,676,500 Natl Oilwell Varco 78,900(b) 5,066,169 Precision Drilling 212,833(b,c) 10,035,076 Tidewater 74,850 3,333,819 Total 31,880,412 Common Stocks (continued) Issuer Shares Value(a) Health Care Equipment & Supplies (7.7%) Beckman Coulter 107,000 $5,969,530 Cooper Companies 73,400 5,033,038 CR Bard 231,100 14,866,663 Foxhollow Technologies 88,900(b,d) 4,080,510 Gen-Probe 147,400(b) 6,709,648 Kinetic Concepts 109,300(b) 5,989,640 St. Jude Medical 229,500(b) 10,534,050 Total 53,183,079 Health Care Providers & Services (8.4%) Caremark Rx 443,100(b) 20,706,062 Community Health Systems 353,800(b) 13,030,454 PacifiCare Health Systems 30,900(b) 2,329,242 Quest Diagnostics 78,200 3,908,436 WellChoice 245,800(b) 17,476,380 Total 57,450,574 Hotels, Restaurants & Leisure (2.9%) GTECH Holdings 335,100 9,577,158 Starbucks 206,400(b) 10,121,856 Total 19,699,014 Household Durables (1.5%) Harman Intl Inds 64,000 6,617,600 Lennar Cl A 64,600 4,011,660 Total 10,629,260 Household Products (1.7%) Church & Dwight 302,600 11,547,216 Insurance (2.0%) Assurant 161,600 6,032,528 IPC Holdings 101,100(c) 3,972,219 United America Indemnity Cl A 222,100(b,c) 3,986,695 Total 13,991,442 Internet Software & Services (1.6%) Akamai Technologies 137,400(b) 1,901,616 VeriSign 414,900(b) 9,044,820 Total 10,946,436 IT Services (5.1%) Affiliated Computer Services Cl A 205,500(b) 10,675,725 Alliance Data Systems 267,200(b) 11,241,104 DST Systems 75,300(b) 4,043,610 Paychex 119,100 4,064,883 VeriFone Holdings 215,700(b) 4,734,615 Total 34,759,937 Machinery (1.6%) Danaher 202,600 10,851,256 Common Stocks (continued) Issuer Shares Value(a) Media (2.2%) EW Scripps Cl A 144,200 $7,210,000 Univision Communications Cl A 186,400(b) 5,014,160 XM Satellite Radio Holdings Cl A 77,400(b) 2,728,350 Total 14,952,510 Metals & Mining (2.0%) Peabody Energy 191,000 13,688,970 Oil & Gas (7.6%) Apache 121,400 8,694,668 Chesapeake Energy 242,400 7,662,264 EOG Resources 213,000 13,595,790 Pioneer Natural Resources 172,900 8,541,260 XTO Energy 343,100 13,655,380 Total 52,149,362 Pharmaceuticals (2.0%) Barr Pharmaceuticals 78,000(b) 3,557,580 MGI PHARMA 118,200(b) 3,186,672 Sepracor 144,700(b) 7,263,940 Total 14,008,192 Semiconductors & Semiconductor Equipment (7.9%) ASML Holding 382,100(b,c) 6,457,490 Broadcom Cl A 110,600(b) 4,811,100 KLA-Tencor 176,900 8,979,444 Marvell Technology Group 414,800(b,c) 19,574,412 Microchip Technology 135,800 4,226,096 Photronics 137,340(b) 2,852,552 Skyworks Solutions 566,600(b) 4,272,164 Xilinx 115,700 3,250,013 Total 54,423,271 Software (4.0%) Autodesk 207,900 8,981,280 Fair Isaac 189,800 7,757,126 Mercury Interactive 184,425(b) 6,762,865 NAVTEQ 78,500(b) 3,653,390 Total 27,154,661 Specialty Retail (1.7%) Advance Auto Parts 96,200(b) 5,861,466 Chico's FAS 165,200(b) 5,734,092 Total 11,595,558 Textiles, Apparel & Luxury Goods (1.5%) Coach 303,300(b) 10,066,527 Trading Companies & Distributors (1.9%) Fastenal 217,800 13,194,324 Total Common Stocks (Cost: $484,470,317) $662,798,151 See accompanying notes to investments in securities. -------------------------------------------------------------------------------- 225 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Strategy Aggressive Fund Bond (0.3%) Issuer Coupon Principal Value(a) rate amount Federal Farm Credit Bank 03-15-06 2.50% $2,000,000 $1,985,358 Total Bond (Cost: $1,999,422) $1,985,358 Short-Term Securities (6.2%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (2.8%) Federal Natl Mtge Assn Disc Nt 09-07-05 3.25% $18,900,000 $18,888,057 Short-Term Securities (continued) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper (3.4%) Alpine Securitization 09-01-05 3.56% $4,000,000(f) $3,999,604 Rabobank USA Financial 09-09-05 3.50 15,000,000 14,986,875 Thunder Bay Funding LLC 09-01-05 3.47 5,000,000(f) 4,999,518 Total 23,985,997 Total Short-Term Securities (Cost: $42,878,096) $42,874,054 Total Investments in Securities (Cost: $529,347,835)(g) $707,657,563 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 8.8% of net assets. (d) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 2.6% of net assets. See Note 6 to the financial statements. 3.6% of net assets is the Fund's cash equivalent position. (f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $8,999,122 or 1.3% of net assets. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $529,615,824 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $192,478,501 Unrealized depreciation (14,436,762) ----------- Net unrealized appreciation $178,041,739 ------------ 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/investments. -------------------------------------------------------------------------------- 226 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT PART C. OTHER INFORMATION Item 23. Exhibits (a)(1) Articles of Incorporation as amended Nov. 10, 1994, filed electronically as Exhibit 1 to Registrant's Post-Effective Amendment No. 34 to Registration Statement No. 2-73115, are incorporated by reference. (a)(2) Articles of Amendment to the Articles of Incorporation, dated June 16, 1999, filed electronically as Exhibit (a)(2) to Registrant's Post-Effective Amendment No. 50 to Registration Statement No. 2-73115, are incorporated by reference. (a)(3) Articles of Amendment to the Articles of Incorporation, dated November 15, 2002, filed electronically as Exhibit (a)(3) to Registrant's Post-Effective Amendment No. 50 to Registration Statement No. 2-73115, are incorporated by reference. (b) By-Laws as amended January 11, 2001, filed electronically as Exhibit (b) to Registrant's Post-Effective Amendment No. 50 to Registration Statement No. 2-73115, are incorporated by reference. (c) Stock certificate for common shares, is on file at the Registrant's headquarters. (d)(1) Investment Management Services Agreement between Registrant on behalf of its underlying series AXP Variable Portfolio - Capital Resource Fund, AXP Variable Portfolio - Emerging Markets Fund, AXP Variable Portfolio - Equity Select Fund, AXP Variable Portfolio - Growth Fund, AXP Variable Portfolio - International Fund, AXP Variable Portfolio - New Dimensions Fund, AXP Variable Portfolio - S&P 500 Index Fund, AXP Variable Portfolio - Small Cap Advantage Fund and AXP Variable Portfolio - Strategy Aggressive Fund, and American Express Financial Corporation, dated December 1, 2002, filed electronically on or about Oct. 28, 2003 as Exhibit (d)(13) to Registrant's Post-Effective Amendment No. 50 to Registration Statement No. 2-73115 is incorporated by reference. (d)(2) Investment Management Services Agreement between Registrant on behalf of its underlying series AXP Variable Portfolio - Large Cap Value Fund and American Express Financial Corporation dated September 10, 2003 filed electronically as Exhibit (d)(14) to Registrant's Post-Effective Amendment No. 50 to Registration Statement No. 2-73115, is incorporated by reference. (d)(3) Investment Management Services Agreement between Registrant, on behalf of its underlying series AXP Variable Portfolio - Mid Cap Value Fund, and American Express Financial Corporation, dated Jan. 12, 2005, filed electronically on or about April 25, 2005 as Exhibit (d)(3) to Registrant's Post-Effective Amendment No. 54 to Registration Statement No. 2-73115 is incorporated by reference. (d)(4) Subadvisory Agreement between American Express Financial Corporation and Kenwood Capital Management LLC on behalf of AXP Variable Portfolio - Small Cap Advantage Fund dated Sept. 13, 1999, filed electronically as Exhibit (d)(9) to Registrant's Post-Effective Amendment No. 40 filed on or about Oct. 29, 1999, is incorporated by reference. (d)(5) Subadvisory Agreement by and between American Express Financial Corporation and Threadneedle International Limited, dated July 10, 2004, filed electronically on or about Oct. 27, 2004 as Exhibit (d)(4) to Registrant's Post-Effective Amendment No. 52 to Registration Statement No. 2-73115 is incorporated by reference. (d)(6) Amendment to Investment Management Services Agreement, dated July 1, 2004, between American Express Financial Corporation and Registrant is filed electronically herewith as Exhibit (d)(6). (d)(7) Investment Management Services Transfer Agreement, dated Sept. 29, 2005, between Ameriprise Financial, Inc. (fka American Express Financial Corporation) and RiverSource Investments, LLC.(1) ---------------------- (1) Incorporated by reference to Exhibit (d)(3) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (e) Underwriting contracts: Not Applicable. (f) All employees are eligible to participate in a profit sharing plan. Entry into the plan is Jan. 1 or July 1. The Registrant contributes each year an amount up to 15 percent of their annual salaries, the maximum deductible amount permitted under Section 404(a) of the Internal Revenue Code. (g)(1) Custodian Agreement, dated Oct. 1, 2005, between Ameriprise Trust Company and Registrant is filed electronically herewith as Exhibit (g)(1). (g)(2) Custodian Agreement between American Express Trust Company and The Bank of New York dated May 13, 1999, filed electronically as Exhibit (g)(3) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 33 to Registration Statement No. 2-93745, filed on or about May 28, 1999 is incorporated by reference. (g)(3) Custodian Agreement First Amendment between American Express Trust Company and The Bank of New York, dated December 1, 2000, filed electronically as Exhibit (g)(4) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002, is incorporated by reference. (g)(4) Custodian Agreement Second Amendment between American Express Trust Company and The Bank of New York, dated June 7, 2001, filed electronically as Exhibit (g)(5) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002, is incorporated by reference. (g)(5) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated January 31, 2002, filed electronically as Exhibit (g)(6) to AXP Precious Metals Fund, Inc. Post-Effective Amendment No. 37 to Registration Statement No. 2-93745, filed on or about May 28, 2002, is incorporated by reference. (g)(6) Custodian Agreement Amendment between American Express Trust Company and The Bank of New York, dated April 29, 2003, filed electronically as Exhibit (g)(8) to AXP Partners Series, Inc. Post-Effective Amendment No. 7 to Registration Statement No. 333-57852, filed on or about May 22, 2003, is incorporated by reference. (h)(1) Administrative Services Agreement, dated Oct. 1, 2005, between Registrant and Ameriprise Financial, Inc.(2) (h)(2) Plan and Agreement of Merger between IDS Life Capital Resource Minnesota, Inc. and IDS Life Capital Resource Fund, Inc. dated April 10, 1986, filed electronically as Exhibit No. 9(a) to Registrant's Post-Effective Amendment No. 25 to Registration Statement No. 2-73115, is incorporated by reference. (h)(3) Agreement and Plan of Reorganization, dated Jan. 8, 2004, between IDS Life Series, Fund, on behalf of its series, IDS Life Series - Equity Portfolio, and AXP Variable Portfolio - Investment Series, Inc., on behalf of its series, AXP Variable Portfolio - Capital Resource Fund, and American Express Financial Corporation filed electronically on or about Oct. 27, 2004 as Exhibit (h)(2) to Registrant's Post-Effective Amendment 52 to Registration Statement No. 2-73115 is incorporated by reference. (h)(4) Agreement and Plan of Reorganization, dated Jan. 8, 2004, between IDS Life Series, Fund, on behalf of its series, IDS Life Series - International Equity Portfolio, and AXP Variable Portfolio - Investment Series, Inc., on behalf of its series, AXP Variable Portfolio - International Fund, and American Express Financial Corporation filed electronically on or about Oct. 27, 2004 as Exhibit (h)(3) to Registrant's Post-Effective Amendment 52 to Registration Statement No. 2-73115 is incorporated by reference. ---------------------- (2) Incorporated by reference to Exhibit (h)(1) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (h)(5) Master Fee Cap/Fee Waiver Agreement, dated Oct. 1, 2005, between RiverSource Investments, LLC, Ameriprise Financial, Inc., RiverSource Service Corporation, Ameriprise Financial Services, Inc. and the RiverSource Funds and Preferred Master Trusts.(3) (h)(6) License Agreement, dated Oct. 1, 2005, between Ameriprise Financial, Inc. and the RiverSource Funds.(4) (h)(7) License Agreement, dated June 17, 1999, between American Express Funds and American Express Company filed electronically on or about Sept. 23, 1999 as Exhibit (h)(4) to AXP Stock Fund, Inc.'s Post-Effective Amendment No. 98 to Registration Statement No. 2-11358, is incorporated by reference. (h)(8) Addendum to Schedule A and Schedule B of the License Agreement between the American Express Funds and American Express Company, dated June 23, 2004, filed electronically on or about June 28, 2004 as Exhibit (h)(2) to AXP Variable Portfolio - Select Series, Inc. Pre-Effective Amendment No. 1 to Registration Statement No. 333-113780 is incorporated by reference. (h)(9) License Agreement, dated Oct. 1, 2005, between Ameriprise Financial, Inc. and the RiverSource Funds is filed electronically herewith as Exhibit (h)(9). (i) Opinion and consent of counsel as to the legality of the securities being registered, is filed electronically herewith. (j) Consent of Independent Registered Public Accounting Firm is filed electronically herewith. (k) Omitted Financial Statements: Not Applicable. (l) Initial Capital Agreements: Not Applicable. (m)(1) Plan and Agreement of Distribution, dated Oct. 1, 2005, between Registrant and IDS Life Insurance Company is filed electronically herewith as Exhibit (m)(1). ---------------------- (3) Incorporated by reference to Exhibit (h)(5) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (4) Incorporated by reference to Exhibit (h)(7) of AXP Fixed Income Series, Inc. Post-Effective Amendment No. 59 to Registration Statement No. 2-51586 filed on or about Oct. 27, 2005. (n) Rule 18f-3 Plan: Not Applicable. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about March 28, 2005 as Exhibit (p)(1) to AXP Selected Series, Inc. Post-Effective Amendment No. 42 to Registration Statement No. 2-93745, is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser, dated January 2005, filed electronically on or about January 27, 2005 as Exhibit (p)(2) to AXP Equity Series, Inc. Post-Effective Amendment No. 99 to Registration Statement No. 2-13188 is incorporated by reference. (p)(3) Code of Ethics for AXP Variable Portfolio - Threadneedle International Fund and AXP Variable Portfolio - Threadneedle Emerging Markets Fund and Subadviser, Threadneedle International Ltd., dated Oct. 2004, adopted under Rule 17j-1 filed electronically on or about Dec. 21, 2004 as Exhibit (p)(3) to AXP International Series, Inc. Post-Effective Amendment No. 41 to Registration Statement No. 2-92309 is incorporated by reference. (q)(1) Directors' Power of Attorney to sign Amendments to this Registration Statement, dated Nov. 11, 2004, filed electronically on or about Feb. 11, 2005 as Exhibit (q)(1) to Registrant's Post-Effective Amendment No. 53 to Registration Statement No. 2-73115 is incorporated by reference. (q)(2) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated Jan. 9, 2002 filed electronically as Exhibit (q)(2) to Registrant's Post-Effective Amendment No. 47, filed on or about Aug. 29, 2002, is incorporated by reference. (q)(3) Officers' Power of Attorney to sign Amendments to this Registration Statement, dated September 17, 2002, filed electronically as Exhibit (q)(3) to Registrant's Post-Effective Amendment No. 48 is incorporated by reference. Item 24. Persons Controlled by or under Common Control with Registrant IDS Life and its subsidiaries are the record holders of all outstanding shares of the Registrant. All of such shares were purchased and are held by IDS Life and its subsidiaries pursuant to instructions from owners of variable annuity and variable life insurance contracts issued by IDS Life and its subsidiaries. Accordingly, IDS Life disclaims beneficial owndership of all shares of the fund. Item 25. Indemnification The Articles of Incorporation of the registrant provide that the Fund shall indemnify any person who was or is a party or is threatened to be made a party, by reason of the fact that she or he is or was a director, officer, employee or agent of the Fund, or is or was serving at the request of the Fund as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, to any threatened, pending or completed action, suit or proceeding, wherever brought, and the Fund may purchase liability insurance and advance legal expenses, all to the fullest extent permitted by the laws of the State of Minnesota, as now existing or hereafter amended. The By-laws of the registrant provide that present or former directors or officers of the Fund made or threatened to be made a party to or involved (including as a witness) in an actual or threatened action, suit or proceeding shall be indemnified by the Fund to the full extent authorized by the Minnesota Business Corporation Act, all as more fully set forth in the By-laws filed as an exhibit to this registration statement. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Any indemnification hereunder shall not be exclusive of any other rights of indemnification to which the directors, officers, employees or agents might otherwise be entitled. No indemnification shall be made in violation of the Investment Company Act of 1940.
Item 26. Business and Other Connections of Investment Adviser (Ameriprise Financial, Inc.) Directors and officers of Ameriprise Financial Inc. who are directors and/or officers of one or more other companies: Name and Title Other company(s) Address* Title within other company(s) ------------------------- ----------------------- ------------------------- ----------------------- Gumer C. Alvero American Centurion Life 20 Madison Ave. Extension Director and Vice President - Annuities Vice President - General Assurance Company P.O. Box 5555 Manager Annuities Albany, NY 12205-0555 American Enterprise Life President and Director Insurance Company American Enterprise President REO 1, LLC Ameriprise Financial Vice President - General Manager Services, Inc. Annuities American Express Insurance Director and Vice President Agency of Alabama Inc. American Express Insurance Director and Vice President Agency of Arizona Inc. American Express Insurance Director and Vice President Agency of Idaho Inc. American Express Insurance Director and Vice President Agency of Maryland Inc. American Express Insurance Director and Vice President Agency of Massachusetts Inc. American Express Insurance Director and Vice President Agency of Nevada Inc. American Express Insurance Director and Vice President Agency of New Mexico Inc. American Express Insurance Director and Vice President Agency of Oklahoma Inc. American Express Insurance Director and Vice President Agency of Wyoming Inc. American Partners Life 1751 Ameriprise Director and President Insurance Company Financial Center Minneapolis MN 55474 IDS Life Insurance Company Director and Executive Vice President - Annuities IDS Life Insurance Company P.O. Box 5144 Director and Vice President - of New York Albany, NY 12205 Annuities Neysa M. Alecu Advisory Capital Partners LLC Money Laundering Money Laundering Prevention Officer Prevention Officer Advisory Capital Strategies Money Laundering Group Inc. Prevention Officer Advisory Convertible Arbitrage LLC Money Laundering Prevention Officer Advisory Select LLC Money Laundering Prevention Officer American Enterprise Money Laundering Investment Services, Inc. Prevention Officer American Enterprise REO 1 LLC Money Laundering Prevention Officer RiverSource Investments, LLC Money Laundering Prevention Officer American Express Asset Management Money Laundering International, Inc. Prevention Officer RiverSource Service Corporation Money Laundering Prevention Officer American Express Corporation Money Laundering Prevention Officer Ameriprise Financial Services, Inc. Money Laundering Prevention Officer American Express Insurance Money Laundering Agency of Alabama Inc. Prevention Officer American Express Insurance Money Laundering Agency of Arizona Inc. Prevention Officer American Express Insurance Money Laundering Agency of Idaho Inc. Prevention Officer American Express Insurance Money Laundering Agency of Maryland Inc. Prevention Officer American Express Insurance Money Laundering Agency of Massachusetts Inc. Prevention Officer American Express Insurance Money Laundering Agency of Nevada Inc. Prevention Officer American Express Insurance Money Laundering Agency of New Mexico Inc. Prevention Officer American Express Insurance Money Laundering Agency of Oklahoma Inc. Prevention Officer American Express Insurance Money Laundering Agency of Texas Inc. Prevention Officer American Express Insurance Money Laundering Agency of Wyoming Inc. Prevention Officer Ameriprise Auto & Home Insurance Money Laundering Casualty Insurance Agency Prevention Officer Boston Equity General Money Laundering Partner LLC Prevention Officer IDS Cable Corporation Money Laundering Prevention Officer IDS Cable II Corporation Money Laundering Prevention Officer IDS Capital Holdings Inc. Money Laundering Prevention Officer IDS Life Insurance Company Money Laundering Prevention Officer IDS Management Corporation Money Laundering Prevention Officer Ward D. Armstrong Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Retirement Services and RiverSource Retirement Services Investments and RiverSource Investments RiverSource Director and Senior Vice President Investments, LLC Ameriprise Trust Director and Chairman of Company the Board Kenwood Capital Management LLC Manager American Express Asset Director Management International Inc. John M. Baker Ameriprise Financial Vice President - Chief Client Vice President - Plan Sponsor Services Inc. Service Officer Services RiverSource Vice President Investments, LLC Ameriprise Trust Director and Senior Vice President Company Dudley Barksdale Ameriprise Financial Vice President - Service Vice President - Service Services Inc. Development Development Timothy V. Bechtold American Centurion Life 20 Madison Ave. Extension Director, President and Chief Vice President - Assurance Company P.O. Box 5555 Executive Officer Insurance Products Albany, NY 12205-0555 American Enterprise Life Director Insurance Company Ameriprise Financial Vice President - Insurance Services Inc. Products American Express Insurance Director, President and Chief Agency of Alabama Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Arizona Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Idaho Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Maryland Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Massachusetts Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Nevada Inc. Executive Officer American Express Insurance Director, President and Chief Agency of New Mexico Inc. Executive Officer American Express Insurance Director and President and Chief Agency of Oklahoma Inc. Executive Officer American Express Insurance Director, President and Chief Agency of Wyoming Inc. Executive Officer American Partners Life Director and Vice President-Insurance Insurance Company Products IDS Life Insurance Company Director and President IDS Life Insurance Company P.O. Box 5144 Director, President and Chief of New York Albany, NY 12205 Executive Officer IDS REO 1, LLC President IDS REO 2, LLC President Kent M. Bergene Vice President - Pricing and Product Development Arthur H. Berman American Enterprise Life Director Senior Vice President and Insurance Company Treasurer Ameriprise Financial Senior Vice President Services Inc. and Treasurer American Partners Life Director Insurance Company IDS Life Insurance Director Company Walter S. Berman Advisory Capital Partners LLC Treasurer Director, Executive Vice President and Advisory Capital Strategies Treasurer Chief Financial Officer Group Inc. Advisory Convertible Arbitrage LLC Treasurer Advisory Select LLC Treasurer American Centurion Life Vice President and Treasurer Assurance Company American Enterprise Life Vice President and Treasurer Insurance Company American Enterprise REO 1, LLC Treasurer RiverSource Investments, LLC Treasurer American Express Asset Management Treasurer International, Inc. Ameriprise Certificate Company Treasurer RiverSource Service Corporation Treasurer American Express Corporation Treasurer Ameriprise Financial Director Services Inc. American Express Vice President and Treasurer Financial Advisors Services Japan Inc. American Express Insurance Treasurer Agency of Alabama Inc. American Express Insurance Treasurer Agency of Arizona Inc. American Express Insurance Treasurer Agency of Idaho Inc. American Express Insurance Treasurer Agency of Maryland Inc. American Express Insurance Treasurer Agency of Massachusetts Inc. American Express Insurance Treasurer Agency of Nevada Inc. American Express Insurance Treasurer Agency of New Mexico Inc. American Express Insurance Treasurer Agency of Oklahoma Inc. American Express Insurance Treasurer Agency of Wyoming Inc. Ameriprise Auto & Home Treasurer Insurance Ameriprise Auto & Home Treasurer Insurance of Kentucky, Inc. Ameriprise Auto & Home Treasurer Insurance of Maryland, Inc. Ameriprise Auto & Home Treasurer Insurance of Pennsylvania, Inc. American Partners Life Vice President and Treasurer Insurance Company AMEX Assurance Company Treasurer Boston Equity General Treasurer Partner LLC IDS Cable Corporation Treasurer IDS Cable II Corporation Treasurer IDS Capital Holdings Inc. Treasurer IDS Life Insurance Company Vice President and Treasurer IDS Life Insurance Company Vice President and Treasurer of New York IDS Management Corporation Treasurer IDS Partnership Services Treasurer Corporation IDS Property Casualty Treasurer Insurance Company IDS Realty Corporation Treasurer IDS REO 1, LLC Treasurer IDS REO 2, LLC Treasurer Investors Syndicate Vice President and Treasurer Development Corp. Kenwood Capital Treasurer Management LLC Threadneedle Asset Management Director Holdings LTD Robert C. Bloomer Ameriprise Financial Vice President - Technologies III Vice President - Services Inc. Technologies III Leslie H. Bodell Ameriprise Financial Vice President - Technologies I Vice President - Services Inc. Technologies I Randy L. Boser Ameriprise Financial Vice President - Mutual Fund Vice President - Services Inc. Business Development Business Development IDS Life Insurance Company Assistant Vice President Kenneth J. Ciak AMEX Assurance Company Director, President and Chief Vice President and General Executive Officer Manager - IDS Property Casualty Ameriprise Financial Vice President and General Services Inc. Manager - IDS Property Casualty Ameriprise Auto & Home Director, President and Chief Insurance Executive Officer of Kentucky Inc. Ameriprise Auto & Home Director, President and Chief Insurance Executive Officer of Maryland Inc. Ameriprise Auto & Home Director, President and Chief Insurance Executive Officer of Pennsylvania Inc. IDS Property Casualty 1 WEG Blvd. Director, President and Chief Insurance Company DePere, WI 54115 Executive Officer Paul A. Connolly Ameriprise Financial Vice President - RL HR/US Retail Vice President - Retail Services Inc. Distribution Services James M. Cracchiolo Ameriprise Financial Director, Chairman of the Board, Director, Chairman of Services Inc. President and Chief Executive Officer the Board, President and Chief Executive Officer Threadneedle Asset Director and Chairman of the Board Management Holdings LTD Colleen Curran Ameriprise Financial Vice President and Vice President and Assistant Services Inc. Assistant General Counsel General Counsel Luz Maria Davis Ameriprise Financial Vice President - Employee Vice President - Employee Services Inc. Communications Communications Paul James Dolan Ameriprise Financial Vice President - CAO Product Sales Vice President - Services Inc. CAO Product Sales William V. Elliott Ameriprise Financial Vice President - Financial Vice President - Financial Services Inc. Planning and Advice Planning and Advice Benjamin R. Field Ameriprise Financial Vice President - Finance Education & Vice President - Finance Services Inc. Planning Services Education & Planning Services Gordon M. Fines RiverSource Investments, LLC Vice President - Senior Portfolio Vice President - Financial Manager Education & Planning Services Ameriprise Financial Vice President - Senior Services Inc. Portfolio Manager I Giunero Floro Ameriprise Financial Services Inc. Vice President - Creative Services Vice President - Creative Services Terrence J. Flynn Ameriprise Financial Services Inc. Vice President - Brokerage Vice President - Brokerage Clearing Operations Clearing Operations American Enterprise President and Chief Executive Officer Investment Services Inc. RiverSource Director and Senior Vice President - Service Corporation Clearing Operations Jeffery P. Fox Ameriprise Financial Vice President - Investment Accounting Vice President - Services Inc. Investment Accounting Laura C. Gagnon Ameriprise Financial Services Inc. Vice President - Investor Relations Vice President - Investor Relations Peter A. Gallus Advisory Capital Strategies Director, President, Chief Operating Vice President - Investment Group Inc. Officer and Chief Compliance Officer Administration Advisory Capital Partners LLC President, Chief Operating Officer, Chief Compliance Officer Advisory Convertible Arbitrage LLC President, Chief Operating Officer, Chief Compliance Officer Advisory Select LLC Vice President and Chief Compliance Officer Ameriprise Financial Vice President - CAO - AEFA Services Inc. Investment Management RiverSource Investments, LLC Senior Vice President, Chief Operating Officer and Assistant Treasurer American Express Asset Assistant Treasurer Management International, Inc. Boston Equity General President, Chief Operating Officer, Partner LLC Chief Compliance Officer Kenwood Capital Management LLC Manager IDS Capital Holdings Inc. Vice President and Controller Michael R. Greene Vice President - Compliance/Legal/Regulatory Project Management Office Steven Guida RiverSource Director Vice President - New Service Corporation Business and Service Ameriprise Financial Vice President - New Services Inc. Business and Service American Express Insurance Vice President Agency of Massachusetts Inc. Teresa A. Hanratty Ameriprise Financial Senior Vice Senior Vice President - Services Inc. President - Field Management Field Management Lorraine R. Hart AMEX Assurance Company Vice President - Vice President - Fixed Income Investments Investment Administration Officer American Centurion Life 20 Madison Ave. Extension Vice President - Investments Assurance Company P.O. Box 5555 Albany, NY 12205-0555 American Enterprise Life 829 Ameriprise Vice President - Investments Insurance Company Financial Center Minneapolis, MN 55474 American Enterprise 829 Ameriprise Vice President REO 1, LLC Financial Center Minneapolis, MN 55474 Ameriprise Vice President - Investments Certificate Company American Express Director, President and Chief Corporation Executive Officer American Express International Vice President - Investments Deposit Company Ameriprise Financial Vice President - Fixed Income Services Inc. Investment Administration Officer American Partners Life 1751 Ameriprise Vice President - Investments Insurance Company Financial Center Minneapolis, MN 55474 IDS Life Insurance Company Vice President - Investments IDS Life Insurance Company P.O. Box 5144 Vice President - Investments of New York Albany, NY 12205 IDS Property Casualty 1 WEG Blvd. Vice President - Investments Insurance Company DePere, WI 54115 IDS REO 1, LLC Vice President IDS REO 2, LLC Vice President Investors Syndicate Director and Vice Development Corp. President - Investments Janis K. Heaney Ameriprise Financial Vice President - Incentive Vice President - Incentive Services Inc. Management Management Brian M. Heath Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Advisor Group Advisor Group Nancy R. Hughes American Centurion Life Assistant Vice President Assistant Vice President Assurance Company American Enterprise Life Assistant Vice President Insurance Company American Enterprise REO 1 LLC Assistant Vice President Ameriprise Certificate Assistant Vice President Company American Partners Life Assistant Vice President Insurance Company IDS Life Insurance Company Assistant Vice President IDS Life Insurance Company Assistant Vice President of New York IDS REO 1 LLC Assistant Vice President IDS REO 2 LLC Assistant Vice President Debra A. Hutchinson Ameriprise Financial Vice President - Technologies I Vice President - Services Inc. Technologies I Andrew A. Jackson Ameriprise Financial General Auditor General Auditor Services Inc. James M. Jensen Ameriprise Financial Vice President - Compensation Vice President - Advice and Services Inc. and Licensing Services Retail Distribution Group, Product, Compensation and American Express Insurance Director, Vice President Field Administration Agency of Alabama Inc. American Express Insurance Director, Vice President Agency of Arizona Inc. American Express Insurance Director, Vice President Agency of Idaho Inc. American Express Insurance Director, Vice President Agency of Maryland Inc. American Express Insurance Director, Vice President Agency of Massachusetts Inc. American Express Insurance Director, Vice President Agency of Nevada Inc. American Express Insurance Director, Vice President Agency of New Mexico Inc. American Express Insurance Director, Vice President Agency of Oklahoma Inc. American Express Insurance Director, Vice President Agency of Wyoming Inc. Amy K. Johnson Vice President - Operations and Compliance Paul R. Johnston American Centurion Life Secretary Secretary Assurance Company American Enterprise Secretary Investment Services Inc. American Enterprise Life Secretary Insurance Company American Enterprise REO 1, LLC Secretary RiverSource Secretary Investments, LLC American Express Asset Management Secretary International, Inc. RiverSource Secretary Service Corporation American Express Corporation Secretary Ameriprise Financial Secretary Services Inc. American Express Secretary Financial Advisors Japan Inc. Ameriprise Financial Secretary Inc. American Express Insurance Secretary Agency of Alabama Inc. American Express Insurance Secretary Agency of Arizona Inc. American Express Insurance Secretary Agency of Idaho Inc. American Express Insurance Secretary Agency of Maryland Inc. American Express Insurance Secretary Agency of Massachusetts Inc. American Express Insurance Secretary Agency of Nevada Inc. American Express Insurance Secretary Agency of New Mexico Inc. American Express Insurance Secretary Agency of Oklahoma Inc. American Express Insurance Secretary Agency of Wyoming Inc. Ameriprise Auto & Home Vice President, General Counsel Insurance and Secretary Ameriprise Auto & Home Secretary Insurance of Kentucky, Inc. Ameriprise Auto & Home Secretary Insurance of Maryland, Inc. Ameriprise Auto & Home Secretary Insurance of Pennsylvania, Inc. Ameriprise Trust Company Secretary American Partners Life Assistant General Counsel Insurance Company and Secretary AMEX Assurance Company Director, General Counsel and Secretary IDS Cable Corporation Vice President and Secretary IDS Cable II Corporation Vice President and Secretary IDS Capital Holdings Inc. Secretary IDS Life Insurance Company Assistant General Counsel and Secretary IDS Life Insurance Company Secretary of New York IDS Management Corporation Vice President and Secretary IDS Partnership Services Vice President and Secretary Corporation IDS Property Casualty Director, Vice President, Insurance Company General Counsel and Secretary IDS Realty Corporation Vice President and Secretary IDS REO 1, LLC Secretary IDS REO 2, LLC Secretary Investors Syndicate Secretary Development Corp. Nancy E. Jones Ameriprise Financial Vice President - Advisor Vice President - Advisor Services Inc. Marketing Marketing William A. Jones Ameriprise Financial Vice President - Technologies III Vice President - Services Inc. Technologies III John C. Junek Ameriprise Financial Senior Vice President and Senior Vice President Services Inc. General Counsel and General Counsel Ora J. Kaine Ameriprise Financial Vice President - Retail Vice President - Retail Services Inc. Distribution Services Distribution Services Michelle M. Keeley AMEX Assurance Company Vice President-Investments Senior Vice President - Fixed Income American Centurion Life Vice President-Investments Assurance Company American Enterprise Life Vice President-Investments Insurance Company RiverSource Director and Senior Vice President - Fixed Income Investments, LLC American Express Director Asset Management Group International Inc. Ameriprise Vice President-Investments Certificate Company Ameriprise Financial Senior Vice President-Fixed Income Services Inc. American Partners Life Vice President-Investments Insurance Company IDS Life Insurance Company Vice President-Investments IDS Life Insurance Company Vice President-Investments of New York Kenwood Capital Management LLC Manager Claire Kolmodin Ameriprise Financial Vice President - Strategic Vice President - Strategic Services Inc. Initiatives Initiatives Lori J. Larson Ameriprise Financial Vice President - Advisor Vice President - Advisor Services Inc. Field Force Growth & Field Force Growth & Retention Retention Daniel E. Laufenberg Ameriprise Financial Vice President - Chief U.S. Economist Vice President and Chief Services Inc. U.S. Economist Jane W. Lee Ameriprise Financial Vice President and General Vice President and General Services Inc. Manager Platinum Manager Platinum Financial Financial Services Services Catherine M. Libbe Ameriprise Financial Vice President - Marketing & Product Vice President - Services Inc. Retirement Services Marketing & Product Retirement Services Diane D. Lyngstad Ameriprise Financial Chief Financial Officer and Vice Vice President - Comp Services Inc. President - Comp and Licensing Services and Licensing Services RiverSource Director, Vice President and Chief Service Corporation Financial Officer Timothy J. Masek Ameriprise Financial Vice President - Fixed Income Research Vice President - Fixed Services Inc. Income Research Mark T. McGannon Ameriprise Financial Vice President and Vice President and Services Inc. General Manager - Products Sales General Manager - Products Sales Brian J. McGrane Ameriprise Financial Vice President and Lead Financial Vice President - Services Inc. Officer Finance Lead Financial Officer Finance Advisory Capital Partners LLC Vice President and Chief Financial Officer Advisory Capital Vice President and Chief Financial Strategies Group Inc. Officer Advisory Convertible Vice President and Chief Financial Arbitrage LLC Officer Advisory Select LLC Vice President and Chief Financial Officer RiverSource Vice President and Chief Financial Investments, LLC Officer American Express Asset Vice President and Chief Financial Management International Inc. Officer Ameriprise Vice President and Chief Financial Certificate Company Officer Ameriprise Trust Company Director Boston Equity General Vice President and Chief Financial Partner LLC Officer Sarah M. McKenzie Ameriprise Financial Vice President - Vice President - Services Inc. Managed and Brokerage Products Managed and Brokerage Products Penny J. Meier Ameriprise Financial Vice President - Business Vice President - Business Services Inc. Transformation/Six Sigma Transformation/Six Sigma Paula R. Meyer Ameriprise Financial Senior Vice President and General Senior Vice President Services Inc. Manager - Mutual Funds and General Manager - Mutual Funds Ameriprise Certificate Director, President Chairman of the Company Board and Chief Executive Officer American Express Director and President International Deposit Company Ameriprise Trust Company Director Investors Syndicate Director, President and Chief Development Corp. Executive Officer RiverSource Service Corporation Senior Vice President Holly Morris Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Technologies Technologies Rebecca A. Nash Ameriprise Financial Vice President - Vice President - Services Inc. Service Operations Service Operations AMEX Assurance Company Vice President - Insurance IDS Property Casualty Vice President - Insurance Company Insurance B. Roger Natarajan American Enterprise Life Director, Vice President Vice President - Finance Insurance Company and Chief Actuary American Centurion Life Vice President and Chief Actuary Assurance Company Ameriprise Financial Vice President - Finance Services Inc. American Partners Life Director, Vice President and Insurance Company Chief Actuary IDS Life Insurance Company Director, Vice President and Chief Actuary IDS Life Insurance Company Vice President and Chief Actuary of New York Francois B. Odouard Ameriprise Financial Vice President - Brokerage Vice President - Services Inc. Brokerage Michael J. O'Keefe Ameriprise Financial Vice President - Advisory Vice President - Advisory Services Inc. Business Systems Business Systems Benji Orr Advisory Capital Partners LLC Deputy Money Laundering Deputy Money Prevention Officer Laundering Prevention Officer Advisory Capital Strategies Group Deputy Money Laundering Inc. Prevention Officer Advisory Convertible Arbitrage LLC Deputy Money Laundering Prevention Officer Advisory Select LLC Deputy Money Laundering Prevention Officer American Enterprise Investment Deputy Money Laundering Services Inc Prevention Officer American Enterprise REO 1 LLC Deputy Money Laundering Prevention Officer American Express Asset Management Deputy Money Laundering International Inc. Prevention Officer American Express Corporation Deputy Money Laundering Prevention Officer American Express Financial Deputy Money Laundering Corporation Prevention Officer American Express Insurance Agency Deputy Money Laundering of Arizona Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Idaho Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Maryland Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Massachusetts Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Nevada Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of New Mexico Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Oklahoma Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Texas Inc. Prevention Officer American Express Insurance Agency Deputy Money Laundering of Wyoming Inc. Prevention Officer American Express Trust Company Deputy Money Laundering Prevention Officer Ameriprise Auto & Home Insurance Deputy Money Laundering Prevention Officer Ameriprise Financial Services, Deputy Money Laundering Inc. Prevention Officer Boston Equity General Partner LLC Deputy Money Laundering Prevention Officer IDS Capital Holdings Inc. Deputy Money Laundering Prevention Officer IDS Management Corporation Deputy Money Laundering Prevention Officer RiverSource Investments, LLC Deputy Money Laundering Prevention Officer RiverSource Service Corporation Deputy Money Laundering Prevention Officer Paul Pearson Vice President - SPS and External Products Samuel Perruchoud RiverSource Investments, LLC Senior Portfolio Manager Senior Portfolio Manager American Express Asset Management Vice President International Inc. Scott R. Plummer American Centurion Life 38a-1 Chief Compliance Officer Vice President - Assurance Company Asset Management Compliance American Enterprise Life 38a-1 Chief Compliance Officer Insurance Company Ameriprise Certificate Compliance Officer Company American Partners 38a-1 Chief Compliance Officer Life Insurance Company IDS Life Insurance Company 38a-1 Chief Compliance Officer IDS Life Insurance Company 38a-1 Chief Compliance Officer of New York Mark A. Riordan Ameriprise Financial Vice President - Finance Vice President - Finance Services Inc. Emerging Technologies Emerging Technologies ReBecca K. Roloff Ameriprise Financial Senior Vice President - GFS Senior Vice President - Services Inc. GFS Andrew C. Schell Ameriprise Financial Vice President - Strategy Vice President - Strategy Services Inc. and Planning and Planning Mark E. Schwarzmann American Enterprise Life Director, Chairman of the Board and Senior Vice President - Insurance Company Chief Executive Officer Insurance and Annuities Ameriprise Financial Senior Vice President - Insurance Services Inc. and Annuities American Partners Life Director, Chairman of the Board and Insurance Company Chief Executive Officer IDS Life Insurance Company Director, Chairman of the Board and Chief Executive Officer Gary A. Scott Ameriprise Financial Vice President - Client Acquisition Vice President - Services Inc. Marketing and Services Client Acquisition Marketing and Services Kim M. Sharan Senior Vice President and Chief Marketing Officer Jacqueline M. Sinjem Ameriprise Financial Vice President - Plan Sponsor Vice President - Plan Services Inc. Services Sponsor Services Ameriprise Trust Vice President Company Peter L. Slattery Advisory Select LLC President and Chief Operating Vice President - Marketing Officer Officer Development IDS Futures Brokerage General Manager and Director Group IDS Futures Corporation Vice President Bridget M. Sperl RiverSource Director, Chairman of the Board; Senior Vice President - Service Corporation President and Chief Executive Officer Client Service Organization Ameriprise Financial Senior Vice President - Services Inc. Client Service Organization IDS Life Insurance Company Executive Vice President - Client Service IDS Property Casualty Director Insurance Company Lisa A. Steffes Ameriprise Financial Vice President - Marketing Vice President - Marketing Services Inc. Officer Development Officer Development AMEX Assurance Company Director IDS Property Casualty 1 WEG Blvd. Director Insurance Company DePere, WI 54115 David K. Stewart American Centurion Life Vice President and Controller Vice President and Assurance Company Controller American Enterprise Treasurer Investment Services Inc. American Enterprise Life Vice President and Controller Insurance Company Ameriprise Vice President, Controller and Certificate Company Chief Accounting Officer Ameriprise Financial Vice President and Controller Services Inc. American Partners Life Vice President and Controller Insurance Company IDS Life Insurance Vice President and Controller Company IDS Life Insurance Vice President and Controller Company of New York Caroline Stockdale-Boon Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Human Resources Human Resources Jeffrey J. Stremcha Ameriprise Financial Vice President - Technologies I Vice President - Services Inc. Technologies I John T. Sweeney American Enterprise Investment Chief Financial Officer Vice President - Lead Services, Inc. Financial Officer - Products Group Ameriprise Financial Vice President, Lead Financial Services Inc. Officer - Banking, Brokerage and Managed Products AMEX Assurance Company Director IDS Cable Corporation Director IDS Cable II Corporation Director IDS Partnership Director Services Corporation IDS Property Casualty Director Insurance Company IDS Realty Corporation Director Joseph E. Sweeney Ameriprise Financial Services Inc. Senior Vice President - Senior Vice President - U.S. Brokerage and Membership U.S. Brokerage and Membership Banking Banking American Express Investment Director Investment Services Inc. William F. "Ted" Truscott Advisory Capital Strategies Director Senior Vice President and Group Inc. Chief Investment Officer RiverSource Director, President and Chairman of Investments, LLC the Board, Chief Investment Officer American Express Asset Director Management International Inc. Ameriprise Financial Senior Vice President and Services Inc. Chief Investment Officer IDS Capital Holdings Inc. Director and President Kenwood Capital Management LLC Manager Threadneedle Asset Management Director Holdings George F. Tsafaridis Ameriprise Financial Vice President - Quality & Service Vice President - Services Inc. Support Quality & Service Support Ramanathan Venkataramana Ameriprise Financial Vice President - Technologies III Vice President - Services Inc. Technologies III Peter S. Velardi Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Field Management Field Management Andrew O. Washburn Ameriprise Financial Vice President - Mutual Fund Marketing Vice President - Services Inc. Marketing Beth E. Weimer Ameriprise Financial Vice President and Chief Vice President and Services Inc. Compliance Officer - Chief Compliance Officer Asset Management and Insurance RiverSource Chief Compliance Officer Service Corporation Jeffery A. Williams Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Cross-Sell/Strategic Cross-Sell/Strategic Management Management William J. Williams Ameriprise Financial Senior Vice President - Field Management Senior Vice President - Services Inc. Field Management Dianne L. Wilson Ameriprise Financial Vice President - Insurance Operations Vice President - Services Inc. Insurance Operations Amex Assurance Company Director and Senior Vice President Ameriprise Auto & Home Vice President Insurance of Kentucky Inc. Ameriprise Auto & Home Vice President Insurance of Maryland Inc. Ameriprise Auto & Home Vice President Insurance of Pennsylvania Inc. IDS Property Casualty Company Director and Senior Vice President Michael D. Wolf Ameriprise Financial Vice President and Equity Vice President and Senior Services Inc. Senior Portfolio Manager Portfolio Manager Michael R. Woodward Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Field Management Field Management American Centurion Life 20 Madison Ave. Extension Director Assurance Company Albany, NY 12205-0555 IDS Life Insurance Company P.O. Box 5144 Director of New York Albany, NY 12205 John Woener Ameriprise Financial Senior Vice President - Senior Vice President - Services Inc. Strategic Planning and Strategic Planning and Business Development Business Development * Unless otherwise noted, address is 70100 Ameriprise Financial Center, Minneapolis, MN 55474.
Item 27. Principal Underwriters (a) Not Applicable. (b) Not Applicable. (c) Not Applicable. Item 28. Location of Accounts and Records American Express Financial Corporation 70100 AXP Financial Center Minneapolis, MN 55474 Item 29. Management Services Not Applicable. Item 30. Undertakings Not Applicable. SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, AXP Variable Portfolio - Investment Series, Inc. certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis, and State of Minnesota on the 27th day of October, 2005. AXP VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. By /s/ Paula R. Meyer ---------------------- Paula R. Meyer, President By /s/ Jeffrey P. Fox ---------------------- Jeffrey P. Fox, Treasurer Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 27th day of October, 2005. Signature Capacity /s/ Arne H. Carlson* Chair of the Board --------------------- Arne H. Carlson /s/ Philip J. Carroll, Jr.* Director --------------------------- Philip J. Carroll, Jr. /s/ Patricia M. Flynn* Director ------------------------ Patricia M. Flynn /s/ Anne P. Jones* Director ------------------- Anne P. Jones /s/ Stephen R. Lewis, Jr.* Director ----------------------------- Stephen R. Lewis, Jr. /s/ Catherine James Paglia* Director ----------------------------- Catherine James Paglia /s/ Alan K. Simpson* Director --------------------- Alan K. Simpson /s/ Alison Taunton-Rigby* Director --------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Director ------------------------- William F. Truscott * Signed pursuant to Directors' Power of Attorney, dated Nov. 11, 2004, filed electronically on or about Feb. 11, 2005 as Exhibit (q)(1) to Registrant's Post-Effective Amendment No. 53 to Registration Statement No. 2-73115, by: /s/ Leslie L. Ogg ------------- Leslie L. Ogg CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 57 TO REGISTRATION STATEMENT NO. 2-73115 This post-effective amendment contains the following papers and documents: The facing sheet. Part A. The prospectus for: RiverSource(SM) Variable Portfolio - Emerging Markets Fund. RiverSource(SM) Variable Portfolio - Growth Fund. RiverSource(SM) Variable Portfolio - International Opportunity Fund. RiverSource(SM) Variable Portfolio - Large Cap Equity Fund. RiverSource(SM) Variable Portfolio - Large Cap Value Fund. RiverSource(SM) Variable Portfolio - Mid Cap Growth Fund. RiverSource(SM) Variable Portfolio - Mid Cap Value Fund. RiverSource(SM) Variable Portfolio - New Dimensions Fund. RiverSource(SM) Variable Portfolio - S&P 500 Index Fund. RiverSource(SM) Variable Portfolio - Small Cap Advantage Fund. RiverSource(SM) Variable Portfolio - Strategy Aggressive Fund. Part B. Statement of Additional Information. Financial Statements. Part C. Other information. The signatures. EX-99 2 exindex.txt EXHIBIT INDEX EXHIBIT INDEX (d)(6) Amendment to Investment Management Services Agreement, dated July 1, 2004, between American Express Financial Corporation and Registrant. (g)(1) Custodian Agreement, dated Oct. 1, 2005, between Ameriprise Trust Company and Registrant. (h)(9) License Agreement, dated Oct. 1, 2005, between Ameriprise Financial, Inc. and the RiverSource Funds. (i) Opinion and consent of counsel as to the legality of the securities being registered. (j) Consent of Independent Registered Public Accounting Firm. (m)(1) Plan and Agreement of Distribution, dated Oct. 1, 2005, between Registrant and IDS Life Insurance Company. EX-99.D6 IMS AGMNT 3 d6-imsagmt.txt AMENDMENT TO INVESTMENT MANAGEMENT SERVICES AGREEMENT AMENDMENT TO INVESTMENT MANAGEMENT SERVICES AGREEMENT Part Two: COMPENSATION TO INVESTMENT MANAGER, paragraph (1)(b)(i)(A), of the Investment Management Services Agreement between AXP Variable Portfolio - Investment Series, Inc., on behalf of its underlying series AXP Variable Portfolio - Blue Chip Advantage Fund, AXP Variable Portfolio - Capital Resource Fund, AXP Variable Portfolio - Emerging Markets Fund, AXP Variable Portfolio - Equity Select Fund, AXP Variable Portfolio - Growth Fund, AXP Variable Portfolio - International Fund, AXP Variable Portfolio - New Dimensions Fund, AXP Variable Portfolio - S&P 500 Index Fund, AXP Variable Portfolio - Small Cap Advantage Fund, AXP Variable Portfolio - Stock Fund and AXP Variable Portfolio - Strategy Aggressive Fund, and American Express Financial Corporation dated December 1, 2002, is modified as follows for AXP Variable Portfolio - International Fund. All other provisions of the agreement remain in full force and effect. (A) Determining the difference in performance (the "Performance Difference") between the Fund and an index of similar funds (the "Index"), as described in paragraph (b)(ii). The Fund and Index are set forth below:
--------------------------------------------------------------- ------------------------------------------------- Fund Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Blue Chip Advantage Fund Lipper Large-Cap Core Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Capital Resource Fund Lipper Large-Cap Core Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Emerging Markets Fund Lipper Emerging Markets Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Equity Select Fund Lipper Mid-Cap Growth Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Growth Fund Lipper Large-Cap Growth Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - International Fund Lipper International Large-Cap Core Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - New Dimensions Fund Lipper Large-Cap Growth Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Small Cap Advantage Fund Lipper Small-Cap Core Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Stock Fund Lipper Large-Cap Core Funds Index --------------------------------------------------------------- ------------------------------------------------- AXP Variable Portfolio - Strategy Aggressive Fund Lipper Mid-Cap Growth Funds Index --------------------------------------------------------------- -------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this amendment as of the 1st day of July, 2004. AXP VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. AXP Variable Portfolio - Blue Chip Advantage Fund AXP Variable Portfolio - Capital Resource Fund AXP Variable Portfolio - Emerging Markets Fund AXP Variable Portfolio - Equity Select Fund AXP Variable Portfolio - Growth Fund AXP Variable Portfolio - International Fund AXP Variable Portfolio - New Dimensions Fund AXP Variable Portfolio - S&P 500 Index Fund AXP Variable Portfolio - Small Cap Advantage Fund AXP Variable Portfolio - Stock Fund AXP Variable Portfolio - Strategy Aggressive Fund By: /s/ Leslie L. Ogg ------------------------------------------------- Leslie L. Ogg Vice President AMERICAN EXPRESS FINANCIAL CORPORATION By: /s/ Paula R. Meyer ------------------------------------------------- Paula R. Meyer Senior Vice President and General Manager - Mutual Funds EX-99.G1 CUST AGMNT 4 g1-custagmt.txt CUSTODIAN AGREEMENT CUSTODIAN AGREEMENT This Custodian Agreement, first entered into as of October 1, 2005 ("Agreement"), is by and between Ameriprise Trust Company, a corporation organized under the laws of the state of Minnesota with its principal place of business at Minneapolis, Minnesota ("Custodian"), and the Corporations and Trusts ("Registrants") listed in Schedule A, each on behalf of its underlying series (the terms "Fund" or "Funds" are used to refer to either the Registrants or the underlying series as context requires). The Fund and the Custodian are collectively referred to as the "parties." WHEREAS, the Fund desires that its securities and cash be hereafter held and administered by the Custodian pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein made, the Fund and the Custodian agree as follows: Section 1. Definitions The word "securities" as used herein shall be construed to include, without being limited to, shares, stocks, treasury stocks, including any stocks of the Fund, notes, bonds, debentures, evidences of indebtedness, options to buy or sell stocks or stock indexes, certificates of interest or participation in any profit-sharing agreements, collateral trust certificates, preorganization certificates or subscriptions, transferable shares, investment contracts, voting trust certificates, certificates of deposit for a security, fractional or undivided interests in oil, gas or other mineral rights, or any certificates of interest or participation in, temporary or interim certificates for, receipts for, guarantees of, or warrants or rights to subscribe to or purchase any of the foregoing, acceptances and other obligations and any evidence of any right or interest in or to any cash, property or assets and any interest or instrument commonly known as a security. In addition, for the purpose of this Agreement, the word "securities" also shall include other instruments in which the Fund may invest including currency forward contracts and commodities such as interest rate or index futures contracts, margin deposits on such contracts or options on such contracts. The words "custodian order" shall mean a request for direction, including a computer printout directed to the Custodian and signed in the name of the Fund on behalf of the Fund by any individual designated in the current certified list referred to in Section 2. The word "facsimile" shall mean an exact copy or likeness, which is electronically transmitted for instant reproduction. Page 2 Section 2. Names, Titles and Signatures of Authorized Persons The Fund will certify to the Custodian the names and signatures of its present officers and other designated persons authorized on behalf of the Fund to direct the Custodian by custodian order as herein before defined. The Fund agrees that whenever any change occurs in this list it will provide to the Custodian a copy of a resolution certified by the Secretary or an Assistant Secretary of the Fund as having been duly adopted by the Fund's board of directors (the "Board") or the Executive Committee of the Board designating those persons currently authorized on behalf of the Fund to direct the Custodian by custodian order. Upon the Custodian's receipt of such a certified resolution (to be accompanied by specimen signatures of the designated persons), the persons so designated in such resolution shall constitute the current certified list. The Custodian is authorized to rely and act upon the names and signatures of the individuals as they appear in the most recent list from the Fund which has been delivered to the Custodian as herein above provided. Section 3. Use of Subcustodians The Custodian may make arrangements, where appropriate, with other banks having not less than two million dollars aggregate capital, surplus and undivided profits for the custody of securities. Any such bank selected by the Custodian to act as subcustodian shall be deemed to be the agent of the Custodian. The Custodian also may enter into arrangements for the custody of securities entrusted to its care through foreign branches of U.S. banks; through foreign banks, banking institutions or trust companies; through foreign subsidiaries of U.S. banks or bank holding companies; or through foreign securities depositories or clearing agencies (hereinafter also called, collectively, the "Foreign Subcustodian") or indirectly through an agent, established under the first paragraph of this section, if and to the extent permitted by Section 17(f) of the Investment Company Act of 1940 (the "1940 Act") and the rules promulgated by the Securities and Exchange Commission (the "SEC") thereunder, or any "no-action" letter received from the staff of the SEC. To the extent the existing provisions of the Agreement are consistent with the requirements of such section, rules, order or no-action letter, they shall apply to all such foreign custodianships. To the extent such provisions are inconsistent with or additional requirements are established by such section, rules, order or no-action letter, the requirements of such section, rules, order or no-action letter will prevail and the parties will adhere to such requirements; provided, however, in the absence of notification from the Fund of any changes or additions to such requirements, the Custodian shall have no duty or responsibility to inquire as to any such changes or additions. Page 3 Section 4. Receipt and Disbursement of Money (1) The Custodian shall open and maintain a separate account or accounts in the name of the Fund or cause its agent to open and maintain such account or accounts subject only to checks, drafts or directives by the Custodian pursuant to the terms of this Agreement. The Custodian or its agent shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Fund. The Custodian or its agent shall make payments of cash to or for the account of the Fund from such cash only: (a) for the purchase of securities for the portfolio of the Fund upon the receipt of such securities by the Custodian or its agent unless otherwise instructed on behalf of the Fund; (b) for the purchase or redemption of shares of capital stock of the Fund; (c) for the payment of interest, dividends, taxes, management fees, or operating expenses (including, without limitation thereto, fees for legal, accounting and auditing services); (d) for payment of distribution fees, commissions, or redemption fees, if any; (e) for payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Fund held by, or to be delivered to, the Custodian; (f) for payments in connection with the return of securities loaned by the Fund upon receipt of such securities or the reduction of collateral upon receipt of proper notice; (g) for payments for other proper corporate purposes; or (h) upon the termination of this Agreement. Before making any such payment for the purposes permitted under these items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1) of this section, the Custodian shall receive and may rely upon a custodian order directing such payment and stating that the payment is for such a purpose permitted under these items (a), (b), (c), (d), (e), (f) or (g) or, where appropriate, a trade affirmation report, and that in respect to item (g), a copy of a resolution of the Board or of the Executive Committee signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is made. Notwithstanding the above, for the purposes permitted under items (a) or (f) of paragraph (1) of this section, the Custodian may rely upon a facsimile order. (2) The Custodian is hereby appointed the attorney-in-fact of the Fund to endorse and collect all checks, drafts or other orders for the payment of money received by the Custodian for the Page 4 account of the Fund and drawn on or to the order of the Funds and to deposit same to the account of the Fund pursuant to this Agreement. Section 5. Receipt of Securities Except as permitted by the second paragraph of this section, the Custodian or its agent shall hold in a separate account or accounts, and physically segregated at all times from those of any other persons, firms or corporations, pursuant to the provisions hereof, all securities received by it for the account of the Fund. The Custodian shall record and maintain a record of all certificate numbers. Securities so received shall be held in the name of the Fund, in the name of an exclusive nominee duly appointed by the Custodian or in bearer form, as appropriate. Subject to such rules, regulations or guidelines as the SEC may adopt, the Custodian may deposit all or any part of the securities owned by the Fund in a "securities depository" which includes any system for the central handling of securities established by a national securities exchange or a national securities association registered with the SEC under the Securities Exchange Act of 1934, or such other person as may be permitted by the SEC, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities. All securities are to be held or disposed of by the Custodian for, and subject at all times to the instructions of, the Fund pursuant to the terms of this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities, except pursuant to the directive of the Fund and only for the account of the Fund as set forth in Section 6 of this Agreement. Section 6. Transfer, Exchange, and Delivery of Securities The Custodian shall have sole power to release or deliver any securities of the Fund held by it pursuant to this Agreement. The Custodian agrees to transfer, exchange or deliver securities held by it or its agent hereunder only: (a) for sales of such securities for the account of the Fund, upon receipt of payment therefore; (b) when such securities are called, redeemed, retired or otherwise become payable; (c) for examination upon the sale of any such securities in accordance with "street delivery" custom which would include delivery against interim receipts or other proper delivery receipts; Page 5 (d) in exchange for or upon conversion into other securities alone or other securities and cash whether pursuant to any plan of merger, consolidation, reorganization, recapitalization or readjustment, or otherwise; (e) for the purpose of exchanging interim receipts or temporary certificates for permanent certificates; (f) upon conversion of such securities pursuant to their terms into other securities; (g) upon exercise of subscription, purchase or other similar rights represented by such securities; (h) for loans of such securities by the Fund upon receipt of collateral; or (i) for other proper corporate purposes. As to any deliveries made by the Custodian pursuant to items (a), (b), (c), (d), (e), (f), (g) and (h), securities or cash received in exchange therefore shall be delivered to the Custodian, its agent, or to a securities depository. Before making any such transfer, exchange or delivery, the Custodian shall receive a custodian order or a facsimile from the Fund requesting such transfer, exchange or delivery and stating that it is for a purpose permitted under Section 6, or, where appropriate, a trade affirmation report, (whenever a facsimile is utilized, the Fund will also deliver an original signed custodian order) and, in respect to item (i), a copy of a resolution of the Board or of the Executive Committee of the Board signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the securities, setting forth the purpose for which such payment, transfer, exchange or delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such transfer, exchange or delivery of such securities shall be made. Section 7. Custodian's Acts Without Instructions Unless and until the Custodian receives a contrary custodian order from the Fund, the Custodian shall or shall cause its agent to: (a) present for payment all coupons and other income items held by the Custodian or its agent for the account of the Fund which call for payment upon presentation and hold all cash received by it upon such payment for the account of the Fund; (b) present for payment all securities held by it or its agent which mature or when called, redeemed, retired or otherwise become payable; Page 6 (c) ascertain all stock dividends, rights and similar securities to be issued with respect to any securities held by the Custodian or its agent hereunder, and to collect and hold for the account of the Fund all such securities; and (d) ascertain all interest and cash dividends to be paid to security holders with respect to any securities held by the Custodian or its agent, and to collect and hold such interest and cash dividends for the account of the Fund. Section 8. Voting and Other Action Neither the Custodian nor any nominee of the Custodian shall vote any of the securities held hereunder by or for the account of the Fund. The Custodian shall promptly deliver to the Fund all notices, proxies and proxy soliciting materials with relation to such securities such proxies to be executed by the registered holder of such securities (if registered otherwise than in the name of the Fund) but without indicating the manner in which such proxies are to be voted. The Custodian shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by the Custodian from issuers of the securities being held for the Fund. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund all written information received by the Custodian from issuers of the securities whose tender or exchange is sought and from the party (or ITS agents) making the tender or exchange offer. Section 9. Transfer Taxes The Fund shall pay or reimburse the Custodian for any transfer taxes payable upon transfers of securities made hereunder, including transfers resulting from the termination of this Agreement. The Custodian shall execute such certificates in connection with securities delivered to it under this Agreement as may be required, under any applicable law or regulation, to exempt from taxation any transfers and/or deliveries of any such securities which may be entitled to such exemption. Section 10. Custodian's Reports The Custodian shall, on behalf of the Fund, furnish the Fund as of the close of business each day a statement showing all transactions and entries for the account of the Fund. The books and records of the Custodian pertaining to its actions as Custodian under this Agreement and securities held hereunder by the Custodian shall be open to inspection and audit by officers of the Fund, internal auditors employed by the Fund's investment adviser, and independent auditors employed by the Fund. The Custodian shall furnish the Fund in such form as may reasonably be requested by the Fund a report, including a list of the securities held by it in custody for the account of the Fund, and identification of any subcustodian and identification of such securities Page 7 held by such subcustodian, as of the close of business of the last business day of each month, which shall be certified by a duly authorized officer of the Custodian. It is further understood that additional reports may from time to time be requested by the Fund. Should any report ever be filed with any governmental authority pertaining to lost or stolen securities, the Custodian will concurrently provide the Fund with a copy of that report. The Custodian also shall furnish such reports on its systems of internal accounting control as the Fund may reasonably request from time to time. Section 11. Concerning Custodian For its services hereunder the Custodian shall be paid such compensation as set forth under Schedule B. The Custodian shall not be liable for any action taken in good faith upon any custodian order or facsimile herein described, trade affirmation report, or certified copy of any resolution of the Board or of the Executive Committee of the Board, and may rely on the genuineness of any such document which it may, in good faith, believe to have been validly prepared or executed. The Fund, on behalf of the Fund, agrees to indemnify and hold harmless the Custodian and its nominee from all taxes, charges, expenses, assessments, claims and liabilities (including counsel fees) incurred or assessed against it or its nominee in connection with the performance of this Agreement, except such as may arise from the Custodian's or its nominee's own negligent action, negligent failure to act or willful misconduct. The Custodian is authorized to charge any account of the Fund for such items. In the event of any advance of cash for any purpose made by the Custodian resulting from orders or instructions of the Fund, or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the Fund shall be security therefore. The Custodian shall maintain a standard of care equivalent to that which would be required of a bailee for hire and shall not be liable for any loss or damage to the Fund resulting from participation in a securities depository unless such loss or damage arises by reason of any negligence, misfeasance, or willful misconduct of officers or employees of the Custodian, or from its failure to enforce effectively such rights as it may have against any securities depository or from use of an agent, unless such loss or damage arises by reason of any negligence, misfeasance, or willful misconduct of officers or employees of the Custodian, or from its failure to enforce effectively such rights as it may have against any agent. Section 12. Termination and Amendment of Agreement Page 8 The Fund and the Custodian mutually may agree from time to time in writing to amend, to add to, or to delete from, any provision of this Agreement. The Custodian may terminate this Agreement by giving the Fund ninety days' written notice of such termination by registered mail addressed to the Fund at its principal place of business. The Fund may terminate this Agreement at any time by written notice thereof delivered, together with a copy of the resolution of the Board authorizing such termination and certified by the Secretary of the Fund, by registered mail to the Custodian. Upon such termination of this Agreement, assets of the Fund held by the Custodian shall be delivered by the Custodian to a successor custodian, if one has been appointed by the Fund, upon receipt by the Custodian of a copy of the resolution of the Board certified by the Secretary, showing appointment of the successor custodian, and provided that such successor custodian is a bank or trust company, organized under the laws of the United States or of any State of the United States, having not less than two million dollars aggregate capital, surplus and undivided profits. Upon the termination of this Agreement as a part of the transfer of assets, either to a successor custodian or otherwise, the Custodian will deliver securities held by it hereunder, when so authorized and directed by resolution of the Board, to a duly appointed agent of the successor custodian or to the appropriate transfer agents for transfer of registration and delivery as directed. Delivery of assets on termination of this Agreement shall be effected in a reasonable, expeditious and orderly manner; and in order to accomplish an orderly transition from the Custodian to the successor custodian, the Custodian shall continue to act as such under this Agreement as to assets in its possession or control. Termination as to each security shall become effective upon delivery to the successor custodian, its agent, or to a transfer agent for a specific security for the account of the successor custodian, and such delivery shall constitute effective delivery by the Custodian to the successor under this Agreement. In addition to the means of termination herein before authorized, this Agreement may be terminated at any time by the vote of a majority of the outstanding shares of the Fund and after written notice of such action to the Custodian. Section 13. General Nothing expressed or mentioned in or to be implied from any provision of this Agreement is intended to, or shall be construed to give any person or corporation other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement, or any covenant, condition or provision herein contained, this Agreement and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and assigns. This Agreement shall be governed by the laws of the State of Minnesota. Page 9 This Agreement supersedes all prior agreements between the parties. IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized.
------------------------------------------------------------ --------------------------------------------------------- AXP Dimensions Series, Inc. AXP Selected Series, Inc. AXP Discovery Series, Inc. AXP Stock Series, Inc. AXP Equity Series, Inc. AXP Strategy Series, Inc. AXP Global Series, Inc. AXP Variable Portfolio Income Series, Inc. AXP Government Income Series, Inc. AXP Variable Portfolio Investment Series, Inc. AXP Growth Series, Inc. AXP Variable Portfolio Managed Series, Inc. AXP International Series, Inc. AXP Variable Portfolio Money Market Series, Inc. AXP Investment Series, Inc. AXP Variable Portfolio Partners Series, Inc. AXP Managed Series, Inc. AXP Variable Portfolio Select Series, Inc. AXP Market Advantage Series, Inc. Growth Trust AXP Money Market Series, Inc. Growth & Income Trust AXP Partners International Series, Inc. Income Trust AXP Partners Series, Inc. World Trust AXP Sector Series, Inc. ------------------------------------------------------------ ---------------------------------------------------------
By: /s/ Leslie L. Ogg -------------------- Leslie L. Ogg Vice President AMERIPRISE TRUST COMPANY By: /s/ Chandrakant A. Patel ------------------------- Chandrakant A. Patel Vice President Page 10 Schedule A Funds Each a Minnesota corporation, except, Growth Trust, Growth & Income Trust, Income Trust and World Trust, which are Massachusetts business trusts.
AXP Dimensions Series, Inc. AXP Partners International Series, Inc. RiverSource New Dimensions Fund** RiverSource International Aggressive Growth Fund AXP Discovery Series, Inc. RiverSource International Equity Fund RiverSource Core Bond Fund RiverSource International Select Value Fund RiverSource Discovery Fund RiverSource International Small Cap Fund RiverSource Income Opportunities Fund AXP Partners Series, Inc. RiverSource Inflation Protected Securities Fund RiverSource Aggressive Growth Fund RiverSource Limited Duration Bond Fund RiverSource Fundamental Value Fund AXP Equity Series, Inc. RiverSource Fundamental Growth Fund RiverSource Mid Cap Growth Fund RiverSource Select Value Fund AXP Global Series, Inc. RiverSource Small Cap Equity Fund RiverSource Global Bond Fund** RiverSource Small Cap Value Fund RiverSource Global Technology Fund** RiverSource Value Fund RiverSource Emerging Markets AXP Sector Series, Inc. Fund** RiverSource Dividend Opportunity Fund RiverSource Global Balanced Fund RiverSource Real Estate Fund RiverSource Global Equity Fund** AXP Selected Series, Inc. AXP Growth Series, Inc. RiverSource Precious Metals Fund RiverSource Growth Fund** AXP Stock Series, Inc. RiverSource Large Cap Equity Fund RiverSource Stock Fund* RiverSource Large Cap Value Fund AXP Strategy Series, Inc. RiverSource Disciplined Equity Fund RiverSource Equity Value Fund AXP Government Income Series, Inc. RiverSource Small Cap Growth Fund RiverSource Short Duration U.S. Government RiverSource Small Cap Advantage Fund Fund** RiverSource Strategy Aggressive Fund RiverSource U.S. Government Mortgage Fund AXP VP Income Series, Inc. AXP International Series, Inc. RiverSource VP Core Bond Fund RiverSource European Equity Fund RiverSource VP Diversified Bond Fund RiverSource International Opportunity Fund RiverSource VP Global Bond Fund AXP Investment Series, Inc. RiverSource VP High Yield Bond Fund RiverSource Diversified Equity Income Fund** RiverSource VP Income Opportunities Fund RiverSource Mid Cap Value Fund RiverSource VP Global Inflation Protected RiverSource Balanced Fund** Securities Fund AXP Managed Series, Inc. RiverSource VP Short Duration U.S. Government RiverSource Strategic Allocation Fund** Fund AXP Market Advantage Series, Inc. AXP VP Investment Series, Inc RiverSource Portfolio Builder Conservative Fund* RiverSource VP Mid Cap Growth Fund RiverSource Portfolio Builder Moderate Conservative Fund* RiverSource VP Growth Fund RiverSource Portfolio Builder Moderate Fund* RiverSource VP Large Cap Equity Fund RiverSource Portfolio Builder Moderate Aggressive Fund* RiverSource VP Large Cap Value Fund RiverSource Portfolio Builder Aggressive Fund* RiverSource VP Mid Cap Value Fund RiverSource Portfolio Builder Total Equity Fund* RiverSource VP New Dimensions Fund RiverSource Small Company Index Fund RiverSource VP S&P 500 Index Fund RiverSource S&P 500 Index Fund RiverSource VP Small Cap Advantage Fund AXP Money Market Series, Inc. RiverSource VP Strategy Aggressive Fund RiverSource Cash Management Fund RiverSource VP Emerging Markets Fund RiverSource VP International Opportunity Fund
AXP VP Managed Series, Inc. RiverSource VP Diversified Equity Income Fund RiverSource VP Balanced Fund AXP VP Money Market Series, Inc. RiverSource VP Cash Management Fund AXP VP Partners Series, Inc. RiverSource VP Select Value Fund RiverSource VP Small Cap Value Fund AXP VP Select Series, Inc. RiverSource VP Core Equity Fund Preferred Master Trusts Growth Trust Growth Portfolio Growth Trends Portfolio Growth & Income Trust Equity Income Portfolio Balanced Portfolio Equity Portfolio Total Return Portfolio Income Trust Government Income Portfolio World Trust Emerging Markets Portfolio World Growth Portfolio World Income Portfolio World Technologies Portfolio ---------------------------------------------------- * A fund-of-funds. See Addendum A. ** Part of a master-feeder structure. See Addendum B. Schedule B Quarterly Fee Schedule
------ --------------------------------------------------------------- -------------------------------------- 1. Annual Maintenance Charge per Account (Total market value $0.05 per $1,000 for assets under inclusive of domestic & international assets) custody, Fund complex-wide $0.025 per $1,000 for assets under custody, Fund complex-wide over $100 billion Minimum per portfolio per quarter $1,000.00 ------ --------------------------------------------------------------- -------------------------------------- 2. Transaction Charges (only for transactions settled by the Custodian) Debt/Equity Issue $15.00 per transaction Commercial Paper (physical) $40.00 per transaction Commercial Paper (DTC eligible) $15.00 per transaction ------ --------------------------------------------------------------- -------------------------------------- 3. Securities Loan: a. DTC Receive/Deliver $15.00 per transaction b. Physical Receiver/Deliver $15.00 per transaction c. Exchange Collateral $15.00 per transaction Options $15.00 per transaction Futures - Movement of Margin Collateral $15.00 per transaction Index Funds - All transactions except physical commercial $10.00 per transaction paper A transaction consists of the receipt or withdrawal of securities and commercial paper and/or change in the security position ------ --------------------------------------------------------------- -------------------------------------- 3. Out-of-Pocket Charges - included but not limited to: Postage Wire Charges Telephone Transfer Fees Insurance Attorney's Fees Courier Service BONY Sub-Custody Fees ------ --------------------------------------------------------------- --------------------------------------
ADDENDUM A Funds of Funds RiverSource Portfolio Builder Conservative Fund RiverSource Portfolio Builder Moderate Conservative Fund RiverSource Portfolio Builder Moderate Fund RiverSource Portfolio Builder Moderate Aggressive Fund RiverSource Portfolio Builder Aggressive Fund RiverSource Portfolio Builder Total Equity Fund Each of the Funds listed above acknowledges that, so long as the Fund operates as a "fund of funds", the only assets held by the Fund will be shares of underlying American Express Funds, short-term securities and government securities. The Fund agrees that the Custodian is entitled to rely upon RiverSource Investments, LLC for an accounting of the number of shares of underlying funds held, purchased or redeemed by the Fund and to delegate to RiverSource Investments responsibility for reporting to the Fund. ADDENDUM B Master-Feeder Funds RiverSource Diversified Equity Income RiverSource New Dimensions Fund Fund RiverSource Short Duration U.S. RiverSource Global Bond Fund Government Fund RiverSource Global Technology Fund RiverSource Stock Fund RiverSource Growth Fund RiverSource Emerging Markets Fund RiverSource Strategic Allocation Fund RiverSource Global Equity Fund RiverSource Balanced Fund Each of the Funds listed above acknowledges that, so long as the Fund invests all of its assets in a corresponding portfolio of a master trust, the only assets held by the Fund will be units of the corresponding portfolio of the master trust. The Fund agrees that the Custodian is entitled to rely upon RiverSource Investments for an accounting of the number of units held, purchased or redeemed by the Fund and to delegate to RiverSource Investments responsibility for all reporting to the Fund. RiverSource Investments agrees to indemnify and hold harmless the Custodian from all claims and liabilities incurred or assessed against the Custodian in connection with the accounting for and reporting to the Fund by RiverSource Investments. EX-99.H9 LICENSE AGT 5 h9-licenseagmt.txt LICENSE AGREEMENT LICENSE AGREEMENT This Agreement, effective as of the 1st day of October 2005, by and between Ameriprise Financial, Inc. (hereinafter called "Licensor"), a corporation organized and existing under the laws of the State of Delaware, whose principal place of business is located at 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, and each of the Corporations and Trusts listed in Schedule A (individually called "Licensee," and collectively the "Licensees"), whose principal place of business is located at 901 Marquette Avenue South, Suite 2810, Minneapolis, Minnesota 55402-3268; WHEREAS, Licensor is the licensor of the trade names, trademarks and service marks ("Marks") and any corresponding registrations and applications thereof listed on Schedule B; and WHEREAS, each Licensee wishes to use certain of Licensor's Marks; NOW, THEREFORE, in consideration of the foregoing and of the mutual promises hereinafter set forth, the parties agree as follows: 1. GRANT OF LICENSE Licensor grants to each Licensee a limited, nonexclusive, nontransferable license to use the Marks solely, as a component of the name of each respective fund listed in Schedule A, in the name of any series of related shares, and in connection with advertising or other communications regarding Licensees' funds; and each Licensee accepts the license subject to Licensor's right to add to or delete from Schedule B upon thirty (30) days written notice, as well as the following terms and conditions. 2. LICENSORSHIP OF MARKS As between the parties, each Licensee acknowledges and agrees that the Marks are owned by Licensor, and agrees that it will do nothing inconsistent with such ownership, and agrees to assist Licensor in recording this Agreement with appropriate government authorities. Each Licensee agrees that nothing in this license shall give Licensee any right, title or interest in the Marks other than the right to use the Marks in accordance with this license. 3. QUALITY STANDARDS The Licensor and each Licensee agree that in the conduct of its respective business and activities and its rendering of services under such marks it shall adhere to the highest ethical and business standards in the mutual funds field and shall do nothing to bring disrepute to, nor to in any manner damage, the Marks listed on Schedule B, nor any associated good will. 4. FORM OF USE Each Licensee agrees to use the Marks only in the form and manner and with appropriate legends as prescribed from time to time by Licensor, and not to use any other trademark or service mark in combination with any of the Marks without prior written approval of Licensor. 5. TERMINATION Licensor shall have the right to terminate this Agreement on ninety (90) days written notice to a Licensee. 6. EFFECT OF TERMINATION Upon termination of this Agreement, each Licensee will be entitled to continue using the Marks until it has obtained shareholder approval to change its corporate name, but in no event shall continued use exceed ninety (90) days after termination of this Agreement. After such time, Licensee will cooperate with Licensor or its appointed agent to apply to the appropriate authorities to cancel recording of this Agreement from all government records, and to destroy or supplement all printed materials bearing any of the Marks. Licensee agrees that all rights in the Marks and the goodwill connected therewith shall remain the property of Licensor. 7. INTERPRETATION OF AGREEMENT It is agreed that this Agreement may be interpreted according to the laws of the State of Minnesota, United States of America. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
LICENSOR: LICENSEES: Ameriprise Financial, Inc. 200 Ameriprise Financial Center AXP Dimensions Series, Inc. Minneapolis, Minnesota 55474 AXP Growth Series, Inc. AXP Variable Portfolio - Investment Series, Inc. By: /s/ Kim M. Sharan --------------------- Kim M. Sharan Executive Vice President Chief Marketing Officer By: /s/ Leslie L. Ogg -------------------------------- Leslie L. Ogg Vice President and General Counsel
SCHEDULE A FUND NAMES ============================================================ Retail Funds: ------------------------------------------------------------ AXP Dimensions Series, Inc. ------------------------------------------------------------ AXP Growth Series, Inc. ------------------------------------------------------------ Variable Portfolio Funds: ------------------------------------------------------------ AXP Variable Portfolio - Investment Series, Inc. ------------------------------------------------------------ SCHEDULE B ============================================= ================================== Trademarks & Service Marks Registration No. --------------------------------------------- ---------------------------------- NEW DIMENSIONS FUND 2,327,973 ============================================= ================================== EX-99.I OPIN COUNSEL 6 i-opincon_vpinvestment.txt OPINION AND CONSENT OF COUNSEL October 27, 2005 AXP Variable Portfolio - Investment Series, Inc. 50606 Ameriprise Financial Center Minneapolis, Minnesota 55474 Gentlemen: I have examined the Articles of Incorporation and the By-Laws of AXP Variable Portfolio Investment Series, Inc. (the Company) and all necessary certificates, permits, minute books, documents and records of the Company, and the applicable statutes of the State of Minnesota, and it is my opinion that the shares sold in accordance with applicable federal and state securities laws will be legally issued, fully paid, and nonassessable. This opinion may be used in connection with the Post-Effective Amendment. Sincerely, /s/ Leslie L. Ogg --------------------------------- Leslie L. Ogg Attorney at Law 901 S. Marquette Ave., Suite 2810 Minneapolis, Minnesota 55402-3268 EX-99.J AUD CONSENT 7 j-audcon.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Consent of Independent Registered Public Accounting Firm ---------------------------------------------------------------------- The board and shareholders AXP Variable Portfolio - Investment Series, Inc.: RiverSource Variable Portfolio - Emerging Markets Fund RiverSource Variable Portfolio - Growth Fund RiverSource Variable Portfolio - International Opportunity Fund RiverSource Variable Portfolio - Large Cap Equity Fund RiverSource Variable Portfolio - Large Cap Value Fund RiverSource Variable Portfolio - Mid Cap Growth Fund RiverSource Variable Portfolio - Mid Cap Value Fund RiverSource Variable Portfolio - New Dimensions Fund RiverSource Variable Portfolio - S&P 500 Index Fund RiverSource Variable Portfolio - Small Cap Advantage Fund RiverSource Variable Portfolio - Strategy Aggressive Fund We consent to the use of our reports included herein and to the references to our Firm under the headings "Financial Highlights" in Part A and "Independent Registered Public Accounting Firm" in Part B of the Registration Statement. /s/ KPMG LLP ------------- KPMG LLP Minneapolis, Minnesota October 26, 2005 EX-99.M1 DIST AGMNT 8 m1-plandist.txt PLAN AND AGREEMENT OF DISTRIBUTION PLAN AND AGREEMENT OF DISTRIBUTION The Plan of Distribution ("Plan") and Agreement of Distribution ("Agreement"), dated October 1, 2005 (together "Plan and Agreement"), is by and between IDS Life Insurance Company ("IDS Life") and the Corporations ("Registrants") listed in Schedule A, each on behalf of its underlying series. The terms "Fund" or "Funds" are used to refer to either the Registrants or the underlying series as context requires. The Plan and Agreement are separate and each has been approved by members of the Board of Directors (the "Board") of the Funds who are not interested persons of the Funds and have no direct or indirect financial interest in the operation of the Plan and Agreement, or any related agreement, and all of the members of the Board, in person, at a meeting called for the purpose of voting on the Plan and Agreement. The Plan and Agreement provide that: 1. IDS Life will purchase the Funds' shares on behalf of its separate accounts and the separate accounts of its affiliated life insurance companies established for the purpose of funding variable life insurance, annuity contracts or both (collectively referred to as "Variable Contracts"). Additionally, IDS Life may offer the Funds' shares to one or more unaffiliated life insurance companies ("Unaffiliated Life Companies") for purchase on behalf of certain of their separate accounts established for the purpose of funding Variable Contracts. 2. The Fund will reimburse IDS Life up to 0.125% of its daily net assets for various costs paid and accrued in connection with the distribution of the Funds' shares and for services provided to existing and prospective Variable Contract owners. Payments under the Plan are based on budgeted expenses and shall be made within five (5) business days after the last day of each month. At the end of each calendar year, IDS Life shall furnish a declaration setting out the actual expenses it has paid and accrued. Any money that has been paid in excess of the amount of these expenses shall be returned to the Funds. 3. IDS Life represents that the money paid by the Funds will benefit the Variable Contract owners and not the separate accounts that legally own the shares and be for the following: (a) Printing and mailing prospectuses, Statements of Additional Information, supplements, and reports to existing and prospective Variable Contract owners; (b) Preparation and distribution of advertisement, sales literature, brokers' materials and promotional materials relating to the Funds; (c) Presentation of seminars and sales meetings describing or relating to the Funds; (d) Training sales personnel regarding the Funds; (e) Compensation of sales personnel for sale of the Funds' shares; (f) Compensation of sales personnel for assisting Variable Contract owners with respect to the Funds' shares; (g) Overhead of IDS Life and its affiliates appropriately allocated to the promotion of sale of the Funds' shares; and (h) Any activity primarily intended to result in the sale of the Funds' shares, including payments to Unaffiliated Life Companies. 4. IDS Life shall provide all information relevant and necessary for the Board of Directors ("Board") to make informed determinations about whether each of the Plan and Agreement should be continued and shall: (a) submit quarterly a report that sets out the expenses paid or accrued by it, the names of the Unaffiliated Life Companies to whom the Funds' shares are sold, and the payments made to each Unaffiliated Life Company that has been reimbursed; (b) monitor the level and quality of services provided by it and all affiliated companies and will use its best efforts to assure that in each case legitimate services are rendered in return for the reimbursement pursuant to the Plan and Agreement; and (c) meet with the Funds' representatives, as reasonably requested, to provide additional information. 5. IDS Life represents that it and all affiliated insurance company sponsors will provide full disclosure of the Funds' 12b-1 Plan and Agreement in the prospectus for any separate account investing in the Funds and will clearly communicate the combined effect of all fees and costs, including the reimbursement under the 12b-1 Plan and Agreement, imposed by the separate account and the Funds in accordance with applicable laws. 6. All payments by IDS Life to Unaffiliated Life Companies shall be made pursuant to a written agreement ("Related Agreement"). All such written agreements will be in a form approved by a majority of the Funds' independent members of the Board and the Board as a whole before it shall be used. The Related Agreement shall: (a) require full disclosure of the combined effect of all fees and charges in accordance with applicable laws; (b) provide for termination at any time without penalty as required by Rule 12b-1; and (c) continue so long as its continuance is done in accordance with the requirements of Rule 12b-1. 7. The Portfolio represents that the Plan and the Agreement has been approved as required by Rule 12b-1 and may continue for more than one year so long as it is continued as required by Rule 12b-1. The Plan shall continue until terminated by action of the members of the Funds' Board who are not interested persons of the Funds and have no direct or indirect financial interest in the operations of the Plan, and the related Agreement will terminate automatically in the event of an assignment as that term is defined in the Investment Company Act of 1940. 8. Neither the Plan nor the Agreement may be amended to materially increase the amount of the payments without the approval of the outstanding voting securities. 9. This Plan and Agreement shall be governed by the laws of the State of Minnesota. AXP VARIABLE PORTFOLIO - INCOME SERIES, INC. AXP VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. AXP VARIABLE PORTFOLIO - MANAGED SERIES, INC. AXP VARIABLE PORTFOLIO - MONEY MARKET SERIES, INC. AXP VARIABLE PORTFOLIO - PARTNERS SERIES, INC. /s/ Leslie L. Ogg --------------------------- Leslie L. Ogg Vice President IDS LIFE INSURANCE COMPANY /s/ Gumer C. Alvero -------------------------- Gumer C. Alvero Director and Executive Vice President - Annuities Schedule A Funds Each a Minnesota corporation: AXP VARIABLE PORTFOLIO - INCOME SERIES, INC. RiverSource Variable Portfolio - Core Bond Fund RiverSource Variable Portfolio - Diversified Bond Fund RiverSource Variable Portfolio - Global Bond Fund RiverSource Variable Portfolio - Global Inflation Protected Securities Fund RiverSource Variable Portfolio - High Yield Bond Fund RiverSource Variable Portfolio - Income Opportunities Fund RiverSource Variable Portfolio - Short Duration U.S. Government Fund AXP VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. RiverSource Variable Portfolio - Emerging Markets Fund RiverSource Variable Portfolio - Growth Fund RiverSource Variable Portfolio - International Opportunity Fund RiverSource Variable Portfolio - Large Cap Equity Fund RiverSource Variable Portfolio - Large Cap Value Fund RiverSource Variable Portfolio - Mid Cap Growth Fund RiverSource Variable Portfolio - Mid Cap Value Fund RiverSource Variable Portfolio - New Dimensions Fund RiverSource Variable Portfolio - S&P 500 Index Fund RiverSource Variable Portfolio - Small Cap Advantage Fund RiverSource Variable Portfolio - Strategy Aggressive Fund AXP VARIABLE PORTFOLIO - MANAGED SERIES, INC. RiverSource Variable Portfolio - Balanced Fund RiverSource Variable Portfolio - Diversified Equity Income Fund AXP VARIABLE PORTFOLIO - MONEY MARKET SERIES, INC. RiverSource Variable Portfolio - Cash Management Fund AXP VARIABLE PORTFOLIO - PARTNERS SERIES, INC. RiverSource Variable Portfolio - Select Value Fund RiverSource Variable Portfolio - Small Cap Value Fund COVER 9 filename9.txt October 27, 2005 Securities and Exchange Commission 450 Fifth St. N.W. Washington, D.C. 20549-1004 ATTN: Mark Cowan Document Control - EDGAR Re: AXP Variable Portfolio - Investment Series, Inc. RiverSource(SM) Variable Portfolio - Growth Fund RiverSource(SM) Variable Portfolio - Large Cap Equity Fund RiverSource(SM) Variable Portfolio - Large Cap Value Fund RiverSource(SM) Variable Portfolio - Mid Cap Growth Fund RiverSource(SM) Variable Portfolio - Mid Cap Value Fund RiverSource(SM) Variable Portfolio - New Dimensions Fund RiverSource(SM) Variable Portfolio - S&P 500 Index Fund RiverSource(SM) Variable Portfolio - Small Cap Advantage Fund RiverSource(SM) Variable Portfolio - Strategy Aggressive Fund RiverSource(SM) Variable Portfolio - Emerging Markets Fund RiverSource(SM) Variable Portfolio - International Opportunity Fund Post-Effective Amendment No. 57 File No. 2-73115/811-3218 Dear Mr. Cowan: Registrant is filing Post-Effective Amendment No. 57 on Form N-1A pursuant to Rule 485(b) to bring the financial statements and other information included in the Registration Statement up to date pursuant to Section 10(a)(3) of the Securities Act of 1933 and to respond to the following staff written comments received via electronic mail on or about October 14, 2005 and oral comments received telephonically on or about October 20, 2005: Comment 1: In the instances where investment strategies changed, disclosure regarding that fact should be made with respect to the bar chart and table. Response: We agree that material changes to a Fund's investment objective or principal investment strategies may necessitate disclosure under the performance chart and table. For the Funds where changes to principal investment strategy have been made, the changes are more based on approach and are driven by a new portfolio manager or portfolio managers (employed with the investment manager). Each Fund's objective and overall strategy remain the same. None of the Funds has a change in investment manager. Comment 2: Past Performance. Reference is made to taxes that may have been paid on reinvested income of capital gains. Is that appropriate for insurance dedicated funds? Response: The reference made to taxes that may have been paid on reinvested income of capital gains is not applicable to these Funds and it will be deleted from the Past Performance section. Comment 3 (a): Balanced Fund (p. 4). Please define "underlying fundamentals." Response: The language in the bullet point has been revised as follows: "Identifying a variety of large, well-established companies whose underlying fundamentals (indicating, for example, a company's financial condition and viability) are stable or are anticipated to become stable, or whose fundamentals are improving." Comment 3 (b): Balanced Fund (p. 4). Also, please disclose the risks associated with value investing, i.e., that a stock judged to be undervalued may be appropriately priced or the adviser's determination of intrinsic value may be wrong. This comment is also applicable to the Large Cap Equity Fund (p. 38) and Large Cap Value Fund (p. 40). Response: The "Principal Risks" section for each of these Funds includes both "Active Management Risk" and "Market Risk" which address the risks articulated, and are true of any actively managed fund. Active management risk is the risk that the portfolio manager(s) may not be successful in making investment decisions suited to achieving a Fund's investment objective, i.e., the portfolio manager(s) select(s) securities, and these decisions, if incorrect, will effect the performance of the Fund, including how successful it is in achieving its objective. Market risk, which includes risks associated with a particular investment style, is the risk that a Fund may under perform other funds with similar investment styles. The "Active Management Risk" will be revised to more clearly state that the success of the Fund or its ability to achieve its investment objective, depends on the selection of securities by the portfolio managers. Comment 4 (a): Diversified Bond Fund (p.12). Please clarify whether the foreign investments that the fund may invest includes equity securities, debt securities, and/or both. Response: The foreign securities disclosure is intended to communicate a limitation on the Fund's foreign investment. That is, no more than 15% of the Fund's net assets will be invested in foreign securities. Other than their foreign character, these securities will be of the same type that make up the Fund's domestic securities' investments. That is, the Fund is a bond fund and, under an investment policy adopted pursuant to Rule 35d-1, at least 80% of its net assets are invested in bonds and other debt securities. The "Principal Investment Strategy" provides additional detail on the types of securities that may make up the fund's portfolio. The majority of these securities will be domestic, but up to 15% may be foreign. Comment 4 (b): Diversified Bond Fund (p.12). Included in the principal investment strategies are investments in emerging markets. If applicable, please include emerging market risk as a principal risk. Response: Although the Fund may invest up to 15% in foreign investments, and some portion of this investment may be in emerging markets, the Fund does not currently make such investments to an extent warranting disclosure of such investments as a principal risk. Comment 5: Diversified Equity Income Fund (p. 15) Please define "small and medium companies." Also, please include investments in such companies among the strategies. This comment applies to the Emerging Markets Fund and Income Opportunities Fund as well. Response: We provide definitions for "small" and "medium" company securities to the extent investment in such securities is a principal investment strategy mandated by the adoption of an investment policy under Rule 35d-1, and we actively monitor whether such companies in the Fund's portfolio meet the definition. That is, for Funds with "small" and "mid" in their names, we have provided additional detail on what qualifies a particular company as small- or mid-cap company. Our rationale for providing the "small and medium" company risk for Diversified Equity Income, Emerging Markets and Income Opportunities is to call out the fact that these Funds are not prohibited from investing in such companies, even though investment in such companies is not called out as a principal strategy, and that there are more risks associated with companies with smaller capitalizations. Capitalization size is not a principal consideration in the selection process, but to the extent the Funds invest in such securities, it is important for investors to understand such risks. Comment 6: Global Bond Fund & Global Inflation Protected Securities Fund (pp. 21 and 24). Emerging market risk is indicated as a principal risk. However, it does not appear that investment in emerging markets is a principal investment strategy. Please resolve the apparent inconsistency. Response: For Global Bond, the first sentence has been revised as follows: "The Fund is a non-diversified fund that invests primarily in debt obligations of U.S. and foreign issuers (which may include issuers located in emerging markets)." For Global Inflation Protected Securities Fund, the principal risk with respect to "emerging markets" has been removed, as the portfolio managers do not presently intend to invest to any substantial degree in issuers located in emerging markets. Comment 7: Mid Cap Value Fund (p. 44). Although as much as 20% of the funds net assets can be invested in convertibles, it appears that the risks associated with convertible securities (call/prepayment risk, interest rate risk, and reinvestment) are not listed as principal risks of investing in the fund. Response: The Fund does not currently invest in convertible securities to an extent that would require disclosure of associated principal risks. Comment 8: S&P 500 Index Fund (p. 48). Although the fund will invest at least 80% of its total assets in securities that are contained in the applicable index, the fund may also buy and sell options and futures contracts. Any risks involved with buying and selling options and futures contracts should be disclosed if considered principal risks of investing in the fund. Response: The Fund's use of derivative investments is limited, although it is an important aspect of the strategy to maintain the Fund's correlation, and reduce tracking error, to the S&P 500 Index. The risks of derivatives strategies, for those funds, including this Fund, that invest in derivatives to a more limited extent, are set forth generally under "Other Investment Strategies and Risks." Comment 9: Short Duration U.S. Government Fund (p. 53). A principal risk of investing in the fund is derivatives risk. Is investing in derivatives a principal investment strategy of the fund? Response: Investment in derivatives is not a principal risk of this Fund, although it does invest in derivatives in a limited fashion. This disclosure has been removed from the principal risks section. Comment 10: Portfolio Holdings Disclosure (SAI, pp. 30-40). Please disclose the procedures that the fund uses to address conflicts between the interests of Fund shareholders, on the one hand, and those of the Fund's investment adviser; principal underwriter; or any affiliated person of the Fund, its investment adviser, or its principle underwriter, on the other. Item 11(f)(vi) to Form N-1A. Response: The procedures that the Fund uses to address conflicts between the interests of Fund shareholders, on the one hand, and those of the Fund's investment adviser, principal underwriter, or any affiliated person of the Fund, are disclosed in the fourth sentence of the last paragraph in the Portfolio Holdings Disclosure section. Importantly, before any new category request for selective disclosure of portfolio holdings may be made, it must be authorized by the Chief Compliance Officer or the fund's General Counsel. This disclosure states: The PHC has been authorized by the Funds' board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of the Fund and its shareholders, TO CONSIDER ANY POTENTIAL CONFLICTS OF INTEREST BETWEEN THE FUND, AEFC, AND ITS AFFILIATES, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized, including a duty not to trade on such information. BEFORE PORTFOLIO HOLDINGS MAY BE SELECTIVELY DISCLOSED, REQUESTS APPROVED BY THE PHC MUST ALSO BE AUTHORIZED BY THE FUND'S CHIEF COMPLIANCE OFFICER OR THE FUND'S GENERAL COUNSEL. Comment 11: Market Timing (p. 69). Please explain why investments in certain securities increase the risk for market timing in some funds, e.g., arbitrage. Also, please identify those funds (See IC-26418. Disclosure should be fund-specific). Response: The first two sentences under the "Market Timing" section disclosure have been revised as follows: "The Board of Directors has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing." With respect to the specificity of the disclosure and the identification of Funds, the "Market Timing" section is structured to be read and understood in the context of the full prospectus, reading the principal investment strategies of a Fund, and understanding such principal investment strategies to the extent there are heightened market timing risk implications. The disclosure states, "To the extent the fund has significant holdings in foreign securities, including emerging markets securities, small cap stocks and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds." The term "Fund" in the prospectus refers to each fund in the prospectus. Comment 12: We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information investors require. Since the fund and its management are in possession of all facts relating to the fund's disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that: the fund is responsible for the adequacy and accuracy of the disclosure in the filings; Staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and the fund may not assert this action as defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Response: The Registrant agrees to make such representations. Responses stated above are also applicable to Post-Effective Amendment No.54 to Registration Statement No.2-73113, Post-Effective Amendment No.36 to Registration Statement No.2-96367, Post-Effective Amendment No.43 to Registration Statement No.2-72584 and Post-Effective Amendment No.13 to Registration Statement No.333-61346, filed on or about Oct. 27, 2005. Registrant has made other non-material changes as it has deemed appropriate. This amendment does not contain disclosure that would render it ineligible to become effective pursuant to Rule 485(b). The prospectus and Statement of Additional Information have been marked to show changes from Registrant's Post-Effective Amendment No. 56 filed on or about October 4, 2005. All marked changes on this filing are non-material. If you have any questions, please contact either Christopher O. Petersen at (612) 671-4321, Boba Selimovic at (612) 671-7449 or Anna Butskaya at 612-671-4993. Sincerely, /s/ Leslie L. Ogg ------------------ Leslie L. Ogg Vice President, General Counsel and Secretary Enclosure: Post-Effective Amendment No. 57 File No.: 2-73115/811-3218