-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q7hxgaxMzEHBY//OTsVKhwX5E+3Joj55bUfW9I0JzJ9Wbr+iNqbltC2oshciA0e0 YMIw//G2B+xj/J2+EQn2cQ== 0001068800-07-000619.txt : 20070306 0001068800-07-000619.hdr.sgml : 20070306 20070306152857 ACCESSION NUMBER: 0001068800-07-000619 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070306 DATE AS OF CHANGE: 20070306 EFFECTIVENESS DATE: 20070306 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RIVERSOURCE VARIABLE PORTFOLIO INVESTMENT SERIES, INC. CENTRAL INDEX KEY: 0000353968 IRS NUMBER: 411409539 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03218 FILM NUMBER: 07674659 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 0000353968 S000003376 RiverSource Variable Portfolio Emerging Markets Fund C000009297 RiverSource VP Emerging Markets Fund 0000353968 S000003377 RiverSource Variable Portfolio Small Cap Advantage Fund C000009298 RiverSource VP Small Cap Advantage Fund 0000353968 S000003379 RiverSource Variable Portfolio Growth Fund C000009300 RiverSource VP Growth Fund 0000353968 S000003380 RiverSource Variable Portfolio International Opportunity Fund C000009301 RiverSource Variable Portfolio International Opportunity Fund 0000353968 S000003381 RiverSource Variable Portfolio Large Cap Equity Fund C000009302 RiverSource VP Large Cap Equity Fund 0000353968 S000003382 RiverSource Variable Portfolio Large Cap Value Fund C000009303 RiverSource VP Large Cap Value Fund 0000353968 S000003383 RiverSource Variable Portfolio Mid Cap Growth Fund C000009304 RiverSource VP Mid Cap Growth Fund 0000353968 S000003384 RiverSource Variable Portfolio Mid Cap Value Fund C000009305 RiverSource VP Mid Cap Value Fund 0000353968 S000003386 RiverSource Variable Portfolio S&P 500 Index Fund C000009307 RiverSource VP S&P 500 Index Fund N-CSR 1 vpinvestment_ncsr.txt RIVERSOURCE VARIABLE PORTFOLIO INVESTMENT SERIES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-3218 ------------ RIVERSOURCE VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 ----------------- Date of fiscal year end: 12/31 -------------- Date of reporting period: 12/31 -------------- Annual Report RIVERSOURCE [LOGO](R) INVESTMENTS RIVERSOURCE(SM) VARIABLE PORTFOLIO FUNDS ANNUAL REPORT ENCLOSED FOR THE PERIOD ENDED DEC. 31, 2006 References to "Fund" throughout this annual report refer to the following individual funds, singularly or collectively as the context requires: 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 - Fundamental Value 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 - 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 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. This annual report 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. The RiverSource(SM) Variable Portfolio Funds provide several alternatives to consider for investment through your variable annuity contract or life insurance policy. TABLE OF CONTENTS 2006 ANNUAL REPORT The purpose of this annual report is to tell investors how the Fund performed. RIVERSOURCE VP - BALANCED FUND Portfolio Management Q&A ............................................... 2 The Ten Largest Holdings ............................................... 4 The Fund's Long-term Performance ....................................... 5 RIVERSOURCE VP - CASH MANAGEMENT FUND Portfolio Management Q&A ............................................... 6 RIVERSOURCE VP - CORE BOND FUND Portfolio Management Q&A ............................................... 8 The Ten Largest Corporate Bond Holdings ................................ 9 The Fund's Long-term Performance ....................................... 10 RIVERSOURCE VP - DIVERSIFIED BOND FUND Portfolio Management Q&A ............................................... 11 The Ten Largest Corporate Bond Holdings ................................ 12 The Fund's Long-term Performance ....................................... 13 RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND Portfolio Management Q&A ............................................... 14 The Ten Largest Holdings ............................................... 15 The Fund's Long-term Performance ....................................... 16 RIVERSOURCE VP - EMERGING MARKETS FUND Portfolio Management Q&A ............................................... 17 The Ten Largest Holdings ............................................... 18 The Fund's Long-term Performance ....................................... 20 RIVERSOURCE VP - FUNDAMENTAL VALUE FUND Portfolio Management Q&A ............................................... 21 The Ten Largest Holdings ............................................... 22 The Fund's Long-term Performance ....................................... 23 RIVERSOURCE VP - GLOBAL BOND FUND Portfolio Management Q&A ............................................... 24 The Ten Largest Holdings ............................................... 25 The Fund's Long-term Performance ....................................... 26 RIVERSOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND Portfolio Management Q&A ............................................... 27 The Fund's Long-term Performance ....................................... 29 RIVERSOURCE VP - GROWTH FUND Portfolio Management Q&A ............................................... 30 The Ten Largest Holdings ............................................... 31 The Fund's Long-term Performance ....................................... 32 RIVERSOURCE VP - HIGH YIELD BOND FUND Portfolio Management Q&A ............................................... 33 The Ten Largest Corporate Bond Holdings ................................ 34 The Fund's Long-term Performance ....................................... 35 RIVERSOURCE VP - INCOME OPPORTUNITIES FUND Portfolio Management Q&A ............................................... 36 The Ten Largest Corporate Bond Holdings ................................ 37 The Fund's Long-term Performance ....................................... 38 RIVERSOURCE VP - INTERNATIONAL OPPORTUNITY FUND Portfolio Management Q&A ............................................... 39 The Ten Largest Holdings ............................................... 40 The Fund's Long-term Performance ....................................... 41 RIVERSOURCE VP - LARGE CAP EQUITY FUND Portfolio Management Q&A ............................................... 42 The Ten Largest Holdings ............................................... 43 The Fund's Long-term Performance ....................................... 44 RIVERSOURCE VP - LARGE CAP VALUE FUND Portfolio Management Q&A ............................................... 45 The Ten Largest Holdings ............................................... 46 The Fund's Long-term Performance ....................................... 47 RIVERSOURCE VP - MID CAP GROWTH FUND Portfolio Management Q&A ............................................... 48 The Ten Largest Holdings ............................................... 50 The Fund's Long-term Performance ....................................... 51 RIVERSOURCE VP - MID CAP VALUE FUND Portfolio Management Q&A ............................................... 52 The Ten Largest Holdings ............................................... 53 The Fund's Long-term Performance ....................................... 54 RIVERSOURCE VP - S&P 500 INDEX FUND Portfolio Management Q&A ............................................... 55 The Ten Largest Holdings ............................................... 56 The Fund's Long-term Performance ....................................... 57 RIVERSOURCE VP - SELECT VALUE FUND Portfolio Management Q&A ............................................... 58 The Ten Largest Holdings ............................................... 60 The Fund's Long-term Performance ....................................... 61 RIVERSOURCE VP - SHORT DURATION U.S. GOVERNMENT FUND Portfolio Management Q&A ............................................... 62 The Fund's Long-term Performance ....................................... 64 RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND Portfolio Management Q&A ............................................... 65 The Ten Largest Holdings ............................................... 66 The Fund's Long-term Performance ....................................... 67 RIVERSOURCE VP - SMALL CAP VALUE FUND Portfolio Management Q&A ............................................... 68 The Ten Largest Holdings ............................................... 71 The Fund's Long-term Performance ....................................... 72 FUND EXPENSES EXAMPLES ................................................. 73 BOARD MEMBERS AND OFFICERS ............................................. 78 PROXY VOTING ........................................................... 79 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AND SUBADVISORY AGREEMENTS ............................................. 80 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................ 81 FINANCIAL STATEMENTS ................................................... 82 NOTES TO FINANCIAL STATEMENTS .......................................... 112 INVESTMENTS IN SECURITIES .............................................. 148
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 1 Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser(s) to the Fund or any other person in the RiverSource or subadviser organization(s). Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a RiverSource Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any RiverSource Fund. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the subaccount or the annuity or life insurance contract. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. PORTFOLIO MANAGEMENT Q&A RiverSource Variable Portfolio (VP) - Balanced Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, the portfolio management team for RiverSource VP - Balanced Fund discusses the Fund's results and positioning for the 12-month period ended Dec. 31, 2006. Q: How did RiverSource VP - Balanced Fund perform for the annual period? A: RiverSource VP - Balanced Fund, which invests in a mix of stocks and bonds, advanced 14.38% for the year ended Dec. 31, 2006. The Russell 1000(R) Value Index (Russell Index) returned 22.25%, while the Lehman Brothers Aggregate Bond Index (Lehman Index) gained 4.33% over the same period. The Fund outperformed its peer group, represented by the Lipper Balanced Funds Index, which returned 11.60%. The Blended Index (made up of 60% Russell Index and 40% Lehman Index) returned 14.71% for the annual period. The Fund's portfolio was approximately two-thirds equities and one-third fixed income securities, an allocation that was relatively unchanged during the period. RiverSource VP - Balanced Fund rose 7.73% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 10.15%, while the Lehman Index returned 2.13%. The Lipper Balanced Funds Index returned 6.59%. The Blended Index returned 6.80% for the four-month period. Q: What factors had a significant effect on equity performance? A: Amid an environment of continued global economic growth and stabilizing short-term interest rates, large-cap value stocks delivered strong gains in 2006, significantly outpacing growth stocks. The Fund benefited from this favorable environment, but the equity portion did not keep pace with the sharp advance of the Russell Index. Comparing the equity portion's performance to the Russell Index, sector allocations added to relative return, while stock selection detracted. Positioning in the industrials, materials and consumer staples sectors had a negative impact on relative results, while positioning in information technology, health care and utilities was beneficial. Within the industrials sector, we focused on specific aerospace and defense stocks that demonstrated very strong fundamentals, relative stability and attractive valuations. Conversely, we de-emphasized the cyclical trucking and railroad segments where prices appeared unattractive and leading indicators suggested fundamentals were deteriorating. However, trucking and railroad stocks outperformed. Results were also unfavorable among materials stocks where the Fund's equity position had less exposure to the more economically sensitive companies within the sector. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Balanced Fund +14.38% Russell 1000(R) Value Index (unmanaged) +22.25% Lehman Brothers Aggregate Bond Index (unmanaged) +4.33% Blended Index (unmanaged) +14.71% Lipper Balanced Funds Index +11.60%
(See "The Fund's Long-term Performance" for Index descriptions) There are risks associated with fixed income investments, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 2 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Balanced Fund The Fund's allocation to consumer staples stocks was larger than that of the Russell Index, an advantage for the fiscal period. Stock selection, however, detracted from relative performance mainly due to Spectrum Brands. The consumer products company appeared poised to benefit from a recent acquisition, but rising raw material costs overwhelmed the potential earnings gains and prevented synergies from being realized. By fiscal year-end, we had significantly reduced the holdings of Spectrum Brands. The Fund's technology positioning benefited from a focus on large-cap companies that were attractively priced, with good growth characteristics and more stable earnings. A number of the Fund's technology themes showed favorable results as hardware stocks Hewlett-Packard and Intl Business Machines, software companies Microsoft and Oracle and computer networking company Cisco Systems performed well. In addition, exposure to semiconductor stocks was advantageous. The Fund held selected semiconductor stocks as firms within the group generated free cash flow, a rarity for cyclical companies. In the health care sector, the Fund had a slightly larger position than the Russell Index, which added to relative return. Stock selection was an even more significant contributor, driven by the timely purchase of health insurers and HMOs. These stocks experienced a severe sell-off during the year, giving us an opportunity to buy companies that had good earnings growth potential at what we considered to be attractive prices. Contributors included CIGNA and Aetna. Stock selection in the utilities sector also added to relative performance. The Fund had smaller positions in many of the more cyclically exposed utility companies that underperformed the rest of the sector as the economy showed preliminary signs of slowing. Q: What factors significantly affected the fixed income segment of the Fund? A: The U.S. bond market posted moderate gains for 2006 as interest rates rose and bond prices fell modestly in response to a strong economy, elevated inflation and the Federal Reserve's tighter monetary policy. Bonds other than U.S. Treasuries performed well and in most cases, riskier bonds performed best. High yield, emerging market and lower-quality investment grade securities outperformed the broader bond market. The fixed income portfolio had a shorter duration than the Lehman Index for most of the year, meaning it was positioned to be less sensitive to changes in interest rates. This was beneficial as interest rates rose. A modest allocation to high yield bonds along with an emphasis on mortgage-backed and collateralized mortgage-backed securities proved advantageous as each of these segments performed well. Also adding to relative performance was security selection among corporate bonds and collateralized mortgage-backed securities. In the first half of the year, the portfolio had a position in bonds denominated in foreign currencies, which also contributed to relative return as the U.S. dollar weakened. Allocations to investment grade corporate bonds and agency securities were smaller than those of the Lehman Index, positioning that was a modest negative. In addition, the Fund's position in Treasury Inflation Protected Securities (TIPS) hurt performance as inflation fears receded. Security selection among mortgage-backed securities was detrimental as the areas we emphasized --higher coupon mortgages, adjustable rate mortgages and collateralized mortgages obligations -- underperformed the rest of the mortgage sector. Q: What changes did you make to the equity segment during the period? A: We added to select stocks in the financials and consumer discretionary sectors, focusing on companies that are very attractively valued, while still offering strong earnings growth potential. We also fine tuned the positioning in the telecommunications sector, shifting assets to companies we believe are able to capitalize on the strong secular trends that are supporting earnings growth in the sector. Q: What changes did you make to the fixed income segment during the period? A: We adjusted the portfolio's duration over the course of the year, moving from a duration that was shorter than the Lehman Index to a neutral duration and then back to a shorter duration as we responded to changing expectations for inflation and economic growth. At times, we also shifted exposure to mortgage-backed securities in order to take advantage of their value relative to other bond sectors. We trimmed the portfolio's holdings of investment grade corporate bonds and used the proceeds to increase holdings of mortgage-backed and collateralized mortgage-backed securities. We modestly increased the high yield bond position. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 3 RiverSource VP - Balanced Fund Q: How do you plan to manage the Fund in the coming months? A: In the current environment, we see corporate profit margins at record levels, signs of slower global economic growth and a weaker U.S. housing market that could lead consumers to reduce their spending. All of these suggest that corporate profit growth is likely to decelerate. Within the equity segment, we prefer to own high quality companies that are attractively valued. The difference between the valuations of traditional growth stocks and traditional value stocks has become quite small, which allows us to add attractive growth opportunities to the portfolio while remaining firmly committed to our value strategy. In doing so, we have de-emphasized companies whose growth is more dependent on economic activity and focused on companies whose growth tends to be stable regardless of how the overall economy is performing. As a result, the Fund's equity positions in media, health care and technology were larger than their respective weightings within the Russell Index. The fixed income segment is positioned with a duration shorter than the Lehman Index, reflecting our expectations for reduced inflation pressure in 2007 and a "soft landing" in which the U.S. economy moves into a period of slower -- but not stagnant -- growth. The fixed income segment has sizable positions in collateralized mortgage-backed and mortgage-backed securities. We consider mortgages to be an attractive sector because we don't believe interest rates will shift dramatically higher or lower. The corporate bond weighting is smaller than the Lehman Index because we believe a peak in corporate earnings and the feverish pace of merger activity will ultimately have a negative effect on performance in the sector. We maintained a modest position in high yield corporate bonds. The Fund's weighting in agency securities is smaller than in the Lehman Index. In the current economic and interest rate environment, a key objective for the fixed income segment is to achieve an attractive yield profile while maintaining a relatively defensive positioning. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +14.38% 3 years +9.22% 5 years +6.41% 10 years +6.59% Since inception (4/30/86) +9.21%
ASSET ALLOCATION & SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Stocks(1) 60.9% Bonds(2) 33.4% [PIE CHART] Senior Loans(4) 0.3% Cash & Cash Equivalents(5) 5.4% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Financials 18.8%, Energy 7.1%, Consumer Discretionary 6.8%, Industrials 5.6%, Information Technology 5.4%, Telecommunication Services 4.5%, Health Care 4.4%, Consumer Staples 3.9%, Utilities 2.5% and Materials 1.9%. (2) Includes Mortgage-Backed 15.7%, U.S. Government Obligations & Agencies 7.2%, Corporate Bonds(3) 4.9%, Commercial Mortgage-Backed 4.5%, Asset-Backed 1.0% and Foreign Government 0.1%. (3) Includes Telecommunication 1.5%, Utilities 1.2%, Financials 0.8%, Consumer Discretionary 0.5%, Energy 0.3%, Consumer Staples 0.2%, Health Care 0.2% and Materials 0.2%. (4) Includes Health Care 0.1%, Materials 0.1% and Telecommunication 0.1%. (5) Of the 5.4%, 2.1% is due to security lending activity and 3.3% is the Fund's cash equivalent position.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Exxon Mobil 2.8% $ 61,232,350 Bank of America 2.4 50,943,136 Citigroup 2.3 50,028,793 American Intl Group 1.7 35,953,328 ConocoPhillips 1.3 28,394,635 Chevron 1.3 28,294,638 Verizon Communications 1.2 26,375,900 Pfizer 1.2 26,246,463 General Electric 1.2 25,992,115 Altria Group 1.2 25,769,257
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 16.6% of portfolio assets - ------------------------------------------------------------------------------ 4 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Balanced Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - BALANCED FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Balanced Russell 1000(R) Value Lehman Brothers Aggregate Lipper Balanced Funds Fund Index Bond Index Blended Index Index 1/1/97 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 1/31/97 $ 11,950 $ 13,518 $ 10,965 $ 12,455 $ 12,030 1/31/98 $ 13,838 $ 15,631 $ 11,918 $ 14,135 $ 13,845 1/31/99 $ 15,892 $ 16,780 $ 11,820 $ 14,729 $ 15,089 1/31/00 $ 15,525 $ 17,956 $ 13,195 $ 16,088 $ 15,449 1/31/01 $ 13,881 $ 16,952 $ 14,308 $ 16,101 $ 14,949 1/31/02 $ 12,087 $ 14,321 $ 15,775 $ 15,232 $ 13,351 1/31/03 $ 14,536 $ 18,622 $ 16,422 $ 18,167 $ 16,013 1/31/04 $ 15,930 $ 21,693 $ 17,135 $ 20,265 $ 17,452 1/31/05 $ 16,554 $ 23,222 $ 17,551 $ 21,331 $ 18,360 1/31/06 $ 18,935 $ 28,389 $ 18,311 $ 24,469 $ 20,490
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Balanced Fund (from 1/1/97 to 12/31/06) as compared to the performance of three widely cited performance indices, the Russell 1000(R) Value Index, the Lehman Brothers Aggregate Bond Index, the Lipper Balanced Funds Index and a Blended Index consisting of a blend of the Russell 1000(R) Value Index and the Lehman Brothers Aggregate Bond Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 5 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Cash Management Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below is the discussion of RiverSource VP - Cash Management Fund's results and strategy for the 12 months ended Dec. 31, 2006. Q: How did RiverSource VP - Cash Management Fund perform for the 12 months ended Dec. 31, 2006? A: RiverSource VP - Cash Management Fund's Class A shares returned 4.49% for the annual period. The Fund's annualized simple yield was 4.52% and its annualized compound yield was 4.63% for the seven-day period ended Dec. 31, 2006.* The Fund serves as a conservative, shorter-term investment choice for individuals seeking current income. RiverSource VP - Cash Management Fund rose 1.54% for the four-month period Sept. 1 - Dec. 31, 2006. * The 7-day yields shown reflect more closely the current earnings of the Fund than the total return. Short-term yields may be higher or lower than the figures shown. Q: What factors most significantly affected the Fund's performance? A: The policies of the Federal Reserve Board (the Fed) and moderating economic growth had the greatest effect on the Fund's annual results. The Fed raised interest rates by 0.25% four more times during the 12 months, bringing the targeted federal funds rate, an interest rate that affects short-term rates, to 5.25% by the end of June. As the Fed raised rates, money market yields also moved higher. In early August, the Fed observed its first pause in its two-year tightening cycle causing yields to fall, as the market began to unwind the possibility of future Fed hikes. The Fed then kept the targeted federal funds rate steady through the remainder of the period. The Fed maintained that any additional firming of monetary policy will be dependent on incoming data for both inflation and economic growth. During the period, U.S. economic growth slowed, with gross domestic product moving from 5.6% in the first quarter of the calendar year to 2.6% in the second and 2.0% in the third. Consensus estimates for the fourth quarter are even lower. Given this backdrop, the money market yield curve flattened during the annual period, as short-term yields continued to move higher. In the last months of the period, as expectations of Fed eases were priced into the market, the money market yield curve actually inverted, meaning yields at the short-term end of the curve were higher than those at the longer-term end of the curve. As actual and anticipated Fed policy shifted over the period, we positioned the Fund accordingly. Q: What changes did you make to the Fund during the period? A: Throughout the period, we were alert to changes in the details of economic releases that could provide opportunities to adjust the portfolio. For example, we were prudently positioned to take advantage of a rising rate environment during the first half of the year by focusing the Fund's holdings on floating rate issues. This strategy reflected our belief that floating rate issues, which are reset in line with changes in market interest rates, were attractively valued relative to fixed interest rate products in a rising interest rate scenario. Indeed, these floating assets enabled the Fund to capture higher rates through the frequent resets of the securities' yields. FUND PERFORMANCE For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Cash Management Fund +4.49%
An investment in money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to maintain the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. - ------------------------------------------------------------------------------ 6 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Cash Management Fund Then, by the middle of the year, because we anticipated the Fed ending its tightening cycle, we became less defensive and invested more in longer-dated fixed-rate securities. These longer-dated purchases enabled the Fund to lock in higher yields vs. floating rate issues. They also lengthened the Fund's average maturity to a range of 50 to 60 days. As of Dec. 31, 2006, the average weighted maturity of the Fund was 54 days, compared to a range of 35 to 40 days during the first half of the year. As always, we attempted to maximize the Fund's yield without taking unnecessary risks. We continued to invest in high quality securities. Q: What is the Fund's tactical view and strategy for the months ahead? A: We believe there is a high probability of the Fed keeping the targeted federal funds rate at its current 5.25% for an extended period of time. Given this view, we intend to continue to opportunistically lengthen the Fund's weighted average maturity through fixed-rate securities as we seek to lock in higher yields. We will continue to closely monitor economic data, Fed policy and any shifts in the money market yield curve, striving to strategically adjust our portfolio positioning accordingly. We intend to continue to focus on high-quality investments with minimal credit risk while seeking competitive yields. SECTOR BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 Commercial Paper 69.4% Floating Rate Notes 19.3% [PIE CHART] Certificates of Deposit 8.3% U.S. Government Obligations & Agencies 3.0%
AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +4.49% 3 years +2.60% 5 years +1.89% 10 years +3.40% Since inception (10/13/81) +5.49%
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 7 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Core Bond Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, the portfolio management team for RiverSource VP - Core Bond Fund discusses the Fund's results and positioning for the 12 months ended Dec. 31, 2006. Q: How did RiverSource VP - Core Bond Fund perform for the annual period? A: RiverSource VP - Core Bond Fund returned 3.82% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the unmanaged Lehman Brothers Aggregate Bond Index (Lehman Index), which gained 4.33%. The Fund's peer group, as represented by the Lipper Intermediate Investment Grade Index, returned 4.47% during the same period. RiverSource VP - Core Bond Fund rose 1.85% for the four-month period Sept. 1 - Dec. 31, 2006. The Lehman Index returned 2.13%, while the Lipper Intermediate Investment Grade Index returned 2.21% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: Increases in interest rates had the greatest impact on the Fund. Rising interest rates reduced bond prices modestly and detracted from the Lehman Index's coupon return. Rates rose in response to a strong economy, elevated inflation levels and continued tightening of monetary policy by the Federal Reserve Board (the Fed), at least through August, when the Fed observed its first pause in two years. Given the rising interest rate environment for the majority of the annual period, we maintained a defensive posture on duration, which helped mitigate the Fund's interest rate risk on a relative basis. Duration is a measure of the Fund's sensitivity to interest rate changes. Also helping the Fund's results was effective sector positioning overall, particularly significant allocations to mortgage-backed securities and commercial mortgage-backed securities (CMBS), as these sectors outperformed equivalent-duration Treasuries and the Lehman Index during the period. Strong issue selection within both CMBS and the investment grade corporate bond sector further helped the Fund's performance. Conversely, the Fund's modest exposure to investment grade corporate bonds and agency securities detracted a bit, as these non-Treasury sectors also outperformed both equivalent-duration U.S. Treasuries and the Lehman Index for the annual period. Also, a position in Treasury Inflation Protected Securities (TIPS) hurt the Fund's relative performance in these months, as short-term inflation expectations fell. Another factor detracting from the Fund's results during the period was its issue selection within the mortgage sector. The premium coupon securities, adjustable-rate mortgages and collateralized mortgage obligations we favored underperformed the rest of the mortgage-backed securities sector as rates rose during the 12 months. Q: What changes did you make to the Fund's portfolio during the period? A: We tactically managed the Fund's duration positioning during the year. For example, we maintained a shorter duration position than the Lehman Index for the first months of the period. Then, by May, once 10-year Treasury yields breached the 5% level and we began to anticipate the Fed nearing an end to its tightening cycle, we moved toward a neutral duration position relative to the Lehman Index. We then shortened the Fund's duration again relative to the Lehman Index beginning in August, as interest rates adjusted to market expectations regarding the pace of economic growth and changes in anticipated inflation data. During the course of the year, we also tactically shifted the Fund's allocation to mortgage-backed securities. We also trimmed the Fund's exposure to investment grade corporate bonds, using proceeds to add to the Fund's positions in CMBS and mortgage-backed securities, where we found better value. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Core Bond Fund +3.82% Lehman Brothers Aggregate Bond Index (unmanaged) +4.33% Lipper Intermediate Investment Grade Index +4.47%
(See "The Fund's Long-term Performance" for Index descriptions) There are risks associated with an investment in a bond fund, including credit risk, interest rate risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 8 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Core Bond Fund Q: What is the Fund's tactical view and strategy for the months ahead? A: With inflation still a factor, the Fed chose to leave the targeted federal funds rate unchanged at 5.25% through the end of 2006. In its December statement, the Fed indicated that inflation remains a concern, but also noted that it was beginning to see the effects of the slowing housing market work its way into the broader economy. Keeping that in mind, upcoming data on both inflation and economic growth will no doubt play an important role in the Fed's decisions during 2007. Based on the current inverted shape of the fixed income yield curve, meaning that long-term rates are lower than short-term rates, it appears that the fixed income market expects the Fed's next move to be a decrease in the federal funds rate. In our view, the level of core inflation remains too high for the Fed to begin cutting rates in the near term. We believe current Fed policy will remain in place at least until the second half of 2007 and that long-term interest rates should continue to drift higher. Given this view, we intend to maintain the Fund's duration, or interest rate risk, shorter than the Lehman Index for the near term. We continue to favor shorter maturity notes over longer maturity bonds during the coming months, as we expect the yield curve to re-steepen in response to what we believe will be a successful "soft landing" for the economy and a lengthy pause by the Fed. From a sector perspective, we intend to maintain the Fund's modest exposure to agencies and to investment grade corporate bonds. We intend to maintain the Fund's sizable positions in CMBS and mortgage-backed securities. The mortgage sector remains attractive given our expectation that interest rates will not move sharply in either direction, but will gravitate higher. As always, we will maintain a disciplined focus on individual security selection. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +3.82% Since inception (2/4/04) +2.94%
SECTOR BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 Mortgage-Backed 42.9% U.S. Government Obligations & Agencies 27.5% Commercial Mortgage-Backed 11.4% Corporate Bonds(1) 10.3% [PIE CHART] Cash & Cash Equivalents 5.5% Asset-Backed 2.3% Foreign Government 0.1% (1) Includes Telecommunication 3.6%, Utilities 2.2%, Financials 1.8%, Consumer Discretionary 0.9%, Energy 0.7%, Consumer Staples 0.4%, Health Care 0.4% and Materials 0.3%.
THE TEN LARGEST CORPORATE BOND HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Nextel Communications 5.95% 2014 1.1% $ 822,875 TELUS 8.00% 2011 0.7 508,495 Popular North America 3.88% 2008 0.7 487,067 Verizon New York 6.88% 2012 0.6 440,605 Telecom Italia Capital 5.25% 2015 0.5 406,337 Verizon Pennsylvania 5.65% 2011 0.5 401,800 Bank of America 6.00% 2036 0.5 346,233 Cadbury Schweppes US Finance LLC 3.88% 2008 0.4 297,033 Consumers Energy 4.80% 2009 0.4 286,199 Home Depot 5.88% 2036 0.4 274,771
Excludes U.S. Treasury and government agency holdings. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 5.8% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 9 RiverSource VP - Core Bond Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - CORE BOND FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Core Bond Lehman Brothers Aggregate Lipper Intermediate Investment Fund Bond Index Grade Index 2/1/04 $ 10,000 $ 10,000 $ 10,000 12/31/04 $ 10,296 $ 10,351 $ 10,346 12/31/05 $ 10,479 $ 10,603 $ 10,582 12/31/06 $ 10,880 $ 11,062 $ 11,055
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Core Bond Fund (from 2/1/04 to 12/31/06) as compared to the performance of two widely cited performance indices, the Lehman Brothers Aggregate Bond Index and the Lipper Intermediate Investment Grade Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ 10 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - Diversified Bond Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, the portfolio management team for RiverSource VP - Diversified Bond Fund discusses the Fund's results and positioning for the 12 months ended Dec. 31, 2006. Q: How did RiverSource VP - Diversified Bond Fund perform for the annual period? A: RiverSource VP - Diversified Bond Fund returned 4.41% for the 12 months ended Dec. 31, 2006. The Fund outperformed its benchmark, the unmanaged Lehman Brothers Aggregate Bond Index (Lehman Index), which gained 4.33%. The Fund's peer group, as represented by the Lipper Intermediate Investment Grade Index, returned 4.47% during the same period. RiverSource VP - Diversified Bond Fund rose 2.32% for the four-month period Sept. 1 - Dec. 31, 2006. The Lehman Index returned 2.13%, while the Lipper Intermediate Investment Grade Index returned 2.21% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: Increases in interest rates had the greatest impact on the Fund. Rising interest rates reduced bond prices modestly and detracted from the Lehman Index's coupon return. Rates rose in response to a strong economy, elevated inflation levels and continued tightening of monetary policy by the Federal Reserve Board (the Fed), at least through August, when the Fed observed its first pause in two years. Given the rising interest rate environment for the majority of the annual period, we maintained a defensive posture on duration, which helped mitigate the Fund's interest rate risk on a relative basis. Duration is a measure of the Fund's sensitivity to interest rate changes. Also helping the Fund's results was effective sector positioning overall, particularly significant allocations to mortgage-backed securities and commercial mortgage-backed securities (CMBS), as these sectors outperformed equivalent-duration Treasuries and the Lehman Index during the period. Strong issue selection within both CMBS and the investment grade corporate bond sector also helped the Fund's performance. The Fund's exposure to high yield corporate bonds supported the Fund's results as well, as this sector notably outpaced the Lehman Index during the year. Finally, the Fund's positioning in non-U.S. dollar bonds, or bonds denominated in foreign currencies, further helped the Fund's performance given the U.S. dollar's weakening vs. most other major currencies during the annual period. Remember, a weakening dollar typically increases the value of the Fund's foreign currency denominated securities when expressed in U.S. dollar terms and vice versa. Conversely, the Fund's modest exposure to investment grade corporate bonds and agency securities detracted a bit, as these non-Treasury sectors also outperformed both equivalent-duration U.S. Treasuries and the Lehman Index for the annual period. Also, a position in Treasury Inflation Protected Securities (TIPS) hurt the Fund's performance in these months, as short-term inflation expectations fell. Another factor detracting from the Fund's results during the period was its issue selection within the mortgage sector. The premium coupon securities, adjustable-rate mortgages and collateralized mortgage obligations we favored underperformed the rest of the mortgage-backed securities sector as rates rose during the 12 months. Q: What changes did you make to the Fund's portfolio during the period? A: We tactically managed the Fund's duration positioning during the year. For example, we maintained a shorter duration position than the Lehman Index for the first months of the period. Then, by May, once 10-year Treasury yields breached the 5% level and we began to anticipate the Fed nearing an end to its tightening cycle, we moved toward a neutral duration position relative to the Lehman Index. We then shortened the Fund's duration again relative to the Lehman Index beginning in August, as interest rates adjusted to market expectations regarding the pace of economic growth and changes in anticipated inflation data. During the course of the year, we also tactically shifted the Fund's allocation to mortgage-backed securities. We also PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Diversified Bond Fund +4.41% Lehman Brothers Aggregate Bond Index (unmanaged) +4.33% Lipper Intermediate Investment Grade Index +4.47%
(See "The Fund's Long-term Performance" for Index descriptions) There are risks associated with an investment in a bond fund, including credit risk, interest rate risk and prepayment and extension risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, generally have more volatile prices and carry more risk to principal and income than investment grade securities. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 11 RiverSource VP - Diversified Bond Fund trimmed the Fund's exposure to investment grade corporate bonds, using proceeds to add to the Fund's positions in CMBS and mortgage-backed securities, where we found better value. We modestly increased the Fund's positioning in high yield bonds as well, adding several attractive high yield bank loan positions. Q: What is the Fund's tactical view and strategy for the months ahead? A: With inflation still a factor, the Fed chose to leave the targeted federal funds rate unchanged at 5.25% through the end of 2006. In its December statement, the Fed indicated that inflation remains a concern, but also noted that it was beginning to see the effects of the slowing housing market work its way into the broader economy. Keeping that in mind, upcoming data on both inflation and economic growth will no doubt play an important role in the Fed's decisions during 2007. Based on the current inverted shape of the fixed income yield curve, meaning that long-term rates are lower than short-term rates, it appears that the fixed income market expects the Fed's next move to be a decrease in the federal funds rate. In our view, the level of core inflation remains too high for the Fed to begin cutting rates in the near term. We believe current Fed policy will remain in place at least until the second half of 2007 and that long-term interest rates should continue to drift higher. Given this view, we intend to maintain the Fund's duration, or interest rate risk, shorter than the Lehman Index for the near term. We continue to favor shorter maturity notes over longer maturity bonds during the coming months, as we expect the yield curve to re-steepen in response to what we believe will be a successful "soft landing" for the economy and a lengthy pause by the Fed. From a sector perspective, we intend to maintain the Fund's modest exposure to agencies and to investment grade corporate bonds. We intend to maintain the Fund's sizable positions in CMBS and mortgage-backed securities. The mortgage sector remains attractive given our expectation that interest rates will not move sharply in either direction, but will gravitate higher. We expect to maintain the Fund's moderate allocation to high yield corporate bonds and bank loans. We expect the high yield corporate bond sector to perform well again in the coming year, as default rates should remain low and the demand for yield rather high. As always, we will maintain a disciplined focus on individual security selection. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +4.41% 3 years +3.67% 5 years +4.20% 10 years +4.59% Since inception (10/13/81) +8.99%
SECTOR BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 Mortgage-Backed 43.9% U.S. Government Obligations & Agencies 19.1% Corporate Bonds(1) 12.4% Cash & Cash Equivalents(2) 11.7% [PIE CHART] Commercial Mortgage-Backed 10.7% Asset-Backed 2.1% Foreign Government 0.1% (1) Includes Telecommunication 4.0%, Utilities 2.5%, Financials 2.0%, Consumer Discretionary 1.2%, Energy 0.9%, Health Care 0.8%, Materials 0.5%, Consumer Staples 0.4% and Industrials 0.1%. (2) Of the 11.7%, 3.3% is due to security lending activity and 8.4% is the Fund's cash equivalent position.
THE TEN LARGEST CORPORATE BOND HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Nextel Communications 5.95% 2014 1.1% $ 33,752,463 Bank of America Alternative Loan Trust 6.00% 2037 1.0 29,966,602 TELUS 8.00% 2011 0.7 20,853,750 Popular North America 3.88% 2008 0.6 19,258,629 Countrywide Alternative Loan Trust 6.00% 2037 0.6 18,955,295 Verizon New York 6.88% 2012 0.6 18,728,292 Nomura Asset Securities 6.99% 2030 0.6 18,699,239 Harborview Mtge Loan Trust 5.44% 2036 0.6 17,943,317 Harborview Mtge Loan Trust 5.60% 2036 0.6 17,866,305 CDC Commercial Mtge Trust 5.68% 2030 0.6 17,710,267
Excludes U.S. Treasury and government agency holdings. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 7.0% of portfolio assets - ------------------------------------------------------------------------------ 12 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Bond Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - DIVERSIFIED BOND FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Diversified Lehman Brothers Aggregate Lipper Intermediate Investment Bond Fund Bond Index Grade Index 1/01/97 $10,000 $10,000 $10,000 1/31/97 $10,883 $10,965 $10,878 1/31/98 $11,047 $11,918 $11,734 1/31/99 $11,235 $11,820 $11,619 1/31/00 $11,843 $13,195 $12,848 1/31/01 $12,751 $14,308 $13,905 1/31/02 $13,456 $15,775 $15,057 1/31/03 $14,059 $16,422 $15,872 1/31/04 $14,689 $17,135 $16,551 1/31/05 $15,001 $17,551 $16,929 1/31/06 $15,662 $18,311 $17,685
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Diversified Bond Fund (from 1/1/97 to 12/31/06) as compared to the performance of two widely cited performance indices, the Lehman Brothers Aggregate Bond Index and the Lipper Intermediate Investment Grade Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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 - ANNUAL REPORT 13 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Diversified Equity Income Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, portfolio managers Warren Spitz, Steve Schroll, Laton Spahr and Paul Stocking discuss RiverSource VP - Diversified Equity Income Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - Diversified Equity Income Fund perform for the annual period? A: RiverSource VP - Diversified Equity Income Fund returned 19.75% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the Russell 1000(R) Value Index (Russell Index), which advanced 22.25% for the period. The Fund outperformed the Lipper Equity Income Funds Index, representing its peer group, which rose 18.40% over the same time frame. RiverSource VP - Diversified Equity Income Fund rose 9.37% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 10.15%, while the Lipper Equity Income Funds Index returned 9.41% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: The Fund posted impressive gains during the period. Stock selection in utilities, the second best performing sector in the Russell Index for the annual period, helped the Fund's results most. Among the Fund's standout individual performers in the utilities sector were AT&T, FPL Group and BT Group. Results from most other sectors were mixed during the annual period. For example, the Fund's modest position in financials helped its performance, but this positive contribution was more than offset by poor stock selection within the sector. Having significant holdings in XL Capital and Marsh & McLennan Companies particularly hurt. Conversely, the Fund's sizable exposure to the energy sector detracted from the Fund's annual returns, as this sector was one of the worst performers in the Russell Index for the annual period. However, our stock selection in the energy sector was effective, with oil services firms McDermott Intl and Schlumberger, standout performers for the Fund. Stock selection in integrated oils disappointed overall, as the positive contributions made by Fund holdings Petrobras and Marathon Oil were more than offset by the negative effect of having only a modest position in the strongly performing energy giant Exxon Mobil. The Fund's allocation to consumer discretionary had a rather neutral impact, but stock selection in this sector detracted. Q: What changes did you make to the Fund's portfolio during the period? A: We maintained the Fund's overall bias toward cyclical stocks, but we somewhat reduced the Fund's exposure to these industries during the period in favor of the more defensive segments of the equity market given a moderation in economic growth expectations. Specifically, during the annual period, we reduced the Fund's positions in materials, energy and producer durables. We increased the Fund's allocations to utilities, financials and health care. INVESTMENT TERM CYCLICAL STOCK: A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down. An example of a cyclical industry is the automobile market: as economic growth slows, consumers have less money to spend on new cars. Non-cyclical stocks are found in industries such as health care, where the demand for goods and services is constant. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Diversified Equity Income Fund +19.75% Russell 1000(R) Value Index (unmanaged) +22.25% Lipper Equity Income Funds Index +18.40%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 14 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund Q: What is the Fund's tactical view and strategy for the months ahead? A: We take larger positions in sectors, industries or individual stocks when we believe we have identified factors that other investors have either missed or ignored or strongly disagree with, and that have the potential to move the share values higher. Generally we view the market as not providing wide differentiation among valuations currently and in the near term. Overall, risk premiums are low across asset classes, providing relatively little opportunity to expand active risk taking. We expect that the themes of energy infrastructure investment, industrial growth and globalization are themes to lead the market over the longer term. However, with our dynamic view of risk management, we expect to moderate the risk profile within the Fund's portfolio by reducing its emphasis on these themes in favor of several new stock-specific opportunities. As always, we will continue to emphasize stocks with attractive valuations and will invest in equities across the market capitalizations sectors with an emphasis on large-cap stocks. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +19.75% 3 years +17.12% 5 years +12.92% Since inception (9/15/99) +9.58%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 28.8% Industrials 16.2% Energy 14.0% Telecommunication Services 8.4% [PIE CHART] Health Care 8.0% Consumer Discretionary 5.2% Other(1) 19.4% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Materials 4.7%, Consumer Staples 4.6%, Utilities 4.2%, Information Technology 3.4%, Telecommunication 0.5% and Cash & Cash Equivalents(2) 2.0%. (2) Of the 2.0%, 0.6% is due to security lending activity and 1.4% is the Fund's cash equivalent position.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Bank of America 3.2% $ 110,286,175 Citigroup 3.1 106,586,350 Pfizer 2.7 93,871,986 AT&T 2.6 91,136,922 St. Paul Travelers Companies 2.4 83,486,018 McDermott Intl 2.3 81,802,308 Altria Group 2.1 73,613,479 ACE 2.1 72,214,583 Exxon Mobil 2.0 70,916,084 XL Capital Cl A 2.0 70,015,251
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 24.5% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 15 RiverSource VP - Diversified Equity Income Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Diversified Russell 1000(R) Value Lipper Equity Income Equity Income Fund Index Funds Index 10/01/99 $10,000 $10,000 $10,000 12/31/99 $10,476 $10,544 $10,406 12/31/00 $10,394 $11,283 $11,182 12/31/01 $10,617 $10,652 $10,601 12/31/02 $ 8,596 $ 8,999 $ 8,859 12/31/03 $12,135 $11,702 $11,147 12/31/04 $14,343 $13,631 $12,599 12/31/05 $16,279 $14,592 $13,330 12/31/06 $19,495 $17,839 $15,782
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Diversified Equity Income Fund (from 10/1/99 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell 1000(R) Value Index and the Lipper Equity Income Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ 16 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - Emerging Markets Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, RiverSource VP - Emerging Markets Fund portfolio managers Julian Thompson and Jules Mort of Threadneedle International Limited (Threadneedle) discuss the Fund's results for the 12 months ended Dec. 31, 2006. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the subadviser to the Fund. Q: How did RiverSource VP - Emerging Markets Fund perform for the fiscal year ended Dec. 31, 2006? A: The Fund returned 33.90% for the 12-month period ended Dec. 31, 2006. The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index (MSCI Index), which returned 32.59%. The Fund also outperformed its peer group, the Lipper Emerging Markets Funds Index, which rose 32.07% for the 12-month time frame. RiverSource VP - Emerging Markets Fund rose 20.17% for the four-month period Sept. 1 - Dec. 31, 2006. The MSCI Index returned 18.62% while the Lipper Emerging Markets Funds Index returned 18.11% for the four-month period. Q: What factors had a significant impact on performance? A: Asset allocation, sector selection and stock selection contributed to performance over the Fund's fiscal year. Throughout the year, asset allocation was the key driver of performance. Standout contributors included Brazil and Russia, the two largest allocations in the Fund. Brazil turned in very strong performance for the period up more than 45% and Russia was up nearly 56% over the period. The Fund's overweight position in both Brazil and Russia relative to the MSCI Index's weighting helped performance. Throughout the year, we have focused on some key investment themes that have benefited the Fund, namely commodities and domestic consumption (i.e., when consumers spend their income on goods and services produced or provided within their country). Both Brazil and Russia are commodity-producing economies and continued to benefit from very strong commodity prices and from what we believe is a long-term growth trend in China. The outlook for China's appetite for commodities, such as iron ore from Brazil and oil from Russia, remains strong in light of China's projected growth and perpetual building of infrastructure and other projects. Domestic consumption in countries such as China is growing and has benefited the Fund with some stand-out performers in the telecommunication and banking sectors. Profits from selling commodities and commodity-related products brought benefits to the economies of exporting countries, such as Brazil and Russia. Among the industries that have indirectly benefited are the banking sector, media and telecom in Russia; and airlines, retail and real estate in Brazil. Several countries detracted from performance. South Africa was one of the Fund's main detractors through much of the period, although South Africa's performance was up 20.5% at the end of the year. Over the year, the Fund has built a sizeable South African position, and midway through the period, it underperformed but rebounded by the end of the period. Another disappointment to the Fund was India. We have been underweight relative to the MSCI Index in India because we considered stocks in India to be expensive and also riskier compared to other places, such as Brazil. We felt that our money could work harder elsewhere, so we reduced the Fund's position in India. In doing so, we missed out on much of its market appreciation. Finally, the Fund had a sizable position in the banking sector in Turkey. The market there peaked in February 2006, and we retained the position. Shortly after, the market sold off on fears that U.S. interest rates would rise, and we sold out of the Fund's position. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Emerging Markets Fund +33.90% MSCI Emerging Markets Index (unmanaged) +32.59% Lipper Emerging Markets Funds Index +32.07%
(See "The Fund's Long-term Performance" for Index descriptions) International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets due to the dramatic pace of economic, social and political change. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 17 RiverSource VP - Emerging Markets Fund Individual stocks in various sectors that contributed to performance over the period included mining company Companhia Vale do Rio Doce (Brazil), Samsung Electronics (South Korea), LUKOIL (Russia), America Movil (Mexico), Gazprom (Russia) and the Industrial & Commercial Bank of China (also known as ICBC). Some stocks that hindered performance included retailer Truworths Intl (South Africa), commercial bank Akbank (Turkey), technology company Lipman (Israel) and food retailer Pyaterochka (Russia). Q: What changes did you make to the Fund during the period? A: We reduced the Fund's position in Asia, somewhat. However, Asia remains a significant focus for the Fund. We also reduced the Fund's exposure to India and Thailand. India's central bank struggles to rein in economic growth and the Indian market is volatile and, in our opinion, overpriced. In Thailand, we believed that the interest rate cycle was not favorable for investments and had concerns with Thailand's political environment. Also, we reduced the Fund's overall position in technology, which impacted the Fund's weighting in Asia. We decreased the Fund's exposure to Taiwan Semiconductors Manufacturing. We reduced the Fund's exposure to South Korea because growth there has slowed and the country's economy acted more like a developed market than an emerging one. Early in the period, we added South Korean company, Samsung Heavy Industries, specialized shipbuilders that enjoyed strong demand for their products. We later reduced the Fund's substantial holding in semiconductor manufacturer Samsung Electronics after its disappointing results from the first calendar quarter in 2006. Commodities and domestic consumption themes are evidenced in the high level of exports, growing trade surpluses and rise in consumer-facing industries in Brazil and Russia, the two largest country allocations in the Fund. In Brazil, mining company Companhia Vale do Rio Doce is among the Fund's largest holdings and continues to benefit through its global exports including iron ore sales to China. In the first half of the period, we bought paper and pulp producer Aracruz Celulose, which has extremely low production costs. We also added Cyrela Brazil Realty, a real estate developer and GOL Linhas Aereas Inteligentes, a low cost, regional airline that benefits from travel within Brazil and operates with little competition and contained costs. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +33.90% 3 years +30.54% 5 years +24.17% Since inception (5/1/00) +12.07%
COUNTRY BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 Brazil 15.6% Russia 15.0% South Korea 10.7% Mexico 8.6% [PIE CHART] Taiwan 8.6% China 4.0% Other(1) 37.5% (1) Includes Hong Kong 6.3%, South Africa 5.7%, Chile 2.7%, Luxembourg 2.3%, India 2.1%, Indonesia 2.1%, Peru 1.3%, Singapore 1.3%, Bermuda 1.2%, Argentina 1.0%, Colombia 1.0%, Hungary 1.0%, Canada 0.8%, Malaysia 0.7%, Poland 0.7%, Turkey 0.7%, Philippine Islands 0.6%, Netherlands 0.5%, Thailand 0.5% and Cash & Cash Equivalents 5.0%.
THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Gazprom ADR 5.0% $ 27,074,541 Samsung Electronics 3.8 20,582,183 Companhia Vale do Rio Doce ADR 3.5 19,358,242 Petroleo Brasileiro ADR 3.1 16,796,124 Taiwan Semiconductor Mfg 3.0 16,452,365 China Mobile 2.9 15,953,715 Sberbank 2.5 13,541,250 Industrial & Commercial Bank of China Series H 2.4 13,034,113 America Movil ADR Series L 2.3 12,672,453 Naspers Series N 2.1 11,693,150
Note: Certain foreign investment risks include: changes in currency exchange rates, adverse political or economic order, and lack of similar regulatory requirements followed by U.S. companies. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 30.6% of portfolio assets - ------------------------------------------------------------------------------ 18 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Emerging Markets Fund In Russia, the oil sector has contributed significantly to performance, and we see this continuing. Russian oil company Gazprom was added during the period and is among the Fund's largest holdings. With profits from some of our Chinese holdings sold late in the period, we added to the Fund's existing position in Sberbank, a Russian bank that has approximately 45% of the market share in Russia. Loans are a big part of its business and its growth prospects, particularly in the mortgage market, looked so promising to us that we consider Sberbank a core holding within the Fund's allocation to Russia, and it has been a strong performer over the period. Our asset allocation to China boosted performance over the period. Notable holdings include the ICBC and China Merchants Bank. Both of these Chinese banks doubled in value during the fourth calendar quarter of 2006 and were significant contributors to performance. Late in the period, we significantly reduced our stake in China Merchants Bank and some other Chinese holdings. Q: How do you intend to manage the Fund in the coming months? A: For most of the period, we have maintained an overweight position in China, relative to the MSCI Index. We have since reduced the Fund's exposure to China, and now have a slight underweight relative to the Index. The strength of the Chinese market has made valuations much less attractive now, particularly in the banking sector. We sold some of the Chinese holdings and put the monies to work elsewhere. We like China's prospects and will continue to watch for companies that, in our view, are a good fit for the Fund and are also attractively valued. We believe that emerging markets will continue to perform well within periods of volatility, and with that in mind, we feel the Fund is suitably positioned. We believe the shape of the portfolio and the sector allocations that we have in place are unlikely to change much because we still favor commodity producers over commodity importers. We also intend to keep the Fund's strategy largely focused on domestic growth companies. We continue to see the best opportunities in Latin America and in Russia. We are considering the Fund's exposure in South Africa at this point, and we are very aware that the retail sector in South Africa is looking very cheap. However, the macroeconomic environment does not look favorable. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 19 RiverSource VP - Emerging Markets Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - EMERGING MARKETS FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Emerging MSCI Emerging Markets Lipper Emerging Markets Markets Fund Index Funds Index 5/01/00 $10,000 $10,000 $10,000 12/31/00 $ 7,345 $ 7,484 $ 7,596 12/31/01 $ 7,244 $ 7,307 $ 7,330 12/31/02 $ 6,850 $ 6,868 $ 6,991 12/31/03 $ 9,613 $10,734 $10,972 12/31/04 $11,934 $13,519 $13,791 12/31/05 $15,968 $18,189 $18,293 12/31/06 $21,381 $24,116 $24,160
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Emerging Markets Fund (from 5/1/00 to 12/31/06) as compared to the performance of two widely cited performance indices, the Morgan Stanley Capital International (MSCI) Emerging Markets Index and the Lipper Emerging Markets Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ 20 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - Fundamental Value Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. RiverSource VP - Fundamental Value Fund rose 9.25% for the period since the Fund's inception on May 1, 2006 through Dec. 31, 2006. The Fund underperformed its benchmarks, the Russell 1000(R) Value Index (Russell Index), which rose 12.54%, while the S&P 500 Index returned 9.65% during the same period. The Fund also underperformed the Lipper Large Cap Value Funds Index, which increased 10.54%. Davis Selected Advisers, L.P. (Davis), an independent money management firm, manages the Fund's portfolio. RiverSource VP - Fundamental Value Fund rose 9.30% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 10.15%, while the S&P 500 Index returned 9.45%. The Lipper Large Cap Value Funds Index returned 9.50% for the four-month period. Q: What factors most significantly affected the Fund's performance for the period? A: Consumer discretionary companies were the most important contributors to the Fund's performance during the period. Stock selection within the sector was positive with Comcast and Harley-Davidson among the top contributors to performance. The Fund's largest sector holdings were in the consumer staples and financials sectors, which contributed to the Fund's performance. Altria Group, a consumer staples holding, and financial companies Berkshire Hathaway, American Express and JP Morgan Chase & Co. were among the Fund's top contributors to performance. The Fund's holdings within the telecommunication services and energy sectors detracted from performance. Sprint Nextel detracted from performance during the period along with energy companies EOG Resources and Occidental Petroleum. In addition, two financial companies Progressive and Aon were among the top detractors from performance. Lastly, the Fund's international holdings contributed positively to performance during the period. The Fund ended the period with approximately 13% of assets invested in foreign companies. Q: What changes did you make to the Fund during the period? A: Our long-term focus usually results in low portfolio turnover. We do not overreact to past short-term performance from individual holdings on either the upside or the downside. We focus deliberately on the future, considering each company's long-term business fundamentals. Q: How are you positioning the Fund going forward? A: We have built a portfolio which is quite different in composition from the S&P 500 Index. The Fund's investment strategy is to buy companies with durable earnings at prices below our estimates of their intrinsic value and hold them for the long term. We perform extensive research on the companies that we buy. We are strong supporters of long-term, buy-and-hold investing. PERFORMANCE COMPARISON For the period ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.] RiverSource VP - Fundamental Value Fund +9.25% S&P 500 Index (unmanaged) +9.65% Russell 1000(R) Value Index (unmanaged) +12.54% Lipper Large Cap Value Funds Index +10.54%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 21 RiverSource VP - Fundamental Value Fund TOTAL RETURN at Dec. 31, 2006 Since inception (5/1/06) +9.25%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 36.0% Consumer Staples 13.8% Consumer Discretionary 13.3% Energy 11.8% [PIE CHART] Industrials 5.9% Cash & Cash Equivalents 5.2% Other(1) 14.0% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Information Technology 4.9%, Materials 4.0%, Health Care 3.5% and Telecommunication Services 1.6%.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) American Express 4.6% $18,600,815 ConocoPhillips 4.5 18,083,913 Altria Group 4.4 17,906,343 American Intl Group 4.4 17,872,004 Tyco Intl 4.2 16,976,576 JPMorgan Chase & Co 4.1 16,706,970 Costco Wholesale 3.6 14,692,573 Berkshire Hathaway Cl B 3.4 13,802,490 Comcast Special Cl A 3.4 13,569,035 HSBC Holdings ADR 2.7 10,939,251
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 39.3% of portfolio assets - ------------------------------------------------------------------------------ 22 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Fundamental Value Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - FUNDAMENTAL VALUE FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Russell 1000(R) Lipper Large-Cap INDEX Fundamental Value Fund S&P 500 Index Value Index Value Funds Index 5/1/06 $ 10,000 $ 10,000 $ 10,000 $ 10,000 5/31/06 $ 9,912 $ 9,712 $ 9,747 $ 9,756 6/31/06 $ 9,976 $ 9,726 $ 9,809 $ 9,763 7/31/06 $ 9,942 $ 9,786 $ 10,048 $ 9,912 8/31/06 $ 9,995 $ 10,019 $ 10,216 $ 10,095 9/31/06 $ 10,170 $ 10,277 $ 10,419 $ 10,330 10/31/06 $ 10,493 $ 10,612 $ 10,760 $ 10,638 11/31/06 $ 10,704 $ 10,814 $ 11,005 $ 10,822 12/31/06 $ 10,925 $ 10,965 $ 11,251 $ 11,055
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Fundamental Value Fund (from 5/1/06 to 12/31/06) as compared to the performance of three widely cited performance indices, the S&P 500 Index, the Russell 1000(R) Value Index and the Lipper Large-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. 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. 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. The Lipper Large-Cap Value Funds Index includes the 30 largest large-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 23 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Global Bond Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, Nic Pifer, portfolio manager for RiverSource VP -Global Bond Fund discusses the Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - Global Bond Fund perform for the annual period? A: RiverSource VP - Global Bond Fund returned 6.73% for the 12 months ended Dec. 31, 2006. The Fund outperformed its benchmark, the Lehman Brothers Global Aggregate Index (Lehman Global Index), which gained 6.64%. The Fund's peer group, as represented by the Lipper Global Income Funds Index, returned 7.21% during the same period. RiverSource VP - Global Bond Fund rose 2.15% for the four-month period Sept. 1 - Dec. 31, 2006. The Lehman Global Index returned 2.05%, while the Lipper Global Income Funds Index returned 2.78% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: Currency markets had the most positive impact on the Fund's annual performance, as the U.S. dollar fell 4.8% on a trade-weighted basis for the 12 months ended Dec. 31, 2006. As the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. Global bonds produced only modestly positive returns for the year overall. Relative to the Lehman Global Index, the Fund benefited most from effective currency positioning. The Fund maintained its significant exposure to the euro and several other European currencies as well as to the "dollar bloc" currencies of Canada, Australia and New Zealand during the annual period. The Fund also maintained its modest exposure to the yen throughout the period. The Fund benefited from its weightings in the euro, other European currencies, "dollar bloc" currencies and yen, as the U.S. dollar weakened vs. the euro, the British pound, the Australian dollar and the New Zealand dollar and strengthened vs. the yen. The Fund's country allocation helped the Fund's results, too. The Fund's underweight in Japanese bonds, overweights in the "dollar bloc" government bond markets and the "peripheral" European markets of Poland, Norway and the Czech Republic, and underweighted-to-neutral position in U.S. bonds all contributed positively. The Fund's overweight in core European bonds detracted from results. On a sector basis, the Fund benefited from its exposure to high yield corporate bonds, as this was one of the best performing sectors of the fixed income market during the annual period. The Fund also benefited from its allocation to and issue selection within mortgage-backed securities and commercial mortgage-backed securities (CMBS). Of course, the majority of the Fund's holdings remained in the government bond sector. We maintained the Fund's duration, a principal measure of interest rate risk, shorter than that of the Lehman Global Index for much of the annual period. This stance was based on our view that the world's major central banks would raise interest rates given the pace of economic growth. The U.S. Federal Reserve Board (the Fed) did, in fact, raise the targeted federal funds rate by an additional 100 basis points (1.00%) during the period. The European Central Bank raised its interest rates five more times during the period, for an additional 125 basis points (1.25%). In the spring, the Bank of Japan took the first step to move away from its zero interest rate policy, raising its interest rates for the first time in five years by 25 basis points (0.25%). As global bond yields generally moved up over the annual period, the Fund's short duration positioning had a modestly positive effect on results. The Fund underperformed its Lipper peer group due primarily to the Fund's more conservative risk profile during the period. For example, the Fund had just a small exposure to emerging markets bonds, which performed quite well for the year. Q: What changes did you make to the Fund's portfolio during the period? A: While still maintaining a significant exposure, we pared back the Fund's position in the euro and other European currencies following the U.S. dollar's significant decline in late April/early May. We then further reduced the Fund's exposure to the euro and other European currencies, bringing them to a neutral position relative to the Lehman Global PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Global Bond Fund +6.73% Lehman Brothers Global Aggregate Index (unmanaged) +6.64% Lipper Global Income Funds Index +7.21%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 24 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Bond Fund Index in November and December when the U.S. dollar notably weakened again. Throughout, we redeployed most of these assets into the U.S. dollar, moving from an underweighted to an overweighted position. We added some exposure to the yen during the period, but maintained the Fund's underweighted allocation. Within sectors, we further reduced the Fund's already modest positions in U.S. and European investment grade corporate bonds, and we increased the Fund's already sizable positions in AAA-rated CMBS, pass-through mortgages and European covered bonds. We view CMBS as high quality substitutes for corporate bonds. Pass-through mortgage securities consist of a pool of residential mortgage loans, where homeowners' monthly payments of principal, interest and prepayments pass from the original bank through a government agency or investment bank to investors. European covered bonds are debt instruments secured by a covered pool of mortgage loans (property as collateral) or public-sector debt to which investors have a preferential claim in the event of default. This added exposure to mortgages proved well-timed, having implemented the strategy just before a strong run in the sector. We scaled back the Fund's exposure to UK bonds, as the UK Central Bank raised its interest rates twice during the annual period for a total of 50 basis points (0.50%). We also made some allocation and duration adjustments in the Fund's U.S. and European bond markets positioning during the year based on valuation analysis. Overall, these adjustments served to shorten further the Fund's duration relative to the Lehman Global Index. Q: What is the Fund's tactical view and strategy for the months ahead? A: While central banks' tightening policies dominated the global bond markets during the past few years, we believe we are now entering a period of neutral or static bank policy. Thus we expect little movement in bond yields, especially in the U.S. During the coming months, we may still see some upward movement of yields in the Japanese and European bond markets, given that the Bank of Japan has indicated a steady but notably slow path to higher interest rates and that the European Central Bank may hike AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +6.73% 3 years +3.72% 5 years +7.71% 10 years +4.99% Since inception (5/1/96) +5.42%
COUNTRY BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 United States 36.8% Japan 10.0% Germany 9.0% France 6.2% [PIE CHART] Cash & Cash Equivalents 5.1% United Kingdom 4.4% Other(1) 28.5% (1) Includes Italy 4.0%, Netherlands 3.1%, Spain 3.1%, Canada 2.7%, Ireland 2.4%, Belguim 2.0%, Greece 1.6%, Australia 1.4%, Poland 1.4%, Norway 1.2%, Austria 1.1%, New Zealand 0.9%, Supra-National 0.9%, Mexico 0.7%, Sweden 0.5%, Denmark 0.4%, Malaysia 0.3%, South Africa 0.3%, Brazil 0.2%, Czechoslovakia Federated Republic 0.2% and South Korea 0.1%.
THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Govt of Japan 1.70% 2009 3.7% $29,455,451 Bundesrepublik Deutschland (Germany) 3.75% 2013 2.7 21,007,445 Govt of Spain 5.15% 2009 2.6 20,424,017 Buoni Poliennali Del Tesoro (Italy) 6.00% 2007 2.5 19,892,154 Irish Govt 4.25% 2007 2.4 19,374,652 Bundesrepublik Deutschland (Germany) 6.50% 2027 2.3 18,403,746 Govt of France 4.00% 2013 2.1 16,706,658 United Kingdom Treasury 5.00% 2012 2.1 16,261,262 Govt of France 5.00% 2012 2.0 16,156,137 Kingdom of Belgium 3.00% 2010 2.0 16,155,110
Note: Certain foreign investments risks include: changes in currency exchange rates, adverse political or economic order, and lack of similar regulatory requirements followed by U.S. companies. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 24.4% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 25 RiverSource VP - Global Bond Fund interest rates one more time before likely going on hold some time in 2007. In the U.S., we believe the Fed's pause in interest rate increases in early August was likely the start of an extended period with the targeted federal funds rate at 5.25%. Global economic growth appears to be slowing to near-trend levels, which should ultimately reduce inflation pressures. Given our benign view for the major central banks, we feel comfortable with the Fund's current positioning. We expect to maintain the Fund's generally conservative profile, a stance that particularly helped the Funds' performance during the volatile months of April and May and which we believe will benefit the Fund during the coming months as well. We also expect to maintain the Fund's comparatively short duration and its current position on the U.S. dollar. As always, we are monitoring the market for changing conditions and regularly re-evaluate the Fund's duration, sector, country, yield curve and currency positioning in an effort to seek an attractive trade-off between risk and potential return. Our sector teams remain focused on careful individual security selection, as we continue to seek opportunities to capitalize on attractively valued bonds. THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - GLOBAL BOND FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Global Lehman Brothers Global Lipper Global Income Bond Fund Aggregate Index Funds Index $10,000 $10,000 $10,000 $10,383 $10,378 $10,362 $11,219 $11,801 $11,018 $10,725 $11,191 $10,716 $11,073 $11,545 $11,163 $11,221 $11,727 $11,442 $12,902 $13,664 $12,778 $14,581 $15,373 $14,466 $16,043 $16,798 $15,697 $15,242 $16,044 $15,398 $16,268 $17,110 $16,508
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Global Bond Fund (from 1/1/97 to 12/31/06) as compared to the performance of two widely cited performance indices, the Lehman Brothers Global Aggregate Index and the Lipper Global Income Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ 26 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - Global Inflation Protected Securities Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, portfolio managers Jamie Jackson and Nic Pifer discuss RiverSource VP - Global Inflation Protected Securities Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - Global Inflation Protected Securities Fund perform for the annual period? A: RiverSource VP - Global Inflation Protected Securities Fund gained 1.19% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the Lehman Brothers Global Inflation Linked Index, which gained 1.24%. The Blended Index (made up of 50% Lehman Brothers Global Inflation Linked Index (excluding U.S., fully hedged to the U.S. dollar) and 50% Lehman Brothers U.S. Treasury Inflation Protected Securities Index) returned 0.86%. The Lehman Brothers U.S. Treasury Inflation Protected Securities Index (Lehman Index) advanced 0.48% for the same time frame. RiverSource VP - Global Inflation Protected Securities Fund fell 0.49% for the four-month period Sept. 1 - Dec. 31, 2006. The Lehman Brothers Global Inflation Linked Index fell 0.30%, while the Blended Index fell 0.68%. The Lehman Index fell 1.06% for the four-month period Q: What factors most significantly affected the Fund's performance? A: The Fund's significant exposure to Treasury Inflation Protected Securities (TIPS), whose interest payments are automatically adjusted to help offset inflation, challenged the Fund during this annual period. Yields of TIPS generally moved higher during the period given that inflation was below expectations. This muted Fund returns, as bond yields and prices typically move in opposite directions. The increase in overall U.S. inflation that accrued to the Fund during the annual period was just 1.31%. Also of particular note was the lack of any outsized monthly spikes registered by the inflation rate throughout the 12-month period. Rather, the complete lack of a hurricane season caught the market off guard and resulted in a dramatic fall in energy prices during the third quarter. For example, overall inflation remained within a 3.3% to 4.3% annualized range from January through August, before declining to a 1.3% to 2.1% annualized range from September through November. Inflation crept up again at the end of the year, as energy prices rose 4.6% in December. When reviewing the performance of TIPS, it is critical to distinguish between overall inflation and core inflation. Overall inflation takes into consideration food and energy as a component of the cost of living. It is the overall inflation rate to which the principal and interest on TIPS are tied. For the 12-month period ended Dec. 31, 2006, overall inflation rose 2.5%, according to the latest available government data, compared to 3.4% for 2005. In contrast, core inflation, a measure closely monitored by the Federal Reserve Board (the Fed), which excludes food and energy, often changes significantly on a monthly basis. Core inflation hovered close to 2% -- a rate considered neutral by the Fed -- for much of the first half of the year before moving outside the Fed's "comfort zone" during the second half of the year. For the 12-month period ended Dec. 31, 2006, core inflation rose 2.6%, compared to 2.2% in each of the preceding two years. The Fund was hurt by holding no nominal U.S. Treasuries during the period, as TIPS underperformed nominal Treasury securities, or non-inflation protected Treasury securities, for the 12 months. TIPS were hurt by a greater increase in yields compared to nominal Treasuries, from a longer duration than nominal Treasuries, and from declining inflation figures. On the positive side, the Fund benefited during the period from its defensive-to-neutral positioning in the form of a duration, a measure of the Fund's sensitivity to interest rates, that was shorter than the Lehman Index for most of the period. We had the Fund positioned for higher rates, and, as mentioned above, TIPS yields did indeed rise during the period. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Global Inflation Protected Securities Fund +1.19% Lehman Brothers Global Inflation Linked Index (unmanaged) +1.24% Lehman Brothers U.S. Treasury Inflation Protected Securities Index (unmanaged) +0.48% Blended Index (unmanaged) +0.86%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses. It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 27 RiverSource VP - Global Inflation Protected Securities Fund Further benefiting the Fund was its position in non-U.S. dollar bonds. Non-U.S. dollar bonds are bonds denominated in foreign currencies. Non-U.S. dollar bonds performed well based on comparatively smaller rate increases in other countries. Select and effective currency positioning further helped the Fund, as the U.S. dollar weakened during the year vs. the euro and the British pound, where the Fund held positions. Remember, as the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. The Fund's exposure to UK inflation-linked bonds also contributed to performance during the fiscal year, as these bonds performed well during the period. Also helping the Fund's performance was exposure to hedged Japanese government bonds, which posted positive returns. A modest Fund position in short-term maturity U.S. government agency inflation-linked bonds, established during this annual period, further benefited the Fund's results, as these securities offered attractive yields. Q: What changes did you make to the Fund's portfolio during the period? A: As indicated, we established a modest fund position in short-term maturity U.S. government agency inflation-linked bonds during the period. We also adjusted the Fund's duration somewhat. We extended the Fund's duration toward a neutral position relative to the Lehman Index early in the second half of the fiscal year in anticipation of the Fed nearing an end to its latest tightening cycle, as we believed it would be appropriate to add some interest rate sensitivity to the Fund. We then became a bit more defensive again, shortening the Fund's duration by the end of the period, as we believe the Fed is likely to maintain its pause for an extended period of time. As the TIPS yield curve remained modestly inverted throughout most of the year, meaning yields at the short-term end of the curve were higher than those at the longer-term end of the curve, we maintained the Fund's barbell position throughout. In other words, we weighted the Fund to a mix of short-term and long-term bonds and had a more moderate exposure to intermediate-term securities. This strategy enabled the Fund to benefit from high short-term yields as well as from yields on long-term securities that were higher than those of intermediate-term securities. Q: What is the Fund's tactical view and strategy for the months ahead? A: In our view, core inflation will probably stay north of 2%, owing to moderately higher inflation expectations. After all, the price of crude oil still is very high compared to its average during the period of disinflation from 1980 to 2003, the Fed seems comfortable with overall inflation at 2.5%, and the recent renewed weakness in the U.S. dollar does nothing to ease core inflation pressures. The bottom line, in our view, is that the economy may remain sluggish longer than many now expect, but it still will not be soft enough to remove all inflation concerns. Furthermore, these combined factors should keep the Fed on hold, with the federal funds rate at its current 5.25%, for longer than the market currently anticipates. As a result, we intend to maintain the Fund's current duration positioning, or interest rate risk, for the near term. We will, of course, continue to closely monitor inflation figures, real rates, security prices, economic data and Fed policy shifts and adjust the portfolio's holdings and duration stance if necessary. COUNTRY BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 United States 50.8% United Kingdom 16.7% France 9.8% Italy 6.9% [PIE CHART] Cash & Cash Equivalents 6.2% Japan 3.0% Other(1) 6.6% (1) Includes Canada 2.8%, Germany 2.0% and Sweden 1.8%.
AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +1.19% Since inception (9/13/04) +2.98%
- ------------------------------------------------------------------------------ 28 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Lehman Brothers U.S. Global Inflation Lehman Brothers Treasury Inflation Protected Securities Global Inflation Protected Securities Fund Linked Index Index Blended Index $10,000 $10,000 $10,000 $10,000 $10,284 $10,307 $10,252 $10,280 $10,572 $10,908 $10,543 $10,725 $10,698 $11,043 $10,594 $10,817
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Global Inflation Protected Securities Fund (from 10/1/04 to 12/31/06) as compared to the performance of two widely cited performance indices, the Lehman Brothers Global Inflation Linked Index, the Lehman Brothers U.S. Treasury Inflation Protected Securities Index and a Blended Index consisting of a blend of the aforementioned indexes. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. The Lehman Brothers U.S. Treasury Inflation Protected Securities 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. The Blended Index consists of 50% Lehman Brothers Global Inflation Linked Index (excluding U.S., fully hedged to the U.S. dollar) and 50% Lehman Brothers U.S. Treasury Inflation Protected Securities Index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 29 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Growth Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, Portfolio Manager Nick Thakore discusses RiverSource VP - Growth Fund's results and positioning for the 12-months ended Dec. 31, 2006. Q: How did RiverSource VP - Growth Fund perform for the fiscal year? A: RiverSource VP - Growth Fund returned 11.08% for the fiscal year ended Dec. 31, 2006. The Fund outperformed its benchmark, the Russell 1000(R) Growth Index (Russell Index), which returned 9.07% for the period. The Fund also significantly outperformed its peer group, represented by the Lipper Large-Cap Growth Funds Index, which advanced 4.72% for the same period. RiverSource VP - Growth Fund rose 8.27% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 8.84%, while the Lipper Large-Cap Growth Funds Index returned 8.20% for the four-month period. Q: What factors influenced the Fund's performance during the period? A: U.S. stock markets advanced sharply during the past 12 months as global growth continued and the Federal Reserve held short-term interest rates steady in the latter months of the year. While fighting a headwind created by the market's clear preference for value stocks, the Fund capitalized on opportunities in the large-cap growth universe, outperforming the Russell Index and its peers. Both sector allocations and stock selection contributed to the Fund's outperformance. Positioning in the information technology, energy and telecommunication services sectors had the largest favorable effect. Positioning in financials and health care detracted. Within information technology, stock selection was the most significant contributor. Also positive was the Fund's information technology weighting which was smaller than the Russell Index. The primary factor behind the information technology outperformance was a focus on large-cap technology companies with historically strong earnings growth and very attractive valuations. Examples include Cisco Systems, Microsoft and Nokia, which performed well in 2006. The Fund also had exposure to faster growing technology companies and benefited from holdings of internet and semiconductor stocks. Internet-related firms continued to be supported by a secular shift toward increased internet advertising, while semiconductor firms demonstrated an ability to generate free-cash flow which is rare for cyclical companies. The Fund's energy allocation was smaller than that of the Russell Index, which was advantageous. Energy stock selection was an even more significant contributor to performance. Within energy, we focused on large-cap integrated oil companies and de-emphasized service-oriented firms and exploration and production companies. This positioning was particularly effective in 2006. The Fund benefited from an emphasis on telecommunication stocks, mainly wireless services. We continued to see a promising combination of powerful secular trends, high free cash flow yields and high growth rates for telecommunication stocks. Stock selection within telecommunication was a slight negative, mainly due to holdings of Sprint Nextel, which struggled to execute its growth plans and experienced deteriorating fundamentals during the period. The portfolio had a smaller financials position than the Russell Index, primarily because we did not consider the sector's growth opportunities attractive relative to the high valuations on many financial stocks. However, the sector outperformed during the period. Stock selection within financials was hampered by the portfolio's underweight in brokerage firms, a group that was very strong this past year. The portfolio's health care allocation was larger than that of the Russell Index, positioning that had a neutral impact on relative performance. Rather, stock selection caused the sector's underperformance as medical device maker Boston Scientific was negatively affected by potential changes in government reimbursements for cardiac devices and by recalls for products acquired through its merger with Guidant. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Growth Fund +11.08% Russell 1000(R) Growth Index (unmanaged) +9.07% Lipper Large-Cap Growth Funds Index +4.72%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 30 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Growth Fund Q: What changes did you make to the Fund during the period? A: We shifted the Fund's telecommunication positioning, reducing its Sprint Nextel holding in favor of attractively valued companies that we think are better positioned to capitalize on the secular growth trend. We also took profits in selected stocks that had appreciated beyond our target valuations. In health care, we added to specific positions where we gained more confidence in the stock's growth potential over the coming year. In technology and energy, we identified selected stocks that had previously underperformed and now exhibited favorable risk/reward potential. Q: How do you plan to manage the Fund in the coming months? A: We think corporate earnings growth is likely to decelerate, given that profit margins are at record levels and leading indicators point to potential for margin erosion. In addition, consumer spending could decline as higher borrowing costs, high energy prices and a weaker housing market may affect consumer confidence. Given our current outlook, we have emphasized stable growth companies over cyclical growth companies, preferring to own strong growers less dependent on the economy. However, we are also monitoring opportunities among cyclical stocks. Specifically, we are looking for companies whose earnings growth is tied to the economy, but the stock's price has already been discounted to reflect the cyclical nature of its earnings. We continue to find opportunities among large-cap companies which still appear inexpensive relative to mid- and small-cap stocks based on the historical relationships between these groups. In general, we believe the Fund holds stocks that, as a group, are likely to grow earnings faster than the market and are at attractive valuation levels. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +11.08% 3 years +9.37% 5 years +3.26% Since inception (9/15/99) -3.23%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Health Care 21.1% Information Technology 20.4% Telecommunication Services 16.1% Consumer Discretionary 14.2% [PIE CHART] Consumer Staples 11.0% Financials 4.6% Other(1) 12.6% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Industrials 4.3%, Energy 3.5%, Materials 1.0% and Cash & Cash Equivalents 3.8%.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) NTL 8.0% $50,945,627 Cisco Systems 4.3 27,033,743 Google Cl A 3.9 24,492,471 Vodafone Group 3.6 22,798,534 ALLTEL 3.4 21,438,466 Exxon Mobil 2.7 17,077,763 Microsoft 2.6 16,573,166 Genentech 2.6 16,296,421 Altria Group 2.2 14,191,453 Procter & Gamble 2.2 13,794,721
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 35.5% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 31 RiverSource VP - Growth Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - GROWTH FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Growth Russell 1000(R) Lipper Large-Cap Fund Growth Index Growth Funds Index $10,000 $10,000 $10,000 $12,028 $12,514 $12,554 $ 9,707 $ 9,708 $10,083 $ 6,702 $ 7,726 $ 7,676 $ 4,953 $ 5,572 $ 5,519 $ 6,015 $ 7,230 $ 7,006 $ 6,522 $ 7,685 $ 7,528 $ 7,083 $ 8,089 $ 8,099 $ 7,868 $ 8,823 $ 8,481
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Growth Fund (from 10/1/99 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell 1000(R) Growth Index and the Lipper Large-Cap Growth Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Russell 1000(R) Growth Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. 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. - ------------------------------------------------------------------------------ 32 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - High Yield Bond Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, Scott Schroepfer, RiverSource VP - High Yield Bond Fund's portfolio manager, discusses the Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - High Yield Bond Fund perform for the annual period ended Dec. 31, 2006? A: RiverSource VP - High Yield Bond Fund rose 10.81% for the 12-month period ended Dec. 31, 2006, underperforming its benchmark, the JP Morgan Global High Yield Index (JP Morgan Index), which advanced 11.45% during the period. The Fund outperformed its peer group, as represented by the Lipper High Current Yield Bond Funds Index, which returned 10.17% during the same time frame. RiverSource VP - High Yield Bond Fund rose 5.43% for the four-month period Sept. 1 - Dec. 31, 2006. The JP Morgan Index returned 5.61%, while the Lipper High Current Yield Bond Funds Index returned 5.39% for the four-month period. Q: What factors most significantly affected the Fund's performance during the 12-month period? A: Strong performers for the period included GMAC, Toys "R" Us, New Page and Nielsen. General Motors' financial services subsidiary GMAC performed very well during the period and contributed positively as the market continued to gain more confidence in the sale of the company, which was finalized at the end of November. Retailer Toys "R" Us was acquired through a leveraged buyout during the period and as it appeared that the new management could stabilize the business, the bonds performed well. During the period, adding to the Fund's positions in NewPage, a coated paper supplier, paid off as the security contributed positively to performance. Finally, the well-known media research and television audience ratings company Nielsen was the subject of a leveraged buyout during the period and has since generated profits as well as cost savings. The Nielson bonds as a result have performed well and became one of the Fund's top contributors for the period. Weaker performers for the Fund during the fiscal period included Georgia Gulf and Select Medical. Chemical company Georgia Gulf performed poorly based on the softness in the housing market. Select Medical, a specialty health care provider, suffered weak performance during the 12-month period over the uncertainty of government reimbursement for long-term acute care hospitals. We believe both positions are trading lower temporarily and we continue to hold the Fund's positions. Q: What changes did you make to the Fund and how is it currently positioned? A: During the period, we lowered the Fund's exposure to homebuilder and building materials securities as we saw the housing market soften. We sold positions early in the period, which benefited the portfolio as those industries underperformed the broader market. In addition, we sold some strong, yet historically volatile performers from the Fund's portfolio to lock in some profits, namely GNC, a health retailer. The difference in yields between higher quality and lower quality bonds narrowed during the period. The Fund's sizable allocation to B-rated bonds remains, as we believe there is still value in the category. The Fund's position in CCC-rated bonds is currently slightly less than the JP Morgan Index since, in our opinion, the difference between owning B-rated securities and CCC-rated was slight during the period and the Fund just wasn't being rewarded to own incrementally riskier positions. Currently the Fund has greater-than-JP Morgan Index weights in the energy, media and wireline telecommunication industries. The Fund also continues to be overweight in the health care sector relative to the JP Morgan Index, specifically, health care providers and hospitals. The Fund remains underweight in the information technology, manufacturing and industrials industries relative to the JP Morgan Index. Q: How do you intend to manage the Fund in the coming months? A: Going forward, we continue to believe that the key to potential outperformance will be leveraging our strength in credit research. We strive to select the right bonds while maintaining a diligent review of potential credit risks at individual companies. We sell bonds when risks outweigh a bond's total return potential. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - High Yield Bond Fund +10.81% JP Morgan Global High Yield Index (unmanaged) +11.45% Lipper High Current Yield Bond Funds Index +10.17%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 33 RiverSource VP - High Yield Bond Fund We have a bottom-up approach when selecting credits. One of our competitive advantages is that our team of nine analysts performs in-depth research to acquire deep knowledge and insight of the industries they cover. We believe that good security selection based on quality and in-depth security research will be key to performance in the near term. We believe that the U.S. may well be in the last stage of the current economic recovery and may be entering a period when economic growth is expected to slow in what we would characterize as a "soft landing." We further expect corporate earnings growth to slow, which along with slower productivity gains, rising energy and commodity costs and higher labor costs, will likely put pressure on profit growth. INVESTMENT TERM SOFT LANDING: A term used to describe a rate of economic growth high enough to avoid recession but slow enough to avoid high inflation. Finally, while company fundamentals generally remain solid, we anticipate that the default rate within the high yield bond market, while not spiking dramatically, may increase somewhat over the coming months. Given this view, taking incremental risk when valuations do not justify it does not seem prudent. Accordingly, we intend to continue upgrading credit quality in the Fund's portfolio. Further, we intend, of course, to continue to seek opportunities to capitalize on attractively valued bonds that have the potential for positive returns. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +10.81% 3 years +8.69% 5 years +8.54% 10 years +5.11% Since inception (5/1/96) +5.33%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Telecommunication 23.3% Consumer Discretionary 21.1% Materials 12.9% Health Care 9.9% [PIE CHART] Utilities 7.5% Industrials 7.4% Other(1) 17.9% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Energy 6.8%, Consumer Staples 4.9%, Financials 2.7% and Cash & Cash Equivalents(2) 3.5%. (2) Of the 3.5%, 0.1% is due to security lending activity and 3.4% is the Fund's cash equivalent.
THE TEN LARGEST CORPORATE BOND HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Williams Companies 7.63% 2019 1.5% $ 18,002,750 Windstream 8.63% 2016 1.4 17,399,548 INVISTA 9.25% 2012 1.2 14,931,850 Insurance Auto Auctions 11.00% 2013 1.0 11,735,050 Qwest 7.63% 2015 0.9 11,481,099 NewPage 10.00% 2012 0.9 11,362,349 MGM MIRAGE 5.88% 2014 0.9 11,171,737 Cott Beverages USA 8.00% 2011 0.9 11,164,920 LaBranche & Co 11.00% 2012 0.9 10,904,300 Georgia-Pacific 7.13% 2017 0.9 10,877,738
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 10.5% of portfolio assets - ------------------------------------------------------------------------------ 34 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - High Yield Bond Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - HIGH YIELD BOND FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - High Yield JP Morgan Global Lipper High Current Yield Index Bond Fund High Yield Index Bond Funds Index 1/1/97 $ 10,000 $ 10,000 $ 10,000 1/31/97 $ 11,337 $ 11,239 $ 11,317 1/31/98 $ 10,837 $ 11,348 $ 11,309 1/31/99 $ 11,513 $ 11,732 $ 11,850 1/31/00 $ 10,441 $ 11,049 $ 10,699 1/31/01 $ 10,922 $ 11,654 $ 10,588 1/21/02 $ 10,239 $ 11,904 $ 10,333 1/31/03 $ 12,816 $ 15,178 $ 13,056 1/31/04 $ 14,277 $ 16,931 $ 14,406 1/31/05 $ 14,851 $ 17,451 $ 14,839 1/31/06 $ 16,457 $ 19,449 $ 16,348
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - High Yield Bond Fund (from 1/1/97 to 12/31/06) as compared to the performance of two widely cited performance indices, the JP Morgan Global High Yield Index and the Lipper High Current Yield Bond Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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 index reflects reinvestment of all distributions and changes in market prices. 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 - ANNUAL REPORT 35 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Income Opportunities Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, Brian Lavin, portfolio manager for RiverSource VP - Income Opportunities Fund discusses the Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - Income Opportunities Fund perform for the annual period? A: RiverSource VP - Income Opportunities Fund returned 7.98% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the unmanaged Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index (Merrill Lynch Index), which gained 9.27%. The Fund's peer group, as represented by the Lipper High Current Yield Bond Funds Index, returned 10.17% during the same period. RiverSource VP - Income Opportunities Fund rose 4.66% for the four-month period Sept. 1 - Dec. 31, 2006. The Merrill Lynch Index returned 5.02%, while the Lipper High Current Yield Bond Funds Index returned 5.39% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: The Fund benefited most from its significant allocation to the paper and forest products industry, as the paper industry generally performed well in 2006. Security selection within the sector also helped the Fund's results, with NewPage, a coated white paper manufacturer, a particularly strong performer. Security selection within the health care industry also boosted the Fund's results relative to the Merrill Lynch Index. Tactical allocation to hospital owner HCA especially helped. The Fund prudently had only a modest position in HCA at the time of its July announcement regarding its agreement to a $33 billion buyout by a group including private equity firms in the largest leveraged buyout in history. The security's price subsequently fell, and we started buying more of HCA on weakness, as we continued to like its fundamentals. When the buyout deal was finalized, the Fund purchased the newly issued bonds as well. HCA-issued securities subsequently performed quite well. Having sizable positions in yellow pages publisher RH Donnelley and in automobile manufacturer General Motors also helped the Fund's results during the period. Conversely, detracting from the Fund's results were significant allocations to the energy, defense and health care industries, which lagged the Merrill Lynch Index. Modest positions in the autos and transportation, airlines and general manufacturing industries, also detracted from performance relative to the Merrill Lynch Index, as these areas outperformed the Merrill Lynch Index during the annual period. A position in health care's Select Medical also hurt the Fund's performance, as the security of this long-term acute care hospital company was pressured by changes in its reimbursement framework. We continued to hold the Fund's position in Select Medical. Another holding that detracted from the Fund's performance was Georgia Gulf within the chemicals industry. Georgia Gulf, a manufacturer of resins used in PVC pipe, vinyl siding and other products, acquired a window manufacturer mid year in a leveraged deal. Georgia Gulf bonds were almost immediately thereafter impacted by a slowdown in the housing market. We exited the Fund's position in Georgia Gulf by the end of the annual period. Having only a modest position in utilities company El Paso Natural Gas which performed well during the year, hurt the Fund's results as well relative to the Merrill Lynch Index. Finally, the riskiest areas of the high yield bond market significantly outperformed higher quality bonds during the annual period. Because the Fund maintained a more conservative and thereby less risky stance than the Merrill Lynch Index and maintained a greater emphasis on bonds rated BB than its Lipper peer group, the Fund's performance relative to each lagged. Q: What changes did you make to the Fund's portfolio during the period? A: We built up the Fund's cash position in anticipation of an increase in new issue volume within the high yield bond market this past autumn. In October and November, we did take advantage of the new issue market, participating in issues across the risk spectrum, with the exception of bonds rated CCC. In so doing, we lowered the Fund's cash position. Through the implementation of this strategy, the Fund was producing a yield greater than the Merrill Lynch Index by the end of the year. Also, during much of the year, we had significant exposure to floating rate securities. This strategy reflected our belief PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Income Opportunities Fund +7.98% Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index (unmanaged) +9.27% Lipper High Current Yield Bond Funds Index +10.17%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 36 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Income Opportunities Fund that floating rate issues, which are reset in line with changes in market rates, were attractively valued relative to fixed rate securities in a rising interest rate environment. Indeed, these floating securities enabled the Fund to capture higher rates throughout the frequent resets of these securities' yields over the first half of the year and again when rates moved higher during the last few months of the annual period. Finally, we increased the Fund's exposure to energy and health care and shifted within those industries from bonds rated BB to those rated B that had greater return potential. We reduced the Fund's position in integrated utilities. At the end of the annual period, the Fund had sizable allocations compared to the Merrill Lynch Index in health care, energy, paper and forest products, and aerospace defense. The Fund had more modest exposure than the Merrill Lynch Index to the technology, integrated utilities, homebuilders, and food and drug retail industries at the end of the period. Q: What is the Fund's tactical view and strategy for the months ahead? A: Going forward, we continue to believe that the key to potential outperformance will be leveraging our strength in credit research. We strive to select the right bonds while maintaining a diligent review of potential credit risks at individual companies. We sell bonds when risks outweigh a bond's total return potential. We have a bottom-up approach when selecting credits. One of our competitive advantages is that our team of nine analysts performs in-depth research to acquire deep knowledge and insight of the industries they cover. We believe that good security selection based on quality and in-depth security research will be key to performance in the near term. On the macro front, we believe that the U.S. may well be entering a period when economic growth moderates in what we would characterize as a "soft landing." We further expect corporate earnings growth to slow and corporate profit margins to narrow over the next year. We also believe the Federal Reserve Board's pause in August was likely the start of a pause held for an extended period of time. INVESTMENT TERM SOFT LANDING: A term used to describe a rate of economic growth high enough to avoid recession but slow enough to avoid high inflation. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +7.98% Since inception (6/1/04) +8.35%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Telecommunication 20.2% Consumer Discretionary 17.0% Materials 13.6% Utilities 9.5% [PIE CHART] Energy 8.6% Health Care 7.7% Other(1) 23.4% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Industrials 6.6%, Financials 5.3%, Consumer Staples 5.0%, and Cash & Cash Equivalents 6.5%.
THE TEN LARGEST CORPORATE BOND HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Dow Jones CDX HY 8.38% 2011 3.0% $ 12,324,000 Windstream 8.63% 2016 1.6 6,756,149 Georgia-Pacific 7.13% 2017 1.5 6,246,344 Cott Beverages USA 8.00% 2011 1.3 5,385,599 Dex Media 8.68% 2013 1.2 4,886,437 Williams Companies 7.63% 2019 1.2 4,750,799 Majestic Star Casino LLC/Capital 9.50% 2010 1.1 4,514,999 Pioneer Natural Resources 5.88% 2016 1.1 4,458,705 Southern Star Central 6.75% 2016 1.1 4,448,850 NewPage 10.00% 2012 1.1 4,446,825 For further detail about these holdings, please refer to the section entitled "Investments in Securities."
[PIE CHART] The 10 holdings listed here make up 14.2% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 37 RiverSource VP - Income Opportunities Fund Finally, while company fundamentals generally remain solid, we anticipate that the default rate within the high yield bond market, while not spiking dramatically, may increase somewhat after next year, as there has been more aggressive issuance within the high yield bond market of late and a greater percentage of bonds rated CCC coming into the market. Given our view for the more near term, however, we intend to more closely align the Fund's portfolio with the Merrill Lynch Index from both a ratings and industry perspective. We further intend, of course, to continue to seek opportunities to capitalize on attractively valued bonds that have the potential for positive returns. THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - INCOME OPPORTUNITIES FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Merrill Lynch U.S. High High Yield Cash Lipper High RiverSource VP - Income Pay BB-B Rated Constrained Current Yield Opportunities Fund Index Bond Funds Index 6/1/04 $ 10,000 $ 10,000 $ 10,000 12/31/04 $ 11,027 $ 10,991 $ 11,035 12/31/05 $ 11,394 $ 11,366 $ 11,366 12/31/06 $ 12,303 $ 12,419 $ 12,522
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Income Opportunities Fund (from 6/1/04 to 12/31/06) as compared to the performance of two widely cited performance indices, the Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index and the Lipper High Current Yield Bond Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index is 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. 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. - ------------------------------------------------------------------------------ 38 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - International Opportunity Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. RiverSource VP - International Opportunity Fund portfolio managers Alex Lyle and Dominic Rossi of Threadneedle International Limited (Threadneedle) discuss the Fund's results and positioning for the 12 months ended Dec. 31, 2006. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the subadviser to the Fund. Q: How did the RiverSource VP - International Opportunity Fund perform for the fiscal year ended Dec. 31, 2006? A: RiverSource VP - International Opportunity Fund gained 24.17% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark index, the Morgan Stanley Capital International (MSCI) EAFE IndexSM (MSCI Index), which returned 26.86% for the period. The Fund also underperformed the Lipper International Large-Cap Core Funds Index, representing the Fund's peer group, which gained 25.11% for the same timeframe. RiverSource VP - International Opportunity Fund rose 8.72% for the four-month period Sept. 1 - Dec. 31, 2006. The MSCI Index returned 10.59%, while the Lipper International Large-Cap Core Funds Index returned 10.35% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: The metals and mining industry demonstrated very positive results over the period with Swiss company Xstrata and South African companies Anglo American and Impala Platinum Holdings performing well. The Fund also benefited from its holdings in the industrials sector. Two companies with large exposure to the oil sector, Vallourec and Keppel were particularly strong. MAN, a German truck manufacturer also did well, benefiting from economic recovery and general demand for transport. Several other individual stocks were especially strong performers over the period. They include China Overseas Land, a real estate company that benefited from the strong economic growth in China and Admiral Group, a niche insurer in the UK focusing on the motor sector. On the downside, several sectors and companies lagged over the period and detracted from performance. The strong performance of the utilities sector was not reflected in the Fund's performance. The Fund maintained a position in the utilities sector that was less than that of the MSCI Index and did not fully participate in the sector's strong performance, much of which was driven by takeover activity. In Japan the Fund's retail and consumer durable exposure was negative for performance as markets were concerned about the strength of the consumer recovery. Poor performers included specialty retailer Komeri and upscale apparel company ONWARD Kashiyama. In addition two emerging market banks, Akbank in Turkey and ABSA in South Africa, suffered from concerns over the financial strength of these economies. Q: What changes did you make to the Fund during the period? A: We have increased the Fund's holdings in the industrials sector. We expect this sector to benefit from a pickup in capital spending by companies that need to replace or improve their existing equipment. Also, we believe that infrastructure expenditure is likely to rise as well, driven in part by the huge-scale development projects in places such as China. Over the period, we added exposure to some industrial companies, such as French company ALSTOM, which makes electrical equipment and ASSA ABLOY, a Swedish manufacturer of security equipment that has a new chief executive and shows considerable potential for restructuring. We have added to the insurance industry, including two new holdings operating in specialty areas. Admiral Group is a fast growing UK motor insurance company, and Hiscox, another UK company, insures high-value residential properties. We bought a holding in Air France due to the potential for synergies in its merger with KLM Royal Dutch Airlines and the expected pick up in business travel. We have subsequently sold the stock following a period of strong performance. Within the emerging markets allocation, we added to Banco Santander Chile, a well-run business with strong prospects due to the growth of banking in Chile. We have also added to the Fund's retail exposure. New holdings include Inditex, the Spanish company that owns the fast growing Zara brand and Ryohin Keikaku, a high quality Japanese clothing retailer. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - International Opportunity Fund +24.17% MSCI EAFE Index (unmanaged) +26.86% Lipper International Large-Cap Core Funds Index +25.11%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 39 RIVERSOURCE VP - INTERNATIONAL OPPORTUNITY FUND We reduced the Fund's positions in the oil industry in expectation of the oil price coming down from the very high levels reached in 2006. We have sold part of the Fund's holdings in Italian group Eni and French group Total and recently sold the Fund's position in Petrochina. Q: How do you intend to manage the Fund in the coming months? A: Supply and demand drive the global markets. With commodities in such strong demand, we currently expect to continue the Fund's large positions in the mining industry. The Fund continues to focus on health care because of its long-term positive outlook based on demographic change, the aging population and increasing affluence. Companies such as Essilor Intl, the French manufacturer of corrective lenses, have found a profitable niche by successfully marrying function with fashion for aging consumers. The Fund also remains above the MSCI Index in the industrials area, which is enjoying strong demand for infrastructure and capital expenditure in general. Geographically, we see outstanding opportunities in emerging markets -- examples include oil companies, such as Gazprom in Russia, as well as mining companies, such as Impala Platinum Holdings in South Africa. We believe that supply shortages for commodities and continuing strong demand from global economies -- particularly the U.S. and China -- will continue to support high prices globally. We continue to favor companies that have good growth prospects whether it is due to a strong competitive position or from operating in a growth market. Large holdings in this category include UK food retailer Tesco and Standard Chartered, a bank which focuses on the Asian market. The economic outlook in international markets remains reasonably healthy, and we are optimistic about the outlook for equities. We believe that international equity markets are attractively valued, and we remain encouraged on the prospects facing the markets. Many companies have high levels of cash, which bodes well for capital expenditures and also supports an environment where mergers and acquisitions could continue. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +24.17% 3 years +18.40% 5 years +11.69% 10 years +4.89% Since inception (1/13/92) +6.38%
COUNTRY BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 United Kingdom 23.5% Japan 21.7% France 10.5% Switzerland 8.8% [PIE CHART] Germany 6.0% Italy 4.0% Other(1) 25.5% (1) Includes Australia 2.4%, Hong Kong 2.4%, Spain 2.4%, Sweden 2.2%, Belgium 1.6%, Ireland 1.4%, Singapore 1.4%, Canada 1.1%, Greece 0.9%, Netherlands 0.9%, South Korea 0.9%, South Africa 0.8%, Austria 0.7%, Brazil 0.7%, Chile 0.6%, China 0.6%, Russia 0.6%, Finland 0.5%, Mexico 0.5%, Taiwan 0.5%, Indonesia 0.4%, Hungary 0.2% and Cash & Cash Equivalents(2) 1.8%. (2) Of the 1.8%, 0.7% is due to security lending activity and 1.1% is the Fund's cash equivalent position.
THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Tesco (United Kingdom) 2.0% $26,432,864 Allianz (Germany) 1.8 24,372,408 UBS (Switzerland) 1.7 22,793,910 BP (United Kingdom) 1.7 22,516,338 Standard Chartered (United Kingdom) 1.7 22,389,802 BG Group (United Kingdom) 1.7 22,202,776 Anglo American (United Kingdom) 1.6 20,553,498 Banco Bilboa Vizcaya Argentaria (Spain) 1.5 20,413,220 Toyota Motor (Japan) 1.5 19,900,000 Total (France) 1.5 19,629,753
Note: Certain foreign investment risks include: changes in currency exchange rates, adverse political or economic order, and lack of similar regulatory requirements followed by U.S. companies. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 16.7% of portfolio assets - ------------------------------------------------------------------------------ 40 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - International Opportunity Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - INTERNATIONAL OPPORTUNITY FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Lipper International RiverSource VP - International MSCI EAFE Large-Cap Core Funds Opportunity Fund Index Index 1/1/97 $10,000 $10,000 $10,000 1/31/97 $10,273 $10,206 $11,001 1/31/98 $11,898 $12,281 $12,629 1/31/99 $17,327 $15,634 $17,548 1/31/00 $13,008 $13,451 $15,588 1/31/01 $ 9,276 $10,598 $12,419 1/31/02 $ 7,583 $ 8,938 $10,612 1/31/03 $ 9,711 $12,440 $14,082 1/31/04 $11,402 $15,015 $16,502 1/31/05 $12,983 $17,120 $18,785 1/31/06 $16,120 $21,718 $23,502
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - International Opportunity Fund (from 1/1/97 to 12/31/06) as compared to the performance of two widely cited performance indices, the Morgan Stanley Capital International (MSCI) EAFE Index and the Lipper International Large-Cap Core Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices. 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 purposes of determining the performance incentive adjustment. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 41 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Large Cap Equity Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, Portfolio Managers Bob Ewing and Nick Thakore discuss RiverSource VP - Large Cap Equity Fund's results and positioning for the 12-months ended Dec. 31, 2006. Q: How did RiverSource VP - Large Cap Equity Fund perform for the annual period? A: RiverSource VP - Large Cap Equity Fund advanced 15.28% for the year ended Dec. 31, 2006. The Fund slightly underperformed its benchmarks, the Russell 1000(R) Index (RusselL Index), which advanced 15.46% and the Standard & Poor's 500 Index (S&P 500 Index), which advanced 15.79% during the period. The Fund outperformed its peer group, the Lipper Large-Cap Core Funds Index, which gained 13.39%. RiverSource VP - Large Cap Equity Fund rose 9.59% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 9.49% and the S&P 500 Index returned 9.45%. The Lipper Large-Cap Core Funds Index returned 8.67% for the four-month period. Q: What factors had a significant impact on performance? A: U.S. stock markets advanced sharply during the past 12 months as global growth continued and the Federal Reserve held short-term interest rates steady in the latter months of the year. The Fund's multi-faceted strategy includes allocations to both large-cap value and large-cap growth stocks, ensuring that a segment of the portfolio is positioned to benefit when one investment style dominates another, as value did this year. The Fund's sector allocations had a meaningful positive impact on its return relative to the Russell Index. Individual stock selection detracted. Positioning in the energy and information technology sectors had the largest favorable effect, while positioning in financials and telecommunication services detracted from relative return. The Fund's energy allocation was smaller than that of the Russell Index, which was beneficial. Stock selection was an even more significant contributor to relative performance. Within the portfolio's energy position, we focused on large-cap integrated oil companies and de-emphasized both service-oriented firms and exploration and production companies. This positioning was particularly effective in 2006. In information technology, stock selection was a significant contributor. The portfolio's information technology allocation was smaller than the Russell Index, which was also advantageous. A key factor in the Fund's information technology outperformance was an emphasis on large-cap technology companies with strong earnings growth and attractive valuations. For example, stocks such as Cisco Systems and Hewlett-Packard performed well during the year. The Fund also had exposure to faster growing technology companies and benefited from holdings of selective semiconductor stocks. The portfolio had a smaller position in financials than the Russell Index, primarily because we did not think the sector's growth opportunities were attractive relative to high valuations on many financial stocks. However, the sector outperformed during the period. Stock selection within the sector was hampered by the portfolio's underweight in brokerage firms, a group that was very strong this past year. We maintained the Fund's emphasis on telecommunication services stocks, mainly wireless services. We continued to see a promising combination of powerful secular trends, high free cash flow yields and high growth rates for telecommunication services stocks. The sector performed well, rebounding from depressed valuations as cost-cutting improved fundamentals for many companies and the Fund's substantial allocation was advantageous. However, stock selection within the sector was a negative factor, primarily due to holdings of Sprint Nextel. Despite the positive industry backdrop, the company struggled to execute its plans for growth and fundamentals deteriorated during the period. We significantly reduced the Fund's Sprint Nextel holdings during the year, shifting the telecommunication services positioning in favor of attractively valued companies that we think are better positioned to capitalize on the secular growth trend. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Large Cap Equity Fund +15.28% Russell 1000(R) Index (unmanaged) +15.46% S&P 500 Index (unmanaged) +15.79% Lipper Large-Cap Core Funds Index +13.39%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 42 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Q: What changes did you make to the Fund during the period? A: As noted above, we repositioned the Fund's telecommunication services holdings to capitalize on the sector's continuing growth opportunities. We also took profits in selected stocks that had appreciated beyond our target valuations. In health care we added to specific stocks where we gained more confidence in the growth potential over the coming year. In information technology and energy, we identified selected stocks that had previously underperformed and now exhibited favorable risk/reward potential. Q: How do you plan to manage the Fund in the coming months? A: We currently see corporate profit margins at record levels, while at the same time, there are signs of slower global economic growth. In addition, continued high energy prices, increased borrowing costs and a weaker U.S. housing market could lead consumers to reduce their spending. All of these suggest that corporate profit growth is likely to decelerate. Given this scenario, we maintain an emphasis on stable growth companies, those whose earnings growth is less dependent on the economy. Also, among companies whose earnings are tied to the economy, we are looking for situations where the cyclical nature of those earnings has already been discounted in the stock price. We continue to emphasize larger cap stocks which still appear inexpensive relative to mid- and small-cap stocks based on the historical relationships between these groups. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +15.28% 3 years +9.03% 5 years +5.48% 10 years +5.34% Since inception (10/13/81) +10.74%
SECTOR COMPOSITION* Percentage of portfolio assets at Dec. 31, 2006 Financials 18.4% Information Technology 14.3% Health Care 12.9% Consumer Discretionary 11.7% [PIE CHART] Telecommunication Services 8.9% Consumer Staples 8.4% Other(1) 25.4% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Energy 8.0%, Industrials 7.6%, Utilities 2.5%, Materials 2.2% and Cash & Cash Equivalents(2) 5.1%. (2) Of the 5.1%, 0.3% is due to security lending activity and 4.8% is the Fund's cash equivalent position.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Exxon Mobil 3.7% $137,242,796 NTL 3.1 114,849,697 General Electric 2.4 90,222,640 American Intl Group 2.1 77,981,773 Cisco Systems 1.9 72,040,486 Microsoft 1.9 70,990,806 Citigroup 1.9 70,481,665 Pfizer 1.9 69,465,148 Bank of America 1.8 68,250,306 Altria Group 1.8 67,620,495
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 22.5% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 43 RiverSource VP - Large Cap Equity Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - LARGE CAP EQUITY FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Lipper Large-Cap RiverSource VP - Large Cap S&P 500 Russell(R) 1000 Value Core Funds Equity Fund Index Index Index 1/1/97 $10,000 $10,000 $10,000 $10,000 1/31/97 $12,414 $13,285 $13,336 $12,922 1/31/98 $15,408 $16,875 $17,147 $16,402 1/31/99 $19,068 $20,403 $20,755 $19,576 1/31/00 $15,738 $18,814 $18,867 $18,133 1/31/01 $12,888 $16,471 $16,623 $15,806 1/31/02 $10,049 $12,905 $12,950 $12,451 1/31/03 $12,985 $16,763 $16,663 $15,539 1/31/04 $13,749 $18,674 $18,476 $16,827 1/31/05 $14,598 $19,845 $19,384 $17,789 1/31/06 $16,829 $22,912 $22,444 $20,171
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Large Cap Equity Fund (from 1/1/97 to 12/31/06) as compared to the performance of three widely cited performance indices, the Russell 1000(R) Index, the Standard & Poor's 500 Index (S&P 500 Index) and the Lipper Large-Cap Core Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Russell 1000(R) Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The index reflects reinvestment of all distributions and changes in market prices. 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. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - ------------------------------------------------------------------------------ 44 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - Large Cap Value Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, Portfolio Manager Bob Ewing discusses RiverSource VP - Large Cap Value Fund's results and positioning for the 12-month period ended Dec. 31, 2006. Q: How did RiverSource VP - Large Cap Value Fund perform for the annual period? A: RiverSource VP - Large Cap Value Fund advanced 19.07% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the Russell 1000(R) Value Index (Russell Index), which increased 22.25% during the period. The Fund outperformed its peer group, the Lipper Large-Cap Value Funds Index, which gained 18.28% during the same time frame. RiverSource VP - Large Cap Value Fund rose 10.15% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 10.15%, while the Lipper Large-Cap Value Funds Index returned 9.50% for the four-month period. Q: What factors significantly affected performance? A: Amid an environment of continued global economic growth and stabilizing short-term interest rates, large-cap value stocks delivered strong gains in 2006, significantly outpacing growth stocks. The Fund benefited from this favorable environment, but did not keep pace with the sharp advance of the Russell Index. Sector allocations added to the Fund's return relative to the Russell Index, while stock selection detracted. The most significant detractors were positioning in the industrials, materials and consumer staples sectors. Positioning in technology, health care and utilities added to relative return. Within the industrials sector, our focus was on specific aerospace and defense stocks that demonstrated very strong fundamentals, relative stability and attractive valuations. Conversely, we de-emphasized stocks in the cyclical trucking and railroad segments where prices appeared unattractive and leading indicators suggested deteriorating fundamentals. However, as trucking and railroad stocks outperformed, the greater emphasis on aerospace and defense was disadvantageous. Results were also unfavorable among materials stocks where the Fund had less exposure to the more economically sensitive companies within the sector. The Fund's allocation to consumer staples was larger than that of the Russell Index, an advantage for the fiscal period. Stock selection, however, detracted from relative performance mainly due to Spectrum Brands. The consumer products company appeared poised to benefit from a recent acquisition, but rising raw material costs overwhelmed the potential earnings gains and prevented synergies from being realized. By fiscal year-end, we had significantly reduced the Fund's holding of Spectrum Brands. Within information technology, our focus was on large-cap companies that were attractively priced, with good growth characteristics and more stable earnings. A number of the Fund's information technology themes showed favorable results as hardware stocks Hewlett-Packard and Intl Business Machine, software companies Microsoft and Oracle and computer networking company Cisco Systems performed well. In addition, exposure to semiconductor stocks was advantageous. The Fund held selected semiconductor stocks as firms within the group generated free cash flow, a rarity for cyclical companies. In the health care sector, the Fund had a slightly larger position than the Russell Index, which added to relative return. Health care stock selection was a significant contributor, driven by the timely purchase of health insurers and HMOs. These stocks experienced a severe sell-off during the year, giving us an opportunity to buy companies that had good earnings growth potential at what we considered to be attractive prices. Contributors included CIGNA and Aetna. Stock selection in the utilities sector also added to relative performance. The Fund had smaller positions in many of the more cyclically exposed utility companies that underperformed the rest of the sector as the economy showed preliminary signs of slowing. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Large Cap Value Fund +19.07% Russell 1000(R) Value Index (unmanaged) +22.25% Lipper Large-Cap Value Funds Index +18.28%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 45 RiverSource VP - Large Cap Value Fund Q: What changes did you make during the period? A: We added to select stocks in the financials and consumer discretionary sectors, focusing on companies that are very attractively valued, while still offering strong earnings growth potential. We also fine tuned the Fund's positioning in the telecommunication services sector, shifting assets to companies that we believe are best able to capitalize on the strong secular trends that are supporting earnings growth in the sector. Q: How do you plan to manage the Fund in the coming months? A: In the current environment, we see corporate profit margins at record levels, signs of slower global economic growth and a weaker U.S. housing market that could lead consumers to reduce their spending. All of these suggest that corporate profit growth is likely to decelerate. Given such a backdrop, we prefer to own high quality companies that are attractively valued. The difference between the valuations of traditional growth stocks and traditional value stocks has become quite small, which allows us to add attractive growth opportunities to the portfolio while remaining firmly committed to our value strategy. In doing so, we have de-emphasized companies whose growth is more dependent on economic activity and focused on companies whose growth tends to be stable regardless of how the overall economy is performing. As a result, the Fund's positions in media, health care and technology are larger than the respective weightings within the Russell Index. We continue to find an increasing number of opportunities among large-cap companies as these stocks still appear inexpensive compared to their mid- and small-cap peers. SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 28.5% Energy 10.9% Consumer Discretionary 10.5% Industrials 8.6% [PIE CHART] Information Technology 8.2% Telecommunication Services 7.0% Other(1) 26.3% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Health Care 6.7%, Consumer Staples 6.0%, Utilities 3.9%, Materials 2.9% and Cash & Cash Equivalents 6.8%.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Exxon Mobil 4.2% $1,066,230 Bank of America 3.5 885,419 Citigroup 3.4 871,148 American Intl Group 2.5 625,521 ConocoPhillips 2.0 519,767 Chevron 2.0 518,239 Verizon Communications 1.9 487,807 General Electric 1.9 479,525 Altria Group 1.9 472,096 Pfizer 1.9 469,981
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 25.2% of portfolio assets AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +19.07% Since inception (2/4/04) +11.61%
- ------------------------------------------------------------------------------ 46 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Large Cap Value Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - LARGE CAP VALUE FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Lipper Large-Cap RiverSource VP - Large Cap Russell 1000(R) Value Value Funds Value Fund Index Index 2/1/04 $10,000 $10,000 $10,000 12/31/04 $11,056 $11,448 $11,032 12/31/05 $11,557 $12,255 $11,723 12/31/06 $13,761 $14,982 $13,865
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Large Cap Value Fund (from 2/1/04 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell 1000(R) Value Index and the Lipper Large-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. The Lipper Large-Cap Value Funds Index includes the 30 largest large-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 47 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Mid Cap Growth Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, portfolio manager John Schonberg discusses RiverSource VP - Mid Cap Growth Fund's results and positioning for the fiscal year ended Dec. 31, 2006. Mr. Schonberg became portfolio manager on Oct. 17, 2006. Q: How did RiverSource VP - Mid Cap Growth Fund perform for the year ended Dec. 31, 2006? A: RiverSource VP - Mid Cap Growth Fund declined 0.07% for the 12 months ended Dec. 31, 2006, underperforming its benchmark, the Russell Midcap(R) Growth Index (Russell Index), which advanced 10.66% for the period. The Fund's peer group, represented by the Lipper Mid-Cap Growth Funds Index, was up 11.02% for the same time frame. RiverSource VP - Mid Cap Growth Fund rose 8.54% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 9.39%, while the Lipper Mid-Cap Growth Funds Index returned 9.26% for the four-month period. Q: What factors most significantly affected performance for the period? A: The past 12 months was an extremely difficult period for the Fund. Within the mid-cap stock universe, high quality mid-cap growth companies continued to underperform lower quality mid-cap growth stocks, as has been the case for the past two to three years. RiverSource Mid Cap Growth Fund is a portfolio focused on higher quality growth stocks. The prolonged outperformance of lower quality stocks was a key factor in the Fund's underperformance of the Russell Index. We believe investor sentiment is likely to shift in favor of higher quality mid-cap companies as the economic cycle progresses and economic activity begins to slow. Such a shift should create a more favorable environment for the Fund. Also contributing to the underperformance of the Fund compared to the Russell Index was the Fund's significant ownership of more established mid-cap growth companies that had previously performed very well, but are now in the later stages of their business cycles -- when growth typically subsides or levels off. Examples include specialty retailer Williams-Sonoma and grocery store chain Whole Foods Market, which have had slower sales at existing stores and disappointing earnings. Both Williams-Sonoma and Whole Foods Market were very strong performers for the Fund in 2005, but have lagged in 2006. We have substantially reduced the Fund's holdings in each of these stocks. Other individual stocks that detracted from the Fund's performance relative to the Russell Index were Dendrite Intl and Omnicare in the health care sector and Legg Mason in the financials sector. Dendrite Intl provides software and systems for pharmaceutical sales forces. When Pfizer, one of its largest clients, reduced its sales force-related expenditures, the negative impact on Dendrite Intl was significant. Omnicare is a geriatric pharmaceutical services company, primarily serving long-term care facilities. The company suffered from pricing pressures on generic drugs, Medicare reimbursement issues, a plant shutdown, and difficulty capitalizing on its acquisition of NeighborCare, a large provider of long-term care and retail pharmacy services. Asset manager Legg Mason was one of the portfolio's best performing stocks in calendar year 2005 as the company swapped its brokerage business for Citicorp's asset management business. However, the anticipated synergies haven't come to fruition as quickly as expected. Earnings have been disappointing as the company works on expense management in order to shore up profit margins. We reduced the Fund's holding of this stock. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Mid Cap Growth Fund -0.07% Russell Midcap(R) Growth Index (unmanaged) +10.66% Lipper Mid-Cap Growth Funds Index +11.02%
(See "The Fund's Long-term Performance" for Index descriptions) Investments in mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 48 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Mid Cap Growth Fund Throughout the year, the portfolio had no exposure to real estate investment trusts (REITs) within the financials sector. This was disadvantageous as REITs delivered very strong results. However, this is the fifth consecutive year that REITs have outperformed and we don't think this period of outperformance can continue indefinitely, so we have not added any positions in the REIT group. On the positive side, the Fund had larger allocations to technology and materials than did the Russell Index, and this positioning was advantageous for shareholders. Individual contributors to the Fund's performance included Diagnostic Products, Martin Marietta Materials and VeriFone Holdings. Martin Marietta Materials provides granite, limestone and other aggregates for construction. Increased construction in the southeast has spurred demand for its products. Health care company Diagnostic Products manufactures kits to help diagnose conditions such as heart disease, allergies and various forms of cancer. In April, Siemens Medical Solutions announced an agreement to acquire Diagnostic Products at a 20% premium to its then-current trading price. We sold the portfolio's holdings before the completion of the acquisition. VeriFone provides technology and software to facilitate secure electronic purchases such as those using debit or credit cards. In April, the company announced the acquisition of Israeli based wireless electronic payment systems provider Lipman Electronic Engineering. The deal should help the company extend growth within its international business operations. A company that we added to the portfolio mid-year also performed very well for the Fund. Akamai Technologies provides servers to increase internet downloading speed. With Apple as one of its clients, the company benefited from the popularity of music downloads. We think Akamai Technologies can continue to benefit as video downloads increase in popularity. Compared to music, video downloads require much more bandwidth and are still in their early stages of adoption by consumers. We believe Akamai Technologies is well-positioned to capitalize on this development. Q: What changes did you make during the year? A: In the final weeks of the fiscal year, we judiciously repositioned the portfolio looking to improve its underlying risk profile. While maintaining the Fund's overall investment approach and its focus on higher quality mid-cap companies, we have increased the number of stocks in the portfolio from about 60 to approximately 121. We also reduced holdings of stocks where the positions had previously been quite large. Examples include Williams-Sonoma, Whole Foods Market and Legg Mason, which were discussed above. We believe these changes will help reduce the variation between the Fund's return and the Russell Index, while still providing the potential performance shareholders are looking for. In terms of specific changes to sector allocations, the portfolio's consumer discretionary weighting is significantly lower than at the start of the fiscal period. We believe consumers face a number of impediments that could hamper spending. Both the downturn in the housing sector and the rise in interest rates could reduce consumers' ability and willingness to spend. At the same time, we think energy prices may stabilize, but will likely stay at a high level. All of these factors support a de-emphasis on consumer-related stocks. Some assets from the consumer discretionary sector were reallocated to information technology, which now makes the Fund's position in information technology larger than that of the Russell Index. We see several factors supporting information technology stocks. First, larger corporations have significant excess cash on their balance sheets and are likely to increase their technology spending in 2007. In addition, we think the introduction of Microsoft's VISTA operating system is a catalyst for widespread technology spending as computers will require substantial additional memory to run the new system. Although we maintain a favorable long-term outlook for the energy sector, in light of its strong performance over the past few years, we took some profits and reduced the Fund's allocation in the energy sector. Going forward, we think oil and energy service companies offer better opportunities within the sector, while companies focused on exploration and production may have difficulty meeting earnings growth expectations. The Fund's weighting in the financials sector was less than that of the Russell Index, and we don't anticipate increasing the Fund's allocation to financials as long as the yield curve remains relatively flat, with little yield difference between short and long-term bonds. Within financials, we have de-emphasized regional banks and REITs (as discussed above). We do see opportunities in stocks such as securities brokers and investment banks that have exposure to capital markets and can potentially benefit from increased merger and acquisition activity. The Fund's health care weighting is slightly larger than that of the Russell Index as we have identified companies with attractive growth potential. Q: What is your tactical view and how will you position the Fund for the months ahead? A: We intend to maintain the portfolio's high quality bias, while further improving its overall risk profile. We continue to seek out what we think are the most attractive mid-cap growth opportunities for the next two to three years. The Fund's sector allocation strategy is still primarily driven by bottom-up stock selection, while also taking into account expectations for the economy. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 49 RiverSource VP - Mid Cap Growth Fund The mid-cap universe has been extremely strong over the past three years. However, in the later stages of an economic cycle, larger cap securities tend to outperform due to their more stable growth patterns. Given our expectation for slower economic activity, we are focusing on the larger companies within the mid-cap segment. However, this positioning was disadvantageous during the past year, but we think that opportunities within the lower-end of the mid-cap universe are more difficult to realize in today's market environment. At the same time that we are focusing on the larger mid-cap companies, we are also seeking faster growing companies, those that are still relatively early in their company life cycle. We believe this combination will be advantageous for the Fund going forward. AVERAGE ANNUAL TOTAL RETURNS At Dec. 31, 2006 1 year -0.07% 3 years +6.28% 5 years +4.88% Since inception (5/1/01) +4.10%
SECTOR BREAKDOWN* Percentage Of portfolio assets at Dec. 31, 2006 Information Technology 27.7% Health Care 18.6% Consumer Discretionary 13.1% Industrials 9.1% [PIE CHART] Energy 7.2% Financials 6.5% Other(1) 17.8% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Materials 3.4%, Consumer Staples 3.2%, Telecommunication Services 3.2%, Utilities 2.0% and Cash & Cash Equivalents(2) 6.0%. (2) Of the 6.0%, 0.7% is due to security lending activity and 5.3% is the Fund's cash equivalent position.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Advent Software 2.1% $14,747,939 T Rowe Price Group 1.9 13,456,956 Acxiom 1.9 12,912,749 Fiserv 1.8 12,751,951 Microchip Technology 1.8 12,694,238 Network Appliance 1.8 12,479,963 Robert Half Intl 1.7 11,531,365 MedImmune 1.6 11,399,969 Techne 1.6 11,237,109 St. Jude Medical 1.6 10,786,625
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 17.8% of portfolio assets - ------------------------------------------------------------------------------ 50 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Mid Cap Growth Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - MID CAP GROWTH FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Mid Cap Russell Midcap(R) Growth Lipper Mid-Cap Growth Growth Fund Index Funds Index 5/1/01 $10,000 $10,000 $10,000 12/31/01 $ 9,896 $ 9,136 $ 9,055 12/31/02 $ 8,534 $ 6,632 $ 6,477 12/31/03 $10,461 $ 9,464 $ 8,771 12/31/04 $11,412 $10,929 $10,002 12/31/05 $12,568 $12,252 $10,960 12/31/06 $12,560 $13,558 $12,168
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Mid Cap Growth Fund (from 5/1/01 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell Midcap(R) Growth Index and the Lipper Mid-Cap Growth Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Russell Midcap(R) Growth Index, an unmanaged index, measures the performance of those stocks in the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth values. The stocks in the index are also members of the Russell 1000(R) Growth Index. The index reflects reinvestment of all distributions and changes in market prices. 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 51 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Mid Cap Value Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, portfolio managers Warren Spitz, Steve Schroll, Laton Spahr and Paul Stocking discuss RiverSource VP - Mid Cap Value Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - Mid Cap Value Fund perform for the annual period? A: RiverSource VP - Mid Cap Value Fund returned 15.32% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the Russell Midcap(R) Value Index (Russell Index), which advanced 20.22% for the period. The Fund also underperformed the Lipper Mid-Cap Value Funds Index, representing its peer group, which rose 15.66% over the same time frame. RiverSource VP - Mid Cap Value Fund rose 8.07% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 9.89%, while the Lipper Mid-Cap Value Funds Index returned 9.81% for the four-month period. Q: What factors most significantly affected the Fund's performance? A: The Fund posted impressive gains during the period. Stock selection across a wide variety of sectors helped the Fund's results most. For example, among the Fund's standout individual performers for the annual period were diverse oil services company McDermott Intl in energy, machinery company AGCO in producer durables, enterprise software provider BMC Software in information technology, metals and mining company Phelps Dodge in basic materials, and tobacco company Loews-Carolina Group in consumer staples. The Fund also benefited from its significant allocation to the autos and transportation industries in general and to airlines in particular. However, these positives were overwhelmed during the period by the detracting effects of a significant exposure to the energy sector, which lagged as energy prices declined. Within energy, holdings in Pioneer Natural Resources, BJ Services, Nabors Inds and Sunoco each disappointed. Also, within financials, a moderate allocation to real estate investment trusts (REITs), which was one of the best performing equity segments for the year, hurt. Having only a small holding in Equity Office Properties Trust, which performed well based on the announcement of a high profile private equity buyout, particularly detracted from results within this industry. Q: What changes did you make to the Fund's portfolio during the period? A: We maintained the Fund's overall bias toward cyclical stocks, but we somewhat reduced the Fund's exposure to these sectors during the period in favor of the more defensive segments of the equity market given a moderation in economic growth expectations. Specifically, during the annual period, we reduced the Fund's positions in basic materials, energy and producer durables. We increased the Fund's allocations to electric utilities, consumer staples and health care services. For example, we added to the Fund's positions in tobacco company Loews-Carolina Group and yellow pages publisher RH Donnelley, and we established a new Fund position in HMO Health Net. INVESTMENT TERM CYCLICAL STOCK: A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down. An example of a cyclical industry is the automobile market: as economic growth slows, consumers have less money to spend on new cars. Non-cyclical stocks are found in industries such as health care, where the demand for goods and services is constant. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Mid Cap Value Fund +15.32% Russell Midcap(R) Value Index (unmanaged) +20.22% Lipper Mid-Cap Value Funds Index +15.66%
(See "The Fund's Long-term Performance" for Index descriptions) - ------------------------------------------------------------------------------ 52 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Mid Cap Value Fund Q: What is the Fund's tactical view and strategy for the months ahead? A: We take larger positions in sectors, industries or individual stocks when we believe we have identified factors that other investors have either missed or ignored or strongly disagree with, and that have the potential to move the share values higher. Generally we view the market as not providing wide differentiation among valuations currently and into the new year. Overall, risk premiums are low across asset classes, providing relatively little opportunity to expand active risk taking. We expect the themes of energy infrastructure investment, industrial growth and globalization to lead the market over the longer term. However, with our dynamic view of risk management, we expect to moderate the risk profile within the Fund's portfolio by reducing its emphasis on these themes in favor of several new stock-specific opportunities. As always, we will continue to emphasize stocks with attractive valuations, with a focus on mid-sized company stocks. SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 20.9% Industrials 15.2% Utilities 13.2% Consumer Discretionary 13.0% [PIE CHART] Energy 9.7% Information Technology 7.5% Other(1) 20.5% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Materials 5.4%, Health Care 4.6%, Consumer Staples 4.1%, Telecommunication Services 3.3%, Telecommunication 0.3% and Cash & Cash Equivalents 2.8%.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) XL Capital Cl A 2.9% $ 10,807,033 Everest Re Group 2.5 9,530,013 ACE 2.0 7,654,473 Aon 2.0 7,488,581 PartnerRe 1.7 6,516,718 Loews-Carolina Group 1.7 6,284,635 McDermott Intl 1.6 5,988,867 American Standard Companies 1.6 5,947,111 Pinnacle West Capital 1.6 5,811,202 Loews 1.5 5,571,577
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 19.1% of portfolio assets AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +15.32% Since inception (5/2/05) +20.44%
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 53 RiverSource VP - Mid Cap Value Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - MID CAP VALUE FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Mid Russell Midcap(R) Lipper Mid-Cap Value Cap Value Fund Value Index Value Funds Index 5/1/05 $10,000 $10,000 $10,000 6/30/05 $10,630 $10,754 $10,717 12/31/05 $11,822 $11,481 $11,387 6/30/06 $12,780 $12,287 $11,889 12/31/06 $13,633 $13,802 $13,169
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Mid Cap Value Fund (from 5/1/05 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell Midcap(R) Value Index and the Lipper Mid-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Russell Midcap(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell Midcap Index with lower price-to-book ratios and lower forecasted growth values. The stocks in the index are also members of the Russell 1000(R) Value Index. The index reflects reinvestment of all distributions and changes in market prices. The Lipper Mid-Cap Value Funds Index includes the 30 largest mid-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. - ------------------------------------------------------------------------------ 54 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - S&P 500 Index Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, portfolio manager David Factor discusses RiverSource VP - S&P 500 Index Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - S&P 500 Index Fund perform for the 12 months ended Dec. 31, 2006? A: RiverSource VP - S&P 500 Index Fund rose 15.27% for the 12 months ended Dec. 31, 2006, underperforming the 15.79% advance of the Fund's benchmark, the unmanaged Standard & Poor's 500 Index (S&P 500 Index or the Index). The Lipper S&P 500 Objective Funds Index, representing the Fund's peer group, returned 15.55% during the same time frame. RiverSource VP - S&P 500 Index Fund rose 9.27% for the four-month period Sept. 1 - Dec. 31, 2006. The S&P 500 Index returned 9.45%, while the Lipper S&P 500 Objective Funds Index returned 9.40% for the four-month period. Mutual funds, unlike unmanaged indices, incur operating expenses. The Fund had an expense ratio of 0.495% for the reporting period. This ratio included fee waivers explained in the Financial Highlights section of this report. (See page 145.) Q: What market factors most significantly affected Fund performance? A: The U.S. equity market was driven higher by strong domestic consumer spending, global growth that helped U.S. multinationals, record-setting merger and acquisition activity, and the ability of buyout firms to marshal billions of dollars of capital to take a host of companies private. Corporate earnings continued to be strong, and equity valuations remained reasonable. The equity market rally that began at the end of June grew even stronger once the Federal Reserve Board (the Fed) paused in its campaign of boosting short-term interest rates in August. The Fed's targeted federal funds rate has stood at 5.25% since the end of June. Toward the end of the year, equity markets responded favorably to moderating inflation concerns, as a relatively warm start to the winter caused declines in energy prices. At the same time, extraordinary enthusiasm for stocks during the year withstood continued unrest in the Middle East, volatile oil prices, a repudiation of Republican policies in the midterm elections, and serious slumps in the auto and housing industries. The year 2006 was the best year for the broad U.S. equity market since 2003. Q: Which equity sectors and securities affected the S&P 500 Index' performance most during the 12 months? A: All of the sectors in the S&P 500 Index produced solid positive returns for the annual period. Financials and energy were the best performing sectors in the S&P 500 Index, with financials, the largest sector by weighting in the Fund, making the largest contribution to the Fund's annual return. The top performing industries for the period were oil, gas and consumable fuels, diversified telecommunication services, diversified financial services, pharmaceuticals and capital markets. On the other hand, materials and utilities were the two weakest sectors on the basis of contribution to returns. The list of weakest performing industries was topped by semiconductors & semiconductor equipment, Internet software and services, health care providers and services, household durables and biotechnology. Among individual stocks in the S&P 500 Index, Exxon Mobil, Cisco Systems, AT&T, Bank of America and Chevron contributed the most to returns during the 12-month period. The biggest underperformers were Intel, Yahoo!, eBay, Amgen and UnitedHealth Group. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - S&P 500 Index Fund +15.27% S&P 500 Index (unmanaged) +15.79% Lipper S&P 500 Objective Funds Index +15.55%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. "Standard & Poors(R)", "S&P", "S&P 500(R)" and "Standard & Poor's 500(R)" are trademarks of the McGraw-Hill Companies, Inc. These trademarks and service marks have been licensed for use by Ameriprise Financial, Inc. The Funds are not sponsored, endorsed, sold or promoted by Standard & Poor's or any of their subsidiaries or affiliates (the "Licensors") and the Licensors make no representation regarding the advisability of investing in the Funds. 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 55 RiverSource VP - S&P 500 Index Fund As always, each sector and stock in the S&P 500 Index was represented in the Fund with approximately the same weighting as in the Index and therefore had a similar effect. Q: What changes were made to the Fund during the period? A: Because the Fund strives to stay fully invested in the stocks that make up the S&P 500 Index and to replicate the performance of the Index, we align the Fund's portfolio with the rebalancings undertaken by Standard & Poor's on a quarterly basis. We also add stocks to and delete stocks from the portfolio to mirror those changes to the Index. Deletions typically result from mergers and acquisitions or financial reversals. Stocks added to the Index often have increased their capitalization beyond that of the S&P MidCap 400 Index, an unmanaged benchmark of medium-sized company stocks. During the annual period, there were 33 additions and 33 deletions to the Index and the Fund's portfolio. Stocks added to the Index and Fund included financial companies Chicago Mercantile Exchange Holdings, Commerce Bancorp and Legg Mason, energy companies Peabody Energy, CONSOL Energy and Chesapeake Energy, real estate companies CB Richard Ellis Group, Boston Properties and Kimco Realty, media companies DIRECTV Group and CBS, and such well-known names in various sectors as Western Union, Google, Dean Foods, Estee Lauder Companies, Celgene, and Whole Foods Market. Deletions included several "household names," including Lucent Technologies, Kerr-McGee, Gateway, Albertson's, Burlington Resources, Knight-Ridder, Maytag, Reebok Intl and MBNA. Q: What is the Fund's tactical view and strategy for the months ahead? A: We do not anticipate any changes in the portfolio beyond the customary quarterly rebalancings and stock substitutions we make to align the Fund with the S&P 500 Index. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +15.27% 3 years +9.89% 5 years +5.67% Since inception (5/1/00) +0.59%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 21.9% Information Technology 14.9% Health Care 11.8% Industrials 10.7% [PIE CHART] Consumer Discretionary 10.5% Energy 9.7% Other(1) 20.5% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Consumer Staples 9.1%, Telecommunication Services 3.5%, Utilities 3.5%, Materials 2.9% and Cash & Cash Equivalents 1.5%.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Exxon Mobil 3.5% $ 13,530,405 General Electric 3.0 11,611,790 Citigroup 2.1 8,285,430 Microsoft 2.0 7,819,856 Bank of America 1.9 7,258,371 Procter & Gamble 1.6 6,165,614 Johnson & Johnson 1.5 5,794,907 Pfizer 1.4 5,653,659 American Intl Group 1.4 5,640,001 Altria Group 1.4 5,445,365
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 19.8% of portfolio assets - ------------------------------------------------------------------------------ 56 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Broadly speaking, the consensus is quite optimistic for the equity market going forward for several reasons. First, most agree that the Fed will not be raising interest rates in 2007, and indeed may begin cutting rates sometime during the second half of the year. Second, global economic growth, particularly in Asia, is expected to continue. Third, merger and acquisition activity fueled by large amounts of cash looking for higher returns than available in the fixed income markets is likely to remain robust. There are risks to such a bullish view, including geopolitical worries, the impact of a weakening dollar, the volatility of energy prices and the potential ripple effects of the housing market slowdown. Furthermore, we expect corporate profits to be weaker in 2007 than in 2006 given slower real economic growth and narrowing corporate profit margins over the next year, as unit labor costs continue to drift higher. In short, given the stellar performance of the equity markets in 2006, we believe that investors may expect positive but more moderate returns in the months ahead. THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - S&P 500 INDEX FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - S&P 500 Lipper S&P 500 Objective Index Fund S&P 500 Index Funds Index 5/1/00 $10,000 $10,000 $10,000 12/31/00 $ 9,016 $ 9,276 $ 9,253 12/31/01 $ 7,893 $ 8,173 $ 8,123 12/31/02 $ 6,123 $ 6,367 $ 6,312 12/31/03 $ 7,837 $ 8,193 $ 8,095 12/31/04 $ 8,642 $ 9,084 $ 8,950 12/31/05 $ 9,022 $ 9,530 $ 9,366 12/31/06 $10,400 $11,035 $10,822
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - S&P 500 Index Fund (from 5/1/00 to 12/31/06) as compared to the performance of two widely cited performance indices, the S&P 500 Index and the Lipper S&P 500 Objective Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 57 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Select Value Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. RiverSource VP - Select Value Fund rose 15.82% for the annual period ended Dec. 31, 2006, underperforming the 22.34% return of the Russell 3000(R) Value Index (Russell Index). The Fund also underperformed its peer group, as represented by the Lipper Multi-Cap Value Funds Index, which advanced 17.07% for the period. RiverSource VP - Select Value Fund rose 7.13% for the period Sept. 1 - Dec. 31, 2006. The Russell Index returned 10.15%, while the Lipper Multi-Cap Value Funds Index returned 9.81% for the four-month period. RiverSource VP - Select Value Fund is managed by Systematic Financial Management, L.P. (Systematic) and WEDGE Capital Management L.L.P. (WEDGE). Systematic and WEDGE replaced GAMCO Asset Management, Inc. (GAMCO) on Sept. 29, 2006. The Fund seeks to provide long-term capital growth by investing in undervalued stocks of all sizes and is managed in a multimanager format with each subadvisor managing approximately 50% of the Fund's portfolio. Q: What factors most significantly affected your portion of the Fund's performance during the period? GAMCO: From the beginning of the fiscal year through Sept. 28, 2006 when we managed the Fund, we were specifically hurt by a large position in consumer discretionary stocks and smaller positions in energy, natural resources and utilities stocks. Specifically, newspaper and broadcasting stocks performed poorly as earnings fell short of estimates and investors became concerned that valuations would contract due to competition from cable and Internet advertising. Manufactured and modular housing stocks declined. Champion Enterprises, Cavalier Homes, Coachmen and Palm Harbor Homes fell despite Palm Harbor and Cavalier's ability to benefit from rebuilding efforts in the Gulf Coast. Recreational vehicle company Fleetwood also suffered as discretionary consumer spending declined. Gaming stocks were among the strongest portfolio performers. Aztar, the operator of the Tropicana Resorts and Casinos in Las Vegas and Atlantic City, was the subject of a bidding war that began with Pinnacle Entertainment offering $38 per share and concluded with a Columbia Entertainment $54 per share merger agreement. Kerzner International rose on news it would be taken private for $3 billion. Las Vegas Sands and Pinnacle Entertainment also rose sharply. Food and beverage companies Groupe Danone, Campbell Soup and Diageo performed well. Albertsons was acquired by corporate and private equity buyers. Archer-Daniels-Midland and Corn Products Intl rose as investors focused on their potential as alternative fuel commodity companies. SYSTEMATIC: The primary reason for the underperformance of our portion of the Fund during this period was stock selection in the information technology sector. Holdings in the utilities and financials sectors also slightly hurt performance. On a positive note, security selection in materials, consumer staples, telecommunication services and energy contributed to performance. Lastly, an overweight in health care detracted from results, while an underweight in financials positively impacted performance. WEDGE: The domestic equity markets posted strong returns during the latter half of 2006 due to the Federal Reserve Board's pause in raising short-term rates, continued moderate economic growth, signs of subdued inflation and global investors flush with cash looking for places to invest. Our portion of the Fund underperformed as a result of an underweight in lower quality stocks, which performed well during the period. In addition, an underweight in the utilities sector as well as poor stock selection in the sector detracted from performance. Lastly, as we were transitioning the portfolio during the latter part of the fiscal year, the market was very strong and not having the Fund's portfolio fully invested for a short period caused the Fund to miss out on some investment opportunities. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Select Value Fund +15.82% Russell 3000(R) Value Index (unmanaged) +22.34% Lipper Multi-Cap Value Funds Index +17.07%
(See "The Fund's Long-term Performance" for Index descriptions) Investments in small- and mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 58 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Select Value Fund Q: What changes did you make to your portion of the Fund during the period? GAMCO: During the period, one of the Fund's holdings, Albertsons, was acquired by a consortium of private equity and corporate buyers. We also took some profits in several positions, including Archer-Daniels-Midland, Aztar and Citizens. Additions to the Fund's portfolio included Rolls Royce, which is in the jet engine business. We added to positions in Rogers Communications, Commonwealth Telephone, and Johnson & Johnson. We also bought shares of Kinder Morgan and Devon Energy. SYSTEMATIC: Within the materials sector, the Fund's positions in OM Group and IPSCO were eliminated during the period. OM Group is an international producer and marketer of metal-based specialty chemicals and related materials. The company's stock price advanced significantly after it raised its quarterly earnings guidance. A major jump in nickel prices was the positive driver for the improved outlook. The Fund eliminated its position in the company as a result of this jump in price when it reached our target valuation. The Fund also sold steel producer IPSCO after a strong earnings report lifted its shares. Higher shipments, pricing, margins and improved product mix caused by strong end-market demand drove the company's impressive results. Hotel real estate investment trust (REIT) DiamondRock Hospitality and office REIT Douglas Emmett were added to the Fund's portfolio during the period, and a position in Host Hotels & Resorts was eliminated. Our decision to swap Host Hotels & Resorts for DiamondRock was a result of the latter's exposure to high-end properties, which are experiencing stronger revenue trends. DiamondRock is also trading at a discount to Host and has a higher dividend yield. Two new additions in the consumer staples sector were supermarket operator SUPERVALU and ConAgra Foods, a manufacturer of processed and packaged foods. In addition, Fomento Economico Mexican and apparel and accessory designer Guess? were eliminated. WEDGE: We lowered our portion of the Fund's exposure to consumer cyclical stocks during the period. We believe consumer spending will be challenged by weakness in home prices, as well as relatively high energy costs and the lagged effect of higher interest rates. As a result, the consumer exposure in our portion of the Fund is conservatively focused on consumer staples and health care stocks. In addition, we added to the portfolio's technology exposure because we believe that the information technology sector should benefit from attractive valuations as companies continue to look for new ways to increase productivity in a slower growth economy. Q: How are you positioning your portion of the Fund going forward? SYSTEMATIC: As of Dec. 31, 2006, our portion of the Fund is overweight in the information technology, industrials, health care and telecommunication services sectors, and underweight in the financials, utilities, consumer discretionary and materials sectors. Overall, the Fund continues to witness strong earnings performance in the consumer staples sector, along with companies in industrials, such as nonresidential construction. Lastly, the Fund's overweight in the health care sector is due to the group's attractive valuations and strong cash-flow characteristics. WEDGE: We believe the economy will continue to grow, but at a decelerating rate, despite conflicting economic signals, as well as broad macroeconomic and geopolitical issues. The American consumer has historically shown considerable resilience and the recent decline in energy costs and the initial signs of stabilization in the housing industry could provide a positive influence. Company profit margins may be under some pressure and earnings growth will likely slow significantly in 2007, leading to improved performance by higher quality companies, which should be beneficial to the Fund's portfolio. Our portion of the Fund's portfolio remains underweight in the financials and utilities sectors and overweight in technology, health care and consumer staples, consistent with our economic outlook and valuations. Subject to finding appropriate company fundamentals and reasonable valuations, we intend to buy quality companies with sustainable earnings growth, increase our weighted average capitalization in anticipation of the market's rotation to larger capitalization companies and increase our dividend yield. INVESTMENT TERM CYCLICAL STOCK: A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down. An example of a cyclical industry is the automobile market: as economic growth slows, consumers have less money to spend on new cars. Non-cyclical stocks are found in industries such as health care, where the demand for goods and services is constant. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 59 RiverSource VP - Select Value Fund AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +15.82% Since inception (2/4/04) +10.02%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 25.5% Industrials 13.2% Information Technology 12.8% Utilities 11.0% [PIE CHART] Consumer Discretionary 9.8% Materials 6.6% Other(1) 21.1% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Health Care 6.5%, Consumer Staples 6.3%, Energy 4.3%, Telecommunication Services 1.7% and Cash & Cash Equivalents 2.3%.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Cadence Design Systems 2.6% $734,310 Lincoln Natl 2.3 644,080 Pinnnacle West Capital 2.0 572,797 AptarGroup 2.0 572,688 RR Donnelley & Sons 2.0 572,194 Old Republic Intl 2.0 568,032 Sonoco Products 2.0 567,094 VF 2.0 566,352 Computer Sciences 2.0 565,722 URS 2.0 565,620
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 20.9% of portfolio assets - ------------------------------------------------------------------------------ 60 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Select Value Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - SELECT VALUE FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Select Russell 3000(R) Value Lipper Multi-Cap Value Fund Index Value Funds Index 2/1/04 $10,000 $10,000 $10,000 12/31/04 $11,340 $11,478 $11,253 12/31/05 $11,397 $12,264 $11,965 12/31/06 $13,200 $15,004 $14,008
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Select Value Fund (from 2/1/04 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell 3000(R) Value Index and the Lipper Multi-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Russell 3000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 3000 Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. The Lipper Multi-Cap Value Funds Index includes the 30 largest multi-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's performance is currently measured against this index for purposes of determining the performance incentive adjustment. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 61 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Short Duration U.S. Government Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. Below, portfolio managers Scott Kirby and Jamie Jackson discuss RiverSource VP - - Short Duration U.S. Government Fund's results and positioning for the annual period ended Dec. 31, 2006. Q: How did RiverSource VP - Short Duration U.S. Government Fund perform for the annual period ended Dec. 31, 2006? A: RiverSource VP - Short Duration U.S. Government Fund rose 3.84% for the 12 months ended Dec. 31, 2006. The Fund underperformed its benchmark, the Lehman Brothers 1-3 Year Government Index (Lehman Index), which gained 4.12%. The Fund also underperformed the Lipper Short U.S. Government Funds Index, representing the Fund's peer group, which rose 4.02% during the same time frame. RiverSource VP - Short Duration U.S. Government Fund rose 1.55% for the four-month period Sept. 1 - Dec. 31, 2006. The Lehman Index returned 1.51%, while the Lipper Short U.S. Government Funds Index returned 1.53% for the four-month period. Q: What factors most significantly affected Fund performance during the annual period? A: Returns for the Fund and its Lehman Index were positive. For the annual period overall, interest rates rose, reducing bond prices modestly and detracting from the Lehman Index's coupon return. Rates rose in response to a strong economy, elevated inflation levels and continued tightening of monetary policy by the Federal Reserve Board (the Fed), at least through August, when the Fed observed its first pause in two years. The biggest contributor to the Fund's performance was its sizable allocation to non-Treasury sectors, as high quality mortgage-backed securities and, to a lesser degree, agencies, outperformed U.S. Treasuries during the annual period. Tactical allocation within mortgage-backed securities also helped, that is, adding to and reducing the Fund's position within mortgages at opportune times. Also, while yields moved higher across the spectrum of maturities, or yield curve, during the 12-month period, they rose less so at the longer end than at the shorter end, causing a further flattening of the yield curve. We had prudently positioned the portfolio for just such a yield curve flattening scenario. The primary detractor from the Fund's results was its exposure to Treasury Inflation Protected Securities (TIPS). TIPS underperformed nominal Treasury securities, or non inflation protected Treasury securities, during the period, given inflation data reports that were less than market expectations. Such muted inflation was due primarily to an unanticipated drop in energy prices. The Fund's comparatively longer duration positioning than the Lehman Index also modestly hurt its performance for the annual period as a whole. Duration is a measure of the Fund's sensitivity to changes in interest rates. Though the Fund's duration positioning helped during the second half of the year when rates rallied, it was not enough to completely offset the detracting effect of its longer duration during the first half of the year when rates rose significantly. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Short Duration U.S. Government Fund +3.84% Lehman Brothers 1-3 Year Government Index (unmanaged) +4.12% Lipper Short U.S. Government Funds Index +4.02%
(See "The Fund's Long-term Performance" for Index descriptions) Shares of the RiverSource VP - Short Duration U.S. Government Fund are not insured or guaranteed by the U.S. government. The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 62 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Q: What changes did you make to the Fund and how is it currently positioned? A: We maintained a longer duration than the Lehman Index throughout the annual period. However, as U.S. Treasury rates fell during the second half of the year, we began to reduce the Fund's duration a bit, moving closer in duration to the Lehman Index. We felt a somewhat more defensive position was then warranted. After rates peaked in July and then rallied, we also took this opportunity to sell some of the Fund's non-Treasury sector holdings, taking profits following this run of strong performance. We increased the Fund's exposure to Treasuries. We also reduced the Fund's exposure to the longer end of the 1-3 year portion of the yield curve, as the yield curve actually inverted in the last months of the annual period, meaning that shorter term yields grew higher than longer term yields. Q: What is the Fund's tactical view and strategy for the months ahead? A: Even with the moderate rise in rates over the annual period, on a more macro level, we believe that U.S. interest rates across the range of maturities, or yield curve, have declined to levels that appear too low, and the yield curve itself has become too flat given our economic view. Although recent data shows inflationary pressures easing, we believe the most likely scenario is for inflation to nudge higher but also for a modest economic slowdown to become apparent in the coming months. We, thus, believe the Fed is likely to maintain its pause, with the targeted federal funds rate at its current 5.25%, for an extended period of time. We further believe that the fixed income market has gotten ahead of itself and that rates will likely drift higher and the yield curve will steepen during the months ahead. Based on this view, we intend to maintain the Fund's current duration positioning for the near term and its more conservative allocation strategy, with somewhat more of a balance between the non-Treasury sectors and U.S. Treasuries. When rates move higher, when the yield curve steepens, and when valuations move toward what we consider to be fair value, then we intend to shift a bit from our current conservative posture to a somewhat more aggressive strategy, lengthening duration and adding to the non-Treasury sectors again. As always, our strategy is to provide added portfolio value with a moderate amount of risk. Quality issues and security selection remain a priority as we continue to seek attractive buying opportunities. SECTOR BREAKDOWN Percentage of portfolio assets at Dec. 31, 2006 Mortgage-Backed* 49.9% U.S. Government Obligations & Agencies 43.4% Foreign Agencies 2.1% [PIE CHART] Commercial Mortgage-Backed 1.8% Asset-Backed 1.4% Cash & Cash Equivalents* 1.4% * Of the 49.9%, 6.0% is due to forward commitment mortgage-backed securities activity. Short-term securities are held as collateral for these commitments.
AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +3.84% 3 years +2.08% 5 years +2.70% Since inception (9/15/99) +3.93%
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 63 RiverSource VP - Short Duration U.S. Government Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - SHORT DURATION U.S. GOVERNMENT FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RiverSource VP - Short Duration U.S. Government Lehman Brothers 1-3 Year Lipper Short U.S. Government Fund Government Index Funds Index 10/1/99 $10,000 $10,000 10,000 12/31/99 $10,045 $10,055 10,060 12/31/00 $10,896 $10,876 10,856 12/31/01 $11,590 $11,804 11,628 12/31/02 $12,266 $12,514 12,243 12/31/03 $12,452 $12,765 12,417 12/31/04 $12,558 $12,902 12,542 12/31/05 $12,756 $13,125 12,753 12/31/06 $13,246 $13,666 13,265
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Short Duration U.S. Government Fund (from 10/1/99 to 12/31/06) as compared to the performance of two widely cited performance indices, the Lehman Brothers 1-3 Year Government Index and the Lipper Short U.S. Government Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ 64 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT PORTFOLIO MANAGEMENT Q&A RiverSource VP - Small Cap Advantage Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. RiverSource VP - Small Cap Advantage Fund advanced 11.69% for the year ended Dec. 31, 2006, underperforming its benchmark, the Russell 2000(R) Index (Russell Index), which rose 18.37% for the same period. The Fund's peer group, represented by the Lipper Small-Cap Core Funds Index, advanced 13.70% for the period. RiverSource VP - Small Cap Advantage Fund rose 8.14% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 9.81%, while the Lipper Small-Cap Core Funds Index returned 8.57% for the four-month period. Stock prices experienced a sharp sell-off in late spring, but moved steadily higher during the last five months of the fiscal year. Catalysts for the advance included moderating energy prices, robust corporate profit growth, a wave of buyouts and mergers, and -- importantly -- the Federal Reserve's decision in August to halt its two-year campaign of raising interest rates. For small-cap investors, 2006 marked the seventh year of the last eight that small-caps outperformed large-caps. Small-cap value stocks outperformed small-cap growth stocks over the 12-month period. Prior to Sept. 14, 2006, the Fund was managed by Dimitris Bertsimas with the RiverSource Investments quantitative investment office in Cambridge who managed less than 20% of the Fund's assets and Jake Hurwitz and Kent Kelley of Kenwood Capital Management (Kenwood) in Minneapolis. As of Sept. 14, 2006, Hurwitz and Kelley became the Fund's sole portfolio managers. They have been managers of the Fund since its inception in 1999. Q: What factors significantly affected Fund performance? HURWITZ AND KELLEY: Consistent with our "bottom-up" focus, stock selection was the most important factor affecting performance. Stock selection produced mixed results for our portfolio segment but overall detracted from returns relative to the Russell Index. The Fund's best relative performance occurred in the industrials sector where several positions in constructions services advanced on strong revenue and earnings growth. Among manufacturing holdings, shares of Gardner Denver, a maker of air compressors, surged after the company significantly raised its earnings guidance for the year. In the aerospace and defense industry, the Fund's positions in Orbital Sciences and Teladyne Technologies, added to the Fund's return. In basic materials, positions in the specialty chemicals and packaging groups were positive contributors. Stock selection in transportation also added to return, as holdings in the airline and freight shipping groups were particularly strong performers. Stock selection in technology was less effective due to a mix of poor performance from some portfolio holdings and strong performance from stocks we either did not own or had positions smaller than the Russell Index. Among the portfolio's technology underweights were a number of low-priced technology stocks that had unusually large gains during the year, such as Rambus and Finisar. In general, these stocks displayed poor earnings prospects and unfavorable valuations relative to other stocks in their industries. Takeovers of several technology companies not in the portfolio also hurt Fund performance relative to the Russell Index. In addition, stock selection in the consumer cyclicals, energy and finance had a negative impact on performance relative to the Russell Index. In general, the effectiveness of our investment approach declined as the fiscal year progressed and market leadership shifted in favor of stocks with lower "quality" characteristics (e.g., below-average profitability, a higher incidence of negative earnings and poor equity market liquidity). In contrast, our quantitative stock selection process favors stocks with strong company fundamentals, such as above-average profit and cash flow margins and attractive valuations. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Small Cap Advantage Fund +11.69% Russell 2000(R) Index (unmanaged) +18.37% Lipper Small-Cap Core Funds Index +13.70%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. Investments in small capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 65 RiverSource VP - Small Cap Advantage Fund BERTSIMAS: For the first eight months of the fiscal year during which we managed a portion of the Fund, our strategy lagged the Fund's benchmark and peers. Of our three quantitative models, the momentum model's results were weakest relative to the Russell Index. The value and quality-adjusted value models also lagged the Russell Index, though the quality-adjusted value model performed well against the Russell Index during difficult market periods, such as February and May 2006. Stock selection detracted from return, primarily due to stocks selected by the momentum model. Selection among health care stocks was quite strong, outperforming both the health care sector and the Russell Index. Our strategy kept sector weightings similar to the Russell Index, so overall sector allocations had minimal impact on return. However, a health care weighting that was smaller than the Russell Index helped performance. Within the consumer discretionary sector, a moderate overweight in some poorly performing home builders was detrimental. Q: How would you describe your current investment strategy? HURWITZ AND KELLEY: Our strategy employs a quantitative approach. We use computer models to seek to identify the most attractive stocks in each economic sector based on a balanced set of valuation, earnings and price-related variables. Our approach seeks to identify quality companies -- differentiated by superior cash flow generation and attractive relative valuations -- from both the growth and value sides of the small-cap universe. We believe the objectivity of our approach is an advantage because investors often let emotions stand in the way of sound investment decisions. We invest in all sectors of the small-cap market at roughly the same weightings as the Russell Index. Our objective is to own a portfolio of stocks that represents the best opportunities in each sector. AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +11.69% 3 years +11.54% 5 years +11.22% Since inception (9/15/99) +9.03%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Financials 21.3% Information Technology 17.7% Industrials 15.5% Consumer Discretionary 14.9% [PIE CHART] Health Care 12.4% Energy 5.3% Other(1) 12.9% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Materials 4.6%, Utilities 3.2%, Consumer Staples 2.0%, Telecommunication Services 1.6% and Cash & Cash Equivalents(2) 1.5%. (2) Of the 1.5%, 0.3% is due to security lending activity and 1.2% is the Fund's cash equivalent.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) Delphi Financial Group Cl A 0.6% $ 1,271,455 Genlyte Group 0.6 1,241,949 ProAssurance 0.6 1,223,040 Polycom 0.5 1,168,398 Selective Insurance Group 0.5 1,125,749 Acuity Brands 0.5 1,124,064 American Commercial Lines 0.5 1,080,915 Hologic 0.5 1,041,437 Phillips-Van Heusen 0.5 1,028,485 Horace Mann Educators 0.5 1,017,636
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 5.3% of portfolio assets - ------------------------------------------------------------------------------ 66 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Q: How are you positioning the Fund going forward? HURWITZ AND KELLEY: We continue to select stocks one at a time, while seeking to provide balanced exposure to growth and value small-cap stocks and keeping sector weightings similar to the Russell Index. Looking ahead to 2007, the U.S. economy and stock market appear to be on solid footings. Although the housing and auto industries weathered sharp slowdowns in 2006, consumer spending remained surprisingly robust due to gains in personal income and declines in energy costs. Similarly, corporate spending on capital expenditures slowed mid year, but appears poised to reaccelerate in 2007 due to strong cash flows and healthy balance sheets. A moderating trend in inflation data has allowed the Federal Reserve Board (the Fed) to hold short-term interest rates steady since August 2006. We believe the Fed is likely to remain on the sidelines through the first half of 2007 unless there is an unexpected pick-up in inflation or slowdown in the economy. In the near term, small-caps could be vulnerable to profit-taking after their strong advance in the second half of last year. However, the current backdrop of low interest rates and low equity market volatility creates an environment that we consider favorable for small-cap relative performance. THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RIVERSOURCE VP - SMALL CAP RUSSELL 2000(R) INDEX LIPPER SMALL-CAP CORE ADVANTAGE FUND FUNDS INDEX 10/1/99 $10,000 $10,000 $10,000 12/31/99 $11,333 $11,844 $11,896 12/31/00 $11,804 $11,486 $12,720 12/31/01 $11,034 $11,772 $13,627 12/31/02 $ 9,151 $ 9,361 $11,007 12/31/03 $13,530 $13,785 $15,509 12/31/04 $16,039 $16,311 $18,358 12/31/05 $16,813 $17,053 $19,745 12/31/06 $18,779 $20,186 $22,450
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Small Cap Advantage Fund (from 10/1/99 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell 2000(R) Index and the Lipper Small-Cap Core Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. The Russell 2000(R) Index, an unmanaged index, measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index. The index reflects reinvestment of all distributions and changes in market prices. 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 the performance incentive adjustment. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 67 PORTFOLIO MANAGEMENT Q&A RiverSource VP - Small Cap Value Fund In 2006, the fiscal year-end for RiverSource Variable Portfolio Funds changed from Aug. 31 to Dec. 31. This annual report reflects this change. RiverSource VP - Small Cap Value Fund rose 20.25% for the 12 months ended Dec. 31, 2006, underperforming the 23.48% return of its benchmark, the Russell 2000(R) Value Index (Russell Index). The Fund outperformed its peer group, as represented by the Lipper Small-Cap Value Funds Index, which advanced 17.13% for the period. RiverSource VP - Small Cap Value Fund rose 9.99% for the four-month period Sept. 1 - Dec. 31, 2006. The Russell Index returned 10.09%, while the Lipper Small-Cap Value Funds Index returned 9.18% for the four-month period. RiverSource VP - Small Cap Value Fund's portfolio is managed by four independent money management firms that each invest a portion of Fund assets in small company value stocks. The goal is to provide long-term capital appreciation. On April 24, 2006, River Road Asset Management, LLC (River Road) replaced both Goldman Sachs Asset Management, L.P. (GSAM) and Royce & Associates, LLC (Royce) as subadvisor to the Fund. As of Dec. 31, 2006, Barrow, Hanley, Mewhinney & Strauss, Inc. (Barrow, Hanley) managed approximately 23%, Donald Smith & Co., Inc. (Donald Smith) managed approximately 22%, Franklin Portfolio Associates LLC (Franklin Portfolio) managed approximately 22%, and River Road managed approximately 33% of the Fund's assets. Q: What factors most significantly affected results for your portion of the Fund for the period? BARROW, HANLEY: A significant underweighting in the financials sector, the worst performing sector in the Russell Index during the period, contributed positively to performance in our portion of the Fund. Also contributing to performance was a significant allocation to the industrials sector and the portfolio's positive stock selection within the information technology sector, specifically Mentor Graphics and Reynolds & Reynolds. Detracting from performance was the Fund's holdings in the consumer discretionary, energy and materials sector. The five best performers included Terex, Century Aluminum, Mentor Graphics, Reynolds & Reynolds and Regal-Beloit. The worst performing stocks were Valassis Communications, Encore Acquisition, Brunswick, Covenant Transport and Mercury Computer Systems. DONALD SMITH: There were a number of stocks that did well in 2006. Notable performers included Air France-KLM, Dillard's, Domtar, Knight Capital Group, Reliant Energy and Visteon. There were three major detractors to performance: Quanta Capital Holdings and PXRE, two reinsurance companies impacted by last year's hurricanes, and Sea Containers, a container transportation company. FRANKLIN PORTFOLIO: Poor stock selection detracted from performance as the market saw investors chasing stocks that displayed characteristics of poor quality. In addition, the economic signals were pointing to a slowing economy if not a recession. It is not unusual for our investment process to experience short-term underperformance during these turning points in the economic cycle. Regarding poor stock selection, four of the leading negative contributors were found within the consumer discretionary sector including the largest, Conns Inc., a specialty retailer that fell during the period. Also overweight positions in the construction industry hurt the portfolio as represented by homebuilder Technical Olympic and Building Materials Holding, a provider of residential construction services and building materials to professional homebuilders and contractors. PERFORMANCE COMPARISON For the year ended Dec. 31, 2006 [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL.] RiverSource VP - Small Cap Value Fund +20.25% Russell 2000(R) Value Index (unmanaged) +23.48% Lipper Small-Cap Value Funds Index +17.13%
(See "The Fund's Long-term Performance" for Index descriptions) The indices do not reflect the effects of expenses (excluding Lipper). It is not possible to invest directly in an index. - ------------------------------------------------------------------------------ 68 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Value Fund RIVER ROAD: The two best performing sectors during the period were consumer discretionary and consumer staples. In addition, large exposure to the consumer discretionary and consumer staples sectors contributed positively to performance. Our portion of the Fund's consumer holdings benefited from a positive macroeconomic environment and numerous company-specific events. The three top performing holdings of our portion of the Fund during the period were all consumer-related, including: Mexico's largest chicken producer, Industrias Bachoco; the second largest independent Coke bottler, Coca-Cola Bottling Company Consolidated; and restaurant operator Jack in the Box, whose Qdoba unit is experiencing tremendous success. Poor stock selection in the energy, information technology and financials sectors detracted from performance during the period. Our portion of the Fund held smaller positions in these poorly performing sectors, which helped mitigate the effects of poor stock selection. Q: What changes did you make to your portion of the Fund? BARROW, HANLEY: Given our methodology, portfolio change significantly depends on finding companies with the potential for high fundamental improvement in our view. Alterations to the portfolio are, thus, evolutionary in nature. During the last 12 months the following stocks were eliminated: Chesapeake, Cost Plus, Tidewater, Kerzner International and Reynolds & Reynolds. Additions to the portfolio included: 21st Century Insurance Group, a personal auto insurance provider; Diebold, a developer of self-service transaction systems; MAXIMUS, a provider of operations and management solutions mainly to the government sector; Mercury Computer Systems, a manufacturer of embedded computer systems and software; EXCO Resources, a natural gas company; and American Axle & Mfg Holdings, a manufacturer of auto parts. DONALD SMITH: Stocks that performed well and that appreciated to large premiums-to-book value were sold. Included in this group were FBL Financial, Knight Capital Group, La Quinta (acquired during the period), Royal Group (acquired during the period) and UTStarcom. New positions were initiated in Domtar, Hutchinson Technology, Semiconductor Mfg Intl, Spansion, Stone Energy and Tech Data. On average, these stocks were purchased at prices close to their lows and at discounts to book value. FRANKLIN PORTFOLIO: Our normal trading activity consists of selling stocks out of the portfolio that have deteriorated and replacing them with stocks that are attractive in our view. The major change to the portfolio during the period was in response to the annual rebalancing of the Russell Index that occurred near the end of June 2006. Although the change in the Russell Index was smaller than it had been during the past several years, we have been repositioning the portfolio to track the Russell Index more closely. We did this by selling the stocks that left the Index and by buying the stocks that entered the Russell Index starting in June. We have continued to do this for several months. RIVER ROAD: Early in the period, we believed the market was going to face increasing investment headwinds. These headwinds were represented by higher energy prices, a Federal Reserve that was raising interest rates, and high relative valuations in our small-cap universe. As a result, we became increasingly focused on companies that we felt were less susceptible to rising interest rates and inflation, slowing economic growth and, perhaps, a downturn in the broader equity markets. Many of these defensive traits are central to our investment philosophy, including companies that have little or no debt and generate significant free cash flow. An additional trait we emphasized was the ability for a company to raise prices quickly. This ability creates a natural hedge against rising rates and inflation. This emphasis led to an increased investment within the grocery industry. Grocery stores can pass along price increases quickly and, during a period of decreased consumer spending, may benefit from an increase in sales of high margin, private label brands. In the wake of the Wal-Mart competitive scare, many grocery stocks are still attractively valued. Current grocery holdings include Village Super Market, Ruddick and convenience store operator Casey's General Stores. As a group, our current grocery-related holdings target a diverse geographic customer base. In addition, they continue to trade at an attractive discount to their values. Fortunately, with the decline in oil prices and strong market performance during the fourth quarter, these relatively defensive holdings still performed well. Village Super Market was one of the Fund's top performing holdings during the period, as was west coast grocery operator Arden, which we recently sold after it achieved our value price target. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 69 RiverSource VP - Small Cap Value Fund Q: How will you manage your portion of the Fund in the coming months? BARROW, HANLEY: Almost regardless of the economic or stock market outlook, we go about our business of managing our portion of the portfolio the same way --stock by stock, seeking the highest returns and lowest risk with no preconceived sector or industry preferences. Usually these company-specific opportunities come our way because we are willing to look beyond temporary difficulties and toward the long-term value of businesses. The current portfolio reflects the cumulative total of these individual opportunities during the last three or four years and, as such, is heavily weighted by beneficiaries of the expanding economy. We expect continued economic improvement and, for the individual companies, further progress toward the attainment of improved fundamentals and market values that reflect company prospects. The current, past and future construction of the portfolio should remain grounded in the discovery and exploitation of individual stock values more or less independent of sector or industry conditions. Those conditions may, as they have in the case of our industrials stocks currently, add to our portion of the Fund's performance -- or subtract from it --over time. The primary value added should continue to come from securities analysis one stock at a time. DONALD SMITH: Energy stocks and financials remain large underweights relative to the Russell Index as we generally find few stocks in these areas that meet our strict valuation criteria. Currently, the information technology sector is the largest sector weighting in our portion of the portfolio. The technology stocks we have purchased for the Fund's portfolio have healthy balance sheets with little debt and large cash positions. Companies with undervalued real estate, such as Dillard's, Genesis HealthCare and Lodgian, are also prominent in the portfolio. In addition, many of the holdings in our portion of the portfolio are positioned to be either direct or indirect beneficiaries of lower energy prices. An airline, such as Alaska Air Group, would be a direct beneficiary of lower fuel costs, while a retailer such as Dillard's or auto parts company such as Visteon would be indirect beneficiaries as less consumer dollars are spent on fuel and more on consumer goods. FRANKLIN PORTFOLIO: We continue to position the portfolio to emphasize stocks with the characteristics that we've identified as leading to long-term outperformance in the small-cap value universe. We emphasize stocks that have inexpensive valuations relative to their peers and their own history, and also have identifiable business or market momentum so that their potential can be realized. We perform this analysis within industries and sectors and we are careful to maintain sector and industry weights within the portfolio similar to those in the Russell Index. As stocks within the portfolio no longer have the desired characteristics, we look to replace them with stocks that meet our criteria. We believe the portfolio is well positioned for the current market environment. The portfolio remains well diversified across all economic sectors and industries and is focused on favorable stock specific attributes of valuation and positive momentum. RIVER ROAD: Heading into 2007, we see little change in the overall positioning for our portion of the Fund. With oil prices declining, interest rates still low, global liquidity abundant and merger and acquisition activity approaching pre-bubble levels, most Wall Street pundits are bullish on the market for 2007. Perhaps this is why we remain healthy skeptics. Or perhaps it is because valuations are high, the economy is clearly slowing and this rally is exceptionally long in the tooth by any historical standard. Either way, our strategy is to largely ignore market-based trends and consistently focus our efforts on finding those stocks that best represent the bottom-up, fundamental characteristics we seek through our value investment philosophy and process. - ------------------------------------------------------------------------------ 70 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Value Fund AVERAGE ANNUAL TOTAL RETURNS at Dec. 31, 2006 1 year +20.25% 3 years +15.14% 5 years +13.08% Since inception (8/14/01) +13.53%
SECTOR BREAKDOWN* Percentage of portfolio assets at Dec. 31, 2006 Consumer Discretionary 18.8% Industrials 17.4% Financials 14.3% Information Technology 13.2% [PIE CHART] Cash & Cash Equivalents(2) 9.8% Materials 7.9% Other(1) 18.6% * Sectors can be comprised of several industries. Please refer to the section entitled "Investments in Securities" for a complete listing. No single industry exceeds 25% of portfolio assets. (1) Includes Consumer Staples 7.0%, Energy 4.6%, Health Care 3.5%, Utilities 2.6% and Telecommunication Services 0.9%. (2) Of the 9.8%, 2.6% is due to security lending activity and 7.2% is the Fund's cash equivalent position.
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. THE TEN LARGEST HOLDINGS
PERCENT VALUE (OF PORTFOLIO ASSETS) (AT DEC. 31, 2006) AK Steel Holding 1.5% $ 9,830,730 Reliant Energy 1.2 7,588,140 Stillwater Mining 1.2 7,431,550 Regal-Beloit 1.1 7,151,862 Mentor Graphics 1.1 7,015,473 Spansion Cl A 1.1 6,862,348 Dillard's Cl A 1.1 6,773,689 Lear 1.0 6,608,814 Industrias Bachoco ADR 1.0 6,438,232 AptarGroup 1.0 6,349,752
For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 11.3% of portfolio assets - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 71 RiverSource VP - Small Cap Value Fund THE FUND'S LONG-TERM PERFORMANCE VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVERSOURCE VP - SMALL CAP VALUE FUND [THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
RIVERSOURCE VP - SMALL CAP LIPPER SMALL-CAP VALUE VALUE FUND RUSSELL 2000(R) INDEX FUNDS INDEX 9/1/01 $10,000 $10,000 $10,000 12/31/01 $10,704 $10,383 $10,394 12/31/02 $ 9,406 $ 9,196 $ 9,230 12/31/03 $12,967 $13,429 $13,617 12/31/04 $15,561 $16,417 $16,429 12/31/05 $16,459 $17,191 $17,653 12/31/06 $19,792 $21,227 $20,677
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Small Cap Value Fund (from 9/1/01 to 12/31/06) as compared to the performance of two widely cited performance indices, the Russell 2000(R) Value Index and the Lipper Small-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable subaccount or variable account. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial institution. Also see "Past Performance" in the Fund's current prospectus. 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. 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. - ------------------------------------------------------------------------------ 72 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT FUND EXPENSES EXAMPLES (UNAUDITED) 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. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the cumulative expenses charged by the acquired funds using the acquired funds expense ratio as of the most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2006. ACTUAL EXPENSES The first line of each table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of each table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare each 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in each table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of each table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher. RiverSource VP - Balanced Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,114.30 $ 4.32 .82% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.84 $ 4.13 .82% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +11.43% for the six months ended Dec. 31, 2006.
RiverSource VP - Cash Management Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,023.60 $ 3.08 .61% Hypothetical (5% return before expenses) $ 1,000 $ 1,021.89 $ 3.07 .61% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +2.36% for the six months ended Dec. 31, 2006.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 73 RiverSource VP - Core Bond Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,045.40 $ 4.23 .83% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.79 $ 4.18 .83% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +4.54% for the six months ended Dec. 31, 2006.
RiverSource VP - Diversified Bond Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,050.40 $ 3.83 .75% Hypothetical (5% return before expenses) $ 1,000 $ 1,021.19 $ 3.78 .75% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +5.04% for the six months ended Dec. 31, 2006.
RiverSource VP - Diversified Equity Income Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,102.10 $ 4.93 .94% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.24 $ 4.73 .94% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +10.21% for the six months ended 31, 2006.
RiverSource VP - Emerging Markets Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,254.40 $ 8.54 1.52% Hypothetical (5% return before expenses) $ 1,000 $ 1,017.35 $ 7.64 1.52% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +25.44% for the six months ended Dec. 31, 2006.
RiverSource VP - Fundamental Value Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,095.00 $ 5.38 1.03% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.80 $ 5.19 1.03% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +9.50% for the six months ended Dec. 31, 2006.
- ------------------------------------------------------------------------------ 74 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Bond Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,043.10 $ 5.20 1.02% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.85 $ 5.14 1.02% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +4.31% for the six months ended Dec. 31, 2006.
RiverSource VP - Global Inflation Protected Securities Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,030.00 $ 3.64 .72% Hypothetical (5% return before expenses) $ 1,000 $ 1,021.34 $ 3.63 .72% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +3.00% for the six months ended Dec. 31, 2006.
RiverSource VP - Growth Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,121.50 $ 5.24 .99% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.00 $ 4.99 .99% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +12.15% for the six months ended Dec. 31, 2006.
RiverSource VP - High Yield Bond Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,076.10 $ 4.61 .89% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.49 $ 4.48 .89% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +7.61% for the six months ended Dec. 31, 2006.
RiverSource VP - Income Opportunities Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,067.00 $ 4.74 .92% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.34 $ 4.63 .92% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +6.70% for the six months ended Dec. 31, 2006.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 75 RiverSource VP - International Opportunity Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,124.00 $ 5.98 1.13% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.30 $ 5.69 1.13% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +12.40% for the six months ended Dec. 31, 2006.
RiverSource VP - Large Cap Equity Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,135.00 $ 4.42 .83% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.79 $ 4.18 .83% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +13.50% for the six months ended Dec. 31, 2006.
RiverSource VP - Large Cap Value Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,142.90 $ 5.56 1.04% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.75 $ 5.24 1.04% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +14.29% for the six months ended Dec. 31, 2006.
RiverSource VP - Mid Cap Growth Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,028.00 $ 4.55 .90% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.44 $ 4.53 .90% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +2.80% for the six months ended Dec. 31, 2006.
RiverSource VP - Mid Cap Value Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,066.70 $ 5.56 1.08% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.55 $ 5.44 1.08% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +6.67% for the six months ended Dec. 31, 2006.
- ------------------------------------------------------------------------------ 76 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - S&P 500 Index Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,124.90 $ 2.65 .50% Hypothetical (5% return before expenses) $ 1,000 $ 1,022.44 $ 2.52 .50% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +12.49% for the six months ended Dec. 31, 2006.
RiverSource VP - Select Value Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,080.40 $ 5.65(c) 1.09% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.50 $ 5.49(c) 1.09% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +8.04% for the six months ended Dec. 31, 2006. (c) Effective as of Jan. 1, 2007, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2007, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.00% of the Fund's average daily net assets. If this change had been in place for the actual the entire six-month period ended Dec. 31, 2006, expenses paid would have been $4.88 and the hypothetical expenses paid would have been $4.73.
RiverSource VP - Short Duration U.S. Government Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,033.50 $ 4.01 .79% Hypothetical (5% return before expenses) $ 1,000 $ 1,020.99 $ 3.98 .79% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +3.35% for the six months ended Dec. 31, 2006.
RiverSource VP - Small Cap Advantage Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,051.30 $ 5.47 1.07% Hypothetical (5% return before expenses) $ 1,000 $ 1,019.60 $ 5.39 1.07% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +5.13% for the six months ended Dec. 31, 2006.
RiverSource VP - Small Cap Value Fund
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2006 DEC. 31, 2006 THE PERIOD(a) EXPENSE RATIO Actual(b) $ 1,000 $ 1,093.70 $ 6.68(c) 1.28% Hypothetical (5% return before expenses) $ 1,000 $ 1,018.55 $ 6.44(c) 1.28% (a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). (b) Based on the actual return of +9.37% for the six months ended Dec. 31, 2006. (c) Effective as of Jan. 1, 2007, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until Dec. 31, 2007, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 1.20% of the Fund's average daily net assets. If this change had been in place for the actual the entire six-month period ended Dec. 31, 2006, expenses paid would have been $6.52 and the hypothetical expenses paid would have been $6.29.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 77 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 100 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who may retire after her 75th birthday. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND LENGTH OF PRINCIPAL OCCUPATION OTHER AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - --------------------------------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Chief Justice, Minnesota Supreme 901 S. Marquette Ave. since 2006 Court, 1998-2005 Minneapolis, MN 55402 Age 52 - --------------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, 901 S. Marquette Ave. since 1999 1999-2006; Chair, Board Services Minneapolis, MN 55402 Corporation (provides Age 72 administrative services to boards); former Governor of Minnesota - --------------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics and 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 56 Business, Bentley College - --------------------------------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 72 - --------------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind Board member Former Managing Director, Shikiar American Progressive Insurance 901 S. Marquette Ave. since 2005 Asset Management Minneapolis, MN 55402 Age 71 - --------------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 and Chair of Economics, Carleton College (manufactures irrigation systems) Minneapolis, MN 55402 the Board since 2007 Age 68 - --------------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc. 901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, distribution and Minneapolis, MN 55402 estate and asset management company) logistics consultants) Age 54 - --------------------------------------------------------------------------------------------------------------------------- Vikki L. Pryor* Board member President and Chief Executive 901 S. Marquette Ave. since 2006 Officer, SBLI USA Mutual Life Minneapolis, MN 55402 Insurance Company, Inc. since 1999 Age 53 - --------------------------------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc. (biotechnology); 901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); American Healthways, Inc. (health Minneapolis, MN 55402 former President, Forester Biotech management programs) Age 62 - ---------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ 78 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS**
NAME, POSITION HELD ADDRESS, WITH FUND AND LENGTH OF PRINCIPAL OCCUPATION OTHER AGE SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS - --------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member President - U.S. Asset Management and 53600 Ameriprise Financial Center since 2001, Chief Investment Officer, Ameriprise Minneapolis, MN 55474 Vice President Financial, Inc. and President, Chairman Age 46 since 2002 of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2005; President, Ameriprise Certificate Company since 2006; Senior Vice President - Chief Investment Officer, Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005 - --------------------------------------------------------------------------------------------------------------------- * Vikki L. Pryor resigned as a member of the Board, effective Jan. 11, 2007. ** Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments.
The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; or visiting riversource.com. The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND LENGTH AGE OF SERVICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS - ----------------------------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since Senior Vice President - Asset Management, RiverSource 172 Ameriprise Financial Center 2006 Investments, LLC since 2006; Managing Director and Global Head Minneapolis, MN 55474 of Product, Morgan Stanley Investment Management, 2004-2006; Age 41 President, Touchstone Investments, 2002-2004; Director of Strategic Planning, Evergreen Investments, 1995-2002 - ----------------------------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed Income, Ameriprise 172 Ameriprise Financial Center since 2004 Financial, Inc. and RiverSource Investments, LLC since 2006; Minneapolis, MN 55474 Vice President - Investments, Ameriprise Certificate Company Age 42 since 2003; Senior Vice President - Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006; Managing Director, Zurich Global Assets, 2001-2002 - ----------------------------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President Vice President - Asset Management and Trust Company Services, 5228 Ameriprise Financial Center since 2006 RiverSource Investments, LLC since 2006; Vice President - Minneapolis, MN 55474 Operations and Compliance, RiverSource Investments, LLC, Age 41 2004-2006; Director of Product Development - Mutual Funds, Ameriprise Financial, Inc., 2001-2004 - ----------------------------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since Vice President - Investment Accounting, Ameriprise Financial, 105 Ameriprise Financial Center 2002 Inc. since 2002; Vice President - Finance, American Express Minneapolis, MN 55474 Company, 2000-2002 Age 51 - ----------------------------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, General Vice President and Chief Counsel - Asset Management, Ameriprise 5228 Ameriprise Financial Center Counsel and Secretary Financial, Inc. since 2005; Vice President, General Counsel and Minneapolis, MN 55474 since 2006 Secretary, Ameriprise Certificate Company since 2005; Vice Age 47 President - Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, U.S. Bancorp Asset Management, 2002-2004; Second Vice President and Assistant General Counsel, Hartford Life, 2001-2002 - ----------------------------------------------------------------------------------------------------------------------------- Jennifer D. Lammers Chief Compliance Officer U.S. Asset Management Chief Compliance Officer, RiverSource 172 Ameriprise Financial Center since 2006 Investments, LLC since 2006; Director - Mutual Funds, Voyageur Minneapolis, MN 55474 Asset Management, 2003-2006; Director of Finance, Voyageur Age 46 Asset Management, 2000-2003 - ----------------------------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer, 2934 Ameriprise Financial Center Prevention Officer since Ameriprise Financial, Inc. since 2004; Manager Anti-Money Minneapolis, MN 55474 2004 Laundering, Ameriprise Financial, Inc., 2003-2004; Compliance Age 43 Director and Bank Secrecy Act Officer, American Express Centurion Bank, 2000-2003 - -----------------------------------------------------------------------------------------------------------------------------
PROXY VOTING The policy of the Board is to vote all proxies of the companies in which the Fund holds investments. The procedures are stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling RiverSource Funds at (888) 791-3380; contacting your financial institution; visiting riversource.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006 is available without charge by visiting riversource.com/funds; or searching the website of the SEC at www.sec.gov. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 79 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AND SUBADVISORY AGREEMENTS For VP - Select Value: During the period covered by this report, RiverSource Investments, LLC ("RiverSource Investments" or the "investment manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as the investment manager to RiverSource funds under an Investment Management Services Agreement ("IMS Agreement"). The Fund operates under an order from the Securities and Exchange Commission that permits the investment manager, subject to the approval of the Board, to appoint unaffiliated subadvisers or change the terms of subadvisory agreements without first obtaining shareholder approval. As a basis for making its determination, the Board monitors the investment performance of the Fund throughout the year using a number of benchmarks and comparison periods of one, three and five years, as well as the entire period during which the subadviser has managed its portion of the investment portfolio. On an annual basis the Board assesses the operating capabilities of the subadviser, such as adherence to the investment strategies of the Fund, compliance with its code of ethics and all applicable legal requirements, and its working relationship with the investment manager, through reports prepared by the investment manager. During the year, if there is a change in the composition of the subadviser's management team or if other circumstances so require, the Board will re-assess the operating capabilities. The Board also considers the fees paid by the investment manager to the subadviser and any business relationships that exist between the investment manager and its affiliates and the subadviser. Based on its review and evaluation, at meetings of the Board held in July and September 2006, the Board, including a majority of its independent members, approved the recommendation of RiverSource Investments to terminate the subadvisory agreement with GAMCO Asset Management Inc. ("GAMCO") and to approve new subadvisory agreements with Systematic Financial Management, L.P., an affiliate of Affiliated Managers Group ("Systematic") and WEDGE Capital Management L.L.P. ("WEDGE"), which became effective on Sept. 29, 2006. In evaluating the recommendation to hire Systematic and WEDGE as subadvisers to the Fund, the Board considered, among other factors: o The favorable history, reputation, qualification and background of each subadviser, as well as the qualifications of each subadviser's personnel and its financial condition. o The expertise that each subadviser offers in providing portfolio management services to other similar portfolios and the performance history of those portfolios. o Each subadviser's proposed investment strategy for the Fund. o Each subadviser's long- and short-term performance relative to comparable mutual funds and unmanaged indexes. o The compliance program of the subadviser. o Fund expenses, including the fees charged by the subadvisers to provide subadvisory services. The terms of the subadvisory agreements are consistent with the language of the registration statement of the Fund and the IMS Agreement between the Fund and RiverSource Investments. Based on the foregoing analysis, the Board determined that the proposed contracts were fair and reasonable in light of the nature, extent and quality of services provided. The Board concluded by approving each of the subadvisory agreements. - ------------------------------------------------------------------------------ 80 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD AND SHAREHOLDERS RIVERSOURCE VARIABLE PORTFOLIO -- INCOME SERIES, INC. RIVERSOURCE VARIABLE PORTFOLIO -- INVESTMENT SERIES, INC. RIVERSOURCE VARIABLE PORTFOLIO -- MANAGED SERIES, INC. RIVERSOURCE VARIABLE PORTFOLIO -- MANAGERS SERIES, INC. RIVERSOURCE VARIABLE PORTFOLIO -- MONEY MARKET 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 RiverSource 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 - S&P 500 Index Fund and RiverSource VP - Small Cap Advantage Fund (funds within RiverSource Variable Portfolio - Investment Series, Inc.), RiverSource VP - Balanced Fund and RiverSource VP - Diversified Equity Income Fund (funds within RiverSource Variable Portfolio - Managed Series, Inc.), RiverSource VP - Fundamental Value Fund, RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund (funds within RiverSource Variable Portfolio - Managers Series, Inc.) and RiverSource VP - Cash Management Fund (fund within RiverSource Variable Portfolio - Money Market Series, Inc.), as of December 31, 2006, and the related statements of operations, statements of changes in net assets and the financial highlights for the periods presented. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of RiverSource 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 - S&P 500 Index Fund, RiverSource VP - Small Cap Advantage Fund, RiverSource VP - Balanced Fund, RiverSource VP - Diversified Equity Income Fund, RiverSource VP - - Fundamental Value Fund, RiverSource VP - Select Value Fund, RiverSource VP - Small Cap Value Fund and RiverSource VP - Cash Management Fund, as of December 31, 2006, 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 February 20, 2007 - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 81 FINANCIAL STATEMENTS STATEMENTS OF ASSETS AND LIABILITIES RiverSource Variable Portfolio Funds
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - CASH CORE BALANCED MANAGEMENT BOND DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $1,759,175,039, $1,056,561,446 and $70,753,073) $ 2,035,539,393 $ 1,056,561,446 $ 70,430,219 Affiliated money market fund (identified cost $115,755,906 for RiverSource VP - Balanced Fund and $4,060,302 for RiverSource VP - Core Bond Fund) (Note 10) 115,755,906 -- 4,060,302 - ----------------------------------------------------------------------------------------------------------------------------------- Total investments in securities 2,151,295,299 1,056,561,446 74,490,521 (identified cost $1,874,930,945, $1,056,561,446 and $74,813,375) Cash in bank on demand deposit -- 31,513 995 Foreign currency holdings for RiverSource VP - Core Bond Fund (identified cost $43,814) (Note 1) -- -- 45,610 Receivable for investment securities sold 22,555,925 -- 513,114 Dividends and accrued interest receivable 7,040,244 3,073,857 474,192 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 2,180,891,468 1,059,666,816 75,524,432 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash on demand deposit 6,361 -- -- Dividends payable to shareholders (Note 1) -- 3,772,176 210,707 Payable for investment securities purchased 6,864,121 -- 509,779 Payable for securities purchased on a forward-commitment basis (Note 1) 52,874,980 -- 8,676,070 Unrealized depreciation on swap transactions, at value (Note 9) 132,008 -- 11,546 Accrued investment management services fee 846,715 275,142 25,084 Accrued distribution fee 204,995 104,488 6,532 Accrued transfer agency fee 98,394 50,153 3,135 Accrued administrative services fee 87,956 47,753 3,658 Payable upon return of securities loaned (Note 6) 45,579,375 -- -- Other accrued expenses 452,258 150,046 34,977 Forward sale commitments, at value (proceeds receivable $2,968,125 for RiverSource VP - Balanced Fund) (Note 1) 2,948,436 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 110,095,599 4,399,758 9,481,488 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 2,070,795,869 $ 1,055,267,058 $ 66,042,944 =================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value ($.001 for RiverSource VP - Balanced Fund) (Note 1) $ 132,634 $ 10,556,434 $ 67,297 Additional paid-in capital 1,792,114,543 1,044,711,592 66,958,425 Undistributed net investment income 3,552,008 -- 8,636 Accumulated net realized gain (loss) (Note 13) (1,012,593) (968) (627,406) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 7 and 9) 276,009,277 -- (364,008) - ----------------------------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 2,070,795,869 $ 1,055,267,058 $ 66,042,944 =================================================================================================================================== Shares outstanding 132,634,421 1,055,643,426 6,729,729 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 15.61 $ 1.00 $ 9.81 - ----------------------------------------------------------------------------------------------------------------------------------- *Including securities on loan, at value (Note 6) $ 44,224,685 $ -- $ -- - -----------------------------------------------------------------------------------------------------------------------------------
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 - DIVERSIFIED DIVERSIFIED EMERGING BOND EQUITY INCOME MARKETS DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers * (identified cost $2,786,448,153, $2,868,949,753 and $430,437,153) $ 2,779,432,185 $ 3,414,010,230 $ 519,215,985 Affiliated money market fund (identified cost $367,744,020, $68,382,998 and $26,987,118) (Note 10) 367,744,020 68,382,998 26,987,118 - ------------------------------------------------------------------------------------------------------------------------------------ Total investments in securities (identified cost $3,154,192,173, $2,937,332,751 and $457,424,271) 3,147,176,205 3,482,393,228 546,203,103 Cash in bank on demand deposit 64,660 -- 1,028 Foreign currency holdings (identified cost $1,466,270 for RiverSource VP - Diversified Bond Fund and $1,818,208 for RiverSource VP - Emerging Markets Fund) (Note 1) 1,526,881 -- 1,813,551 Receivable for investment securities sold 82,915,251 7,572,605 490,134 Dividends and accrued interest receivable 18,984,084 4,804,211 80,995 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 3,250,667,081 3,494,770,044 548,588,811 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash on demand deposit -- 11 -- Dividends payable to shareholders (Note 1) 9,913,038 -- -- Payable for investment securities purchased 64,357,787 26,424,099 295,309 Payable for securities purchased on a forward-commitment basis (Note 1) 325,676,209 -- -- Unrealized depreciation on swap transactions, at value (Note 9) 467,838 -- -- Accrued investment management services fee 982,560 1,531,470 452,469 Accrued distribution fee 268,309 336,264 51,955 Accrued transfer agency fee 128,784 161,401 24,938 Accrued administrative services fee 134,743 137,399 33,153 Payable upon return of securities loaned (Note 6) 103,523,750 19,669,800 -- Other accrued expenses 395,099 422,567 93,377 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 505,848,117 48,683,011 951,201 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 2,744,818,964 $ 3,446,087,033 $ 547,637,610 ==================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 2,621,164 $ 2,226,594 $ 315,628 Additional paid-in capital 2,892,586,085 2,860,759,558 427,057,364 Undistributed (excess of distributions over) net investment income 349,619 3,542,176 (137,137) Accumulated net realized gain (loss) (Note 13) (141,742,617) 34,497,933 31,627,508 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 7 and 9) (8,995,287) 545,060,772 88,774,247 - ------------------------------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 2,744,818,964 $ 3,446,087,033 $ 547,637,610 ==================================================================================================================================== Shares outstanding 262,116,403 222,659,395 31,562,840 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 10.47 $ 15.48 $ 17.35 - ------------------------------------------------------------------------------------------------------------------------------------ *Including securities on loan, at value (Note 6) $ 100,528,280 $ 18,672,913 $ -- - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 83 STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - FUNDAMENTAL GLOBAL GLOBAL INFLATION VALUE BOND PROTECTED SECURITIES DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers (identified cost $351,747,534, $732,711,123 and $531,101,473) $ 382,221,871 $ 750,888,320 $ 539,239,802 Affiliated money market fund (identified cost $20,893,483, $40,757,916 and $35,514,748) (Note 10) 20,893,483 40,757,916 35,514,748 - ------------------------------------------------------------------------------------------------------------------------------------ Total investments in securities (identified cost $372,641,017, $773,469,039 and $566,616,221) 403,115,354 791,646,236 574,754,550 Foreign currency holdings (identified cost $34,151 for RiverSource VP - Fundamental Value Fund and $682,607 for RiverSource VP - Global Bond Fund) (Note 1) 33,974 681,438 -- Receivable for investment securities sold -- 39,699 -- Dividends and accrued interest receivable 495,128 10,568,451 4,866,684 Unrealized appreciation on foreign currency contracts held, at value (Note 5) -- 397,260 2,459,607 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 403,644,456 803,333,084 582,080,841 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash on demand deposit -- 97,434 -- Dividends payable to shareholders (Note 1) -- 1,306,030 -- Payable for investment securities purchased 6,444,958 12,181,484 -- Payable for securities purchased on a forward-commitment basis (Note 1) -- 6,883,342 -- Unrealized depreciation on foreign currency contracts held, at value (Note 5) -- 200,164 5,926 Unrealized depreciation on swap transactions, at value (Note 9) -- 135,240 -- Accrued investment management services fee 219,703 428,033 196,668 Accrued distribution fee 37,621 77,179 55,872 Accrued transfer agency fee 18,057 37,045 26,818 Accrued administrative services fee 18,057 48,293 31,039 Other accrued expenses 35,874 116,450 73,046 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 6,774,270 21,510,694 389,369 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 396,870,186 $ 781,822,390 $ 581,691,472 ==================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 363,553 $ 717,073 $ 596,133 Additional paid-in capital 366,032,473 763,772,968 591,910,070 Excess of distributions over net investment income -- (417,435) (18,528,196) Accumulated net realized gain (loss) (Note 13) -- (562,557) (2,918,913) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 5, 7 and 9) 30,474,160 18,312,341 10,632,378 - ------------------------------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 396,870,186 $ 781,822,390 $ 581,691,472 ==================================================================================================================================== Shares outstanding 36,355,344 71,707,326 59,613,312 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 10.92 $ 10.90 $ 9.76 - ------------------------------------------------------------------------------------------------------------------------------------
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 - HIGH YEILD INCOME GROWTH BOND OPPORTUNITIES DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $555,936,728, $1,151,167,612 and $378,759,197) $ 612,000,845 $ 1,170,178,469 $ 384,540,058 Affiliated money market fund (identified cost $24,044,598, $42,251,953 and $26,802,813) (Note 10) 24,044,598 42,251,953 26,802,813 - ------------------------------------------------------------------------------------------------------------------------------------ Total investments in securities (identified cost $579,981,326, $1,193,419,565 and $405,562,010) 636,045,443 1,212,430,422 411,342,871 Cash in bank on demand deposit 1,537 -- -- Foreign currency holdings for RiverSource VP - Growth Fund (identified cost $2,395) (Note 1) 2,461 -- -- Receivable for investment securities sold 10,116,780 24,207 -- Dividends and accrued interest receivable 1,167,348 20,673,377 6,122,614 Other receivable -- 91,484 -- - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 647,333,569 1,233,219,490 417,465,485 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash on demand deposit -- -- 41,789 Dividends payable to shareholders (Note 1) -- 7,760,703 2,213,275 Payable for investment securities purchased 6,247,324 776,675 1,532,242 Payable for securities purchased on a forward-commitment basis (Note 1) -- 6,304,144 3,905,775 Accrued investment management services fee 303,230 565,023 190,215 Accrued distribution fee 63,174 120,612 38,979 Accrued transfer agency fee 30,322 57,892 18,709 Accrued administrative services fee 29,782 63,851 21,828 Payable upon return of securities loaned (Note 6) -- 1,616,000 -- Other accrued expenses 141,423 279,722 42,327 Options contracts written at value (premium received, $710,816 for VP - Growth Fund) (Note 8) 788,025 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 7,603,280 17,544,622 8,005,139 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 639,730,289 $ 1,215,674,868 $ 409,460,346 ==================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 853,104 $ 1,773,604 $ 396,869 Additional paid-in capital 675,628,377 1,409,849,550 402,145,288 Undistributed net investment income 792,279 1,658,951 -- Accumulated net realized gain (loss) (Note 13) (93,531,928) (216,709,578) 1,137,328 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 55,988,457 19,102,341 5,780,861 - ------------------------------------------------------------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 639,730,289 $ 1,215,674,868 $ 409,460,346 ==================================================================================================================================== Shares outstanding 85,310,379 177,360,389 39,686,904 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 7.50 $ 6.85 $ 10.32 - ------------------------------------------------------------------------------------------------------------------------------------ *Including securities on loan, at value (Note 6) $ -- $ 1,540,000 $ -- - ------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 85 STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - INTERNATIONAL LARGE CAP LARGE CAP OPPORTUNITY EQUITY VALUE DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $1,008,434,926, $3,094,457,138 and $20,540,210) $ 1,298,698,768 $ 3,546,728,183 $ 23,656,647 Affiliated money market fund (identified cost $24,975,398, $189,743,159, and $1,714,470) (Note 10) 24,975,398 189,743,159 1,714,470 - ----------------------------------------------------------------------------------------------------------------------------------- Total investments in securities (identified cost $1,033,410,324, $3,284,200,297, and $22,254,680) 1,323,674,166 3,736,471,342 25,371,117 Cash in bank on demand deposit 15,517 39,590 327 Foreign currency holdings for RiverSource VP - International Opportunity Fund and RiverSource VP - Large Cap Equity Fund (identified cost $2,468, 356 and $855,880 respectively) (Note 1) 2,456,101 862,183 -- Receivable for investment securities sold 51,043 24,253,495 10,851 Dividends and accrued interest receivable 924,998 5,690,937 30,316 Reclaims receivable 792,609 -- -- Unrealized appreciation on foreign currency contracts held, at value (Note 5) 3,567 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 1,327,918,001 3,767,317,547 25,412,611 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investment securities purchased 7,175,008 14,844,335 9,289 Unrealized depreciation on swap transactions, at value (Note 9) -- 9,302 -- Accrued investment management services fee 772,066 1,679,744 11,882 Accrued distribution fee 129,003 371,568 2,476 Accrued administrative services fee 78,200 148,696 1,188 Accrued transfer agency fee 61,919 178,346 1,188 Payable upon return of securities loaned (Note 6) 8,673,000 10,739,000 -- Other accrued expenses 299,766 459,348 25,489 Options contracts written, at value (premiums received, $1,360,071 for RiverSource VP - Large Cap Equity Fund) (Note 8) -- 1,507,780 -- - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 17,188,962 29,938,119 51,512 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 1,310,729,039 $ 3,737,379,428 $ 25,361,099 =================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 993,949 $ 1,492,524 $ 20,743 Additional paid-in capital 1,457,770,548 3,492,452,739 22,255,835 Undistributed (excess of distributions over) net investment income (3,212,601) 4,048,156 3,711 Accumulated net realized gain (loss) (Note 13) (435,185,853) (212,985,345) (35,627) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 5, 7 and 9) 290,362,996 452,371,354 3,116,437 - ----------------------------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 1,310,729,039 $ 3,737,379,428 $ 25,361,099 =================================================================================================================================== Shares outstanding 99,394,884 149,252,411 2,074,264 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 13.19 $ 25.04 $ 12.23 - ----------------------------------------------------------------------------------------------------------------------------------- *Including securities on loan, at value (Note 6) $ 7,968,310 $ 9,916,664 $ -- - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 86 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - MID CAP MID CAP S&P 500 GROWTH VALUE INDEX DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $638,880,414, $338,395,311 and $298,758,392) $ 652,189,853 $ 363,742,799 $ 385,299,617 Affiliated money market fund (identified cost $41,780,759, $10,451,921 and $6,076,431) (Note 10) 41,780,759 10,451,921 6,076,431 - ----------------------------------------------------------------------------------------------------------------------------------- Total investments in securities (identified cost $680,661,173, $348,847,232 and $304,834,823) 693,970,612 374,194,720 391,376,048 Cash in bank on demand deposit -- -- 328 Expense reimbursement receivable from the Investment Manager -- -- 138,671 Receivable for investment securities sold 924,554 -- 60,924 Dividends and accrued interest receivable 241,378 633,374 529,398 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 695,136,544 374,828,094 392,105,369 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payable for investment securities purchased -- 4,003,358 22,443 Accrued investment management services fee 392,121 199,001 68,264 Accrued distribution fee 70,022 35,536 38,787 Accrued transfer agency fee 33,610 17,057 18,617 Accrued administrative services fee 32,795 17,057 18,617 Payable upon return of securities loaned (Note 6) 4,678,800 -- -- Other accrued expenses 139,073 83,310 88,388 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 5,346,421 4,355,319 255,116 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 689,790,123 $ 370,472,775 $ 391,850,253 =================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 604,078 $ 274,720 $ 408,471 Additional paid-in capital 1,789,498,947 346,119,792 304,758,788 Undistributed (excess of distributions over) net investment income 31,821 (89,293) 548,565 Accumulated net realized gain (loss) (Note 13) (1,113,654,162) (1,179,932) (409,503) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 7) 13,309,439 25,347,488 86,543,932 - ----------------------------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 689,790,123 $ 370,472,775 $ 391,850,253 =================================================================================================================================== Shares outstanding 60,407,816 27,471,975 40,847,131 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 11.42 $ 13.49 $ 9.59 - ----------------------------------------------------------------------------------------------------------------------------------- *Including securities on loan, at value (Note 6) $ 4,553,934 $ -- $ -- - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 87 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 DEC. 31, 2006 FUND FUND FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $26,380,520, $489,298,912 and $198,284,179) $ 27,764,781 $ 487,143,485 $ 216,496,004 Affiliated money market fund (identified cost $668,002, $668,494 and $3,218,242) (Note 10) 668,002 668,494 3,218,242 - ----------------------------------------------------------------------------------------------------------------------------------- Total investments in securities (identified cost $27,048,522, $489,967,406, and $201,502,421) 28,432,783 487,811,979 $ 219,714,246 Cash in bank on demand deposit -- -- 2,142 Foreign currency holdings for RiverSource VP - Select Value Fund (identified cost $1,512) (Note 1) 1,521 -- -- Receivable for investment securities sold 312,264 3,111,552 6,687,636 Dividends and accrued interest receivable 25,662 3,145,228 205,488 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets 28,772,230 494,068,759 226,609,512 - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash on demand deposit 170 -- -- Dividends payable to shareholders (Note 1) -- 1,402,735 -- Payable for investment securities purchased 249,012 3,066,100 5,887,435 Payable for securities purchased on a forward-commitment basis (Note 1) -- 32,215,025 -- Accrued investment management services fee 17,656 174,943 138,803 Accrued distribution fee 2,829 45,559 21,963 Accrued transfer agency fee 1,358 21,867 10,542 Accrued administrative services fee 1,358 25,512 14,056 Payable upon return of securities loaned (Note 6) -- -- 664,000 Other accrued expenses 20,723 103,387 74,041 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 293,106 37,055,128 6,810,840 - ----------------------------------------------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 28,479,124 $ 457,013,631 $ 219,798,672 =================================================================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 25,039 $ 451,085 $ 168,742 Additional paid-in capital 26,794,997 470,620,437 192,534,085 Undistributed (excess of distributions over) net investment income 13,790 (83,879) 2,340 Accumulated net realized gain (loss) (Note 13) 261,030 (12,114,878) 8,881,680 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 7) 1,384,268 (1,859,134) 18,211,825 - ----------------------------------------------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 28,479,124 $ 457,013,631 $ 219,798,672 =================================================================================================================================== Shares outstanding 2,503,889 45,108,468 16,874,236 - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 11.37 $ 10.13 $ 13.03 - ----------------------------------------------------------------------------------------------------------------------------------- *Including securities on loan, at value (Note 6) $ -- $ -- $ 616,170 - -----------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 88 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - SMALL CAP VALUE DEC. 31, 2006 FUND ASSETS Investments in securities, at value (Note 1) Unaffiliated issuers* (identified cost $506,886,794) $ 573,241,632 Affiliated money market fund (identified cost $62,517,146) (Note 10) 62,517,146 - ------------------------------------------------------------------------------------------- Total investments in securities (identified cost $569,403,940) 635,758,778 Cash in bank on demand deposit 2,507 Receivable for investment securities sold 8,206,014 Dividends and accrued interest receivable 418,368 - ------------------------------------------------------------------------------------------- Total assets 644,385,667 - ------------------------------------------------------------------------------------------- LIABILITIES Payable for investment securities purchased 8,562,968 Accrued investment management services fee 460,614 Accrued distribution fee 60,560 Accrued transfer agency fee 29,068 Accrued administrative services fee 38,322 Payable upon return of securities loaned (Note 6) 16,505,900 Other accrued expenses 99,540 - ------------------------------------------------------------------------------------------- Total liabilities 25,756,972 - ------------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 618,628,695 =========================================================================================== REPRESENTED BY Capital stock -- $.01 par value (Note 1) $ 415,536 Additional paid-in capital 534,575,868 Undistributed net investment income 337,561 Accumulated net realized gain (loss) (Note 13) 16,944,892 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 66,354,838 - ------------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 618,628,695 =========================================================================================== Shares outstanding 41,553,625 - ------------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 14.89 - ------------------------------------------------------------------------------------------- *Including securities on loan, at value (Note 6) $ 15,612,752 - -------------------------------------------------------------------------------------------
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 89 STATEMENTS OF OPERATIONS RiverSource Variable Portfolio Funds
RIVERSOURCE VP - BALANCED FUND RIVERSOURCE VP - CASH MANAGEMENT FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 9,206,939 $ 36,616,054 $ -- $ -- Interest 11,850,745 39,923,037 17,825,567 35,217,690 Income distributions from affiliated money market fund (Note 10) 1,160,067 -- -- -- Fee income from securities lending (Note 6) 24,438 191,300 -- -- Less foreign taxes withheld (95,790) (84,794) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total income 22,146,399 76,645,597 17,825,567 35,217,690 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 3,770,059 11,773,679 1,115,733 3,099,857 Distribution fee 847,080 2,821,196 423,265 940,713 Transfer agency fee 406,585 652,017 203,160 246,070 Administrative services fees and expenses 363,485 1,246,324 193,956 447,159 Custodian fees 109,647 229,150 28,600 63,635 Compensation of board members 10,981 20,913 6,791 11,730 Printing and postage 157,800 577,375 44,000 194,040 Professional fees 21,224 27,000 16,200 21,500 Other 21,093 40,506 7,828 14,364 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 5,707,954 17,388,160 2,039,533 5,039,068 Earnings and bank fee credits on cash balances (Note 2) (1,594) (2,918) (1,156) (3,315) - ------------------------------------------------------------------------------------------------------------------------------------ Total net expenses 5,706,360 17,385,242 2,038,377 5,035,753 - ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 16,440,039 59,260,355 15,787,190 30,181,937 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 50,059,770 134,095,911 1,627 (798) Foreign currency transactions (2,771) (124,615) -- -- Futures contracts 617,131 1,604,234 -- -- Swap transactions 238,151 (944) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 50,912,281 135,574,586 1,627 (798) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 86,221,470 (29,065,213) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 137,133,751 106,509,373 1,627 (798) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 153,573,790 $ 165,769,728 $ 15,788,817 $ 30,181,139 ==================================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 90 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - CORE BOND FUND RIVERSOURCE VP - DIVERSIFIED BOND FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Interest $ 1,002,492 $ 2,907,966 $ 38,415,672 $ 96,130,706 Income distributions from affiliated money market fund (Note 10) 67,945 -- 5,653,065 -- Fee income from securities lending (Note 6) -- -- 103,452 530,882 - ------------------------------------------------------------------------------------------------------------------------------------ Total income 1,070,437 2,907,966 44,172,189 96,661,588 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 100,468 333,535 3,821,877 10,386,439 Distribution fee 26,164 75,382 1,039,343 2,445,873 Transfer agency fee 12,558 18,540 498,868 620,106 Administrative services fees and expenses 14,651 41,986 523,528 1,289,984 Custodian fees 17,598 60,092 55,200 207,670 Compensation of board members 3,829 8,597 11,059 17,496 Printing and postage 4,185 10,158 154,200 521,210 Professional fees 13,995 20,000 21,383 27,000 Other 342 8,993 35,663 38,858 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 193,790 577,283 6,161,121 15,554,636 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (19,971) (59,290) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 173,819 517,993 6,161,121 15,554,636 Earnings and bank fee credits on cash balances (Note 2) (573) (2,769) (1,620) (7,722) - ------------------------------------------------------------------------------------------------------------------------------------ Total net expenses 173,246 515,224 6,159,501 15,546,914 - ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 897,191 2,392,742 38,012,688 81,114,674 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 317,144 (1,059,999) 21,369,534 (32,643,150) Foreign currency transactions -- (4,827) -- (152,633) Futures contracts 54,109 116,511 2,169,354 5,423,762 Swap transactions 15,987 (524) 743,098 21,956 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 387,240 (948,839) 24,281,986 (27,350,065) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (139,404) (522,771) (4,617,556) (15,056,707) - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 247,836 (1,471,610) 19,664,430 (42,406,772) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 1,145,027 $ 921,132 $ 57,677,118 $ 38,707,902 ==================================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 91 STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND EMERGING MARKETS FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 22,943,644 $ 55,141,757 $ 1,676,670 $ 7,670,211 Interest 66,283 2,450,193 54,799 562,009 Income distributions from affiliated money market 898,637 -- 217,449 -- fund (Note 10) Fee income from securities lending (Note 6) 64,983 217,630 -- -- Less foreign taxes withheld (73,113) (410,141) (153,135) (660,717) - --------------------------------------------------------------------------------------------------------------------------------- Total income 23,900,434 57,399,439 1,795,783 7,571,503 - --------------------------------------------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 6,677,888 14,825,523 1,766,834 3,834,039 Distribution fee 1,300,920 2,845,725 194,711 425,597 Transfer agency fees 624,420 789,012 93,458 123,328 Administrative services fees and expenses 538,977 1,252,553 124,511 284,260 Custodian fees 114,000 352,750 131,148 303,261 Compensation of board members 13,092 17,513 4,923 9,264 Printing and postage 156,000 559,350 7,782 73,362 Professional fees 23,982 30,000 14,797 20,500 Other 40,163 23,679 14,081 178,175 - --------------------------------------------------------------------------------------------------------------------------------- Total expenses 9,489,442 20,696,105 2,352,245 5,251,786 Earnings and bank fee credits on cash balances (Note 2) (524) (1,987) (856) (2,136) - --------------------------------------------------------------------------------------------------------------------------------- Total net expenses 9,488,918 20,694,118 2,351,389 5,249,650 - --------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 14,411,516 36,705,321 (555,606) 2,321,853 - --------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 26,724,517 208,875,344 34,881,200 56,915,477 Foreign currency transactions (10,328) 35,615 (358,824) (858,475) - --------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 26,714,189 208,910,959 34,522,376 56,057,002 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 242,752,342 53,554,454 55,618,639 15,075,906 - --------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 269,466,531 262,465,413 90,141,015 71,132,908 - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 283,878,047 $ 299,170,734 $ 89,585,409 $ 73,454,761 ================================================================================================================================= (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
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 - FUNDAMENTAL VALUE FUND GLOBAL BOND FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006(b) DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 1,575,933 $ 433,738 $ -- $ -- Interest 59,897 234,568 9,743,817 23,851,829 Income distributions from affiliated money market fund (Note 10) 279,083 -- 430,350 -- Fee income from securities lending (Note 6) -- -- 11,727 9,274 Less foreign taxes withheld (12,806) (7,391) (3,690) (27,307) - ---------------------------------------------------------------------------------------------------------------------------------- Total income 1,902,107 660,915 10,182,204 23,833,796 - ---------------------------------------------------------------------------------------------------------------------------------- Expenses (Note 2): Investment management services fee 737,998 206,566 1,676,013 4,640,640 Distribution fee 128,343 35,371 301,306 762,389 Transfer agency fee 61,603 16,978 144,622 192,817 Administrative services fees and expenses 61,603 16,978 189,002 489,934 Custodian fees 26,348 27,090 67,000 158,750 Compensation of board members 2,609 -- 5,645 10,696 Printing and postage 15,908 3,242 8,000 177,050 Professional fees 14,159 20,000 17,293 24,000 Other 3,698 164 457 13,130 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 1,052,269 326,389 2,409,338 6,469,406 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) -- (23,585) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- 1,052,269 302,804 2,409,338 6,469,406 Earnings and bank fee credits on cash balances (Note 2) -- (548) (1,120) (1,806) - ---------------------------------------------------------------------------------------------------------------------------------- Total net expenses 1,052,269 302,256 2,408,218 6,467,600 - ---------------------------------------------------------------------------------------------------------------------------------- Investment income (loss) -- net 849,838 358,659 7,773,986 17,366,196 - ---------------------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 378,167 115,654 2,380,893 (1,642,404) Foreign currency transactions (6,706) (61,127) (976,401) (487,909) Futures contracts -- -- 165,230 972,433 Swap transactions -- -- 171,015 (10,629) - ---------------------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments 371,461 54,527 1,740,737 (1,168,509) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 26,525,481 3,938,541 6,466,660 (5,952,008) - ---------------------------------------------------------------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 26,896,942 3,993,068 8,207,397 (7,120,517) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 27,746,780 $ 4,351,727 $ 15,981,383 $ 10,245,679 ================================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006. (b) For the period from May 1, 2006 (date the Fund became available) to Aug. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 93 STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND RIVERSOURCE VP - GROWTH FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ -- $ -- $ 2,837,034 $ 10,276,586 Interest 2,486,887 12,599,540 119,184 1,466,282 Income distributions from affiliated money market fund (Note 10) 425,320 -- 385,954 -- Fee income from securities lending (Note 6) -- -- -- 48,444 Less foreign taxes withheld -- (2,674) (60,682) (194,117) - ------------------------------------------------------------------------------------------------------------------------------ Total income 2,912,207 12,596,866 3,281,490 11,597,195 - ------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 707,400 1,164,368 1,449,964 3,751,065 Distribution fee 200,968 318,273 256,433 746,056 Transfer agency fee 96,462 99,902 123,084 207,746 Administrative services fees and expenses 112,213 176,325 121,045 366,683 Custodian fees 14,400 45,645 48,000 151,100 Compensation of board members 3,808 8,597 5,611 10,380 Printing and postage 15,500 92,286 42,000 152,200 Professional fees 13,976 20,000 15,415 21,000 Other 47 23,353 5,870 12,356 - ------------------------------------------------------------------------------------------------------------------------------ Total expenses 1,164,774 1,948,749 2,067,422 5,418,586 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (7,228) (114,683) -- -- - ------------------------------------------------------------------------------------------------------------------------------ 1,157,546 1,834,066 2,067,422 5,418,586 Earnings and bank fee credits on cash balances (Note 2) (780) (2,594) (600) (1,518) - ------------------------------------------------------------------------------------------------------------------------------ Total net expenses 1,156,766 1,831,472 2,066,822 5,417,068 - ------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 1,755,441 10,765,394 1,214,668 6,180,127 - ------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) -- (2,708,631) (5,753,825) 33,312,570 Foreign currency transactions (6,575,653) (5,949,866) 10,914 24,873 Futures contracts -- -- -- (1,049,226) Options contracts written (Note 8) -- -- (1,014,976) 1,282,736 - ------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments (6,575,653) (8,658,497) (6,757,887) 33,570,953 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,783,356 7,996,039 55,051,567 (20,509,288) - ------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies (4,792,297) (662,458) 48,293,680 13,061,665 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (3,036,856) $ 10,102,936 $ 49,508,348 $ 19,241,792 ============================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 94 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - HIGH YIELD RIVERSOURCE VP - INCOME BOND FUND OPPORTUNITIES FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG .31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Interest $ 31,610,736 $ 97,299,978 $ 7,903,691 $ 7,750,350 Income distributions from affiliated money market fund (Note 10) 909,607 -- 417,364 -- Fee income from securities ending (Note 6) 2,827 -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total income 32,523,170 97,299,978 8,321,055 7,750,350 - ------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 2,316,669 7,413,897 665,749 653,044 Distribution fee 494,359 1,541,872 136,426 131,976 Transfer agency fee 237,284 373,691 65,482 45,332 Administrative services fees and expenses 261,944 840,455 76,397 76,233 Custodian fees 23,760 95,043 12,325 34,820 Compensation of board members 7,618 14,280 4,081 8,597 Printing and postage 101,350 354,210 9,242 33,485 Professional fees 19,902 27,000 14,213 20,000 Other 13,064 18,363 1,805 9,308 - ------------------------------------------------------------------------------------------------------------------------------ Total expenses 3,475,950 10,678,811 985,720 1,012,795 Earnings and bank fee credits on cash balances (Note 2) (1,672) (4,108) (750) (3,680) - ------------------------------------------------------------------------------------------------------------------------------ Total net expenses 3,474,278 10,674,703 984,970 1,009,115 - ------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 29,048,892 86,625,275 7,336,085 6,741,235 - ------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions (Note 3) 4,636,729 1,041,488 1,457,589 (259,128) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,113,325 (19,241,545) 6,365,184 (1,116,480) - ------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 34,750,054 (18,200,057) 7,822,773 (1,375,608) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $63,798,946 $68,425,218 $ 15,158,858 $ 5,365,627 ============================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 95 STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - INTERNATIONAL RIVERSOURCE VP - LARGE CAP OPPORTUNITY FUND EQUITY FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 7,252,055 $ 28,910,841 $ 21,486,802 $ 64,447,141 Interest 68,026 477,054 548,131 3,523,830 Income distributions from affiliated money market fund (Note 10) 138,218 -- 2,645,626 -- Fee income from securities lending (Note 6) 103,960 854,518 33,932 411,482 Less foreign taxes withheld (736,272) (2,953,973) (219,488) (536,985) - ------------------------------------------------------------------------------------------------------------------------------ Total income 6,825,987 27,288,440 24,495,003 67,845,468 - ------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 3,169,722 10,469,388 7,050,915 18,214,495 Distribution fee 521,812 1,580,636 1,538,178 3,994,421 Transfer agency fee 250,461 391,479 738,300 1,168,235 Administrative services fees and expenses 316,870 976,719 615,503 1,726,620 Custodian fees 137,000 406,430 148,170 431,400 Compensation of board members 7,950 14,164 16,991 25,530 Printing and postage 66,000 305,050 68,500 644,700 Professional fees 19,664 26,500 29,181 36,000 Other 23,909 23,460 44,948 45,973 - ------------------------------------------------------------------------------------------------------------------------------ Total expenses 4,513,388 14,193,826 10,250,686 26,287,374 Earnings and bank fee credits on cash balances (Note 2) (880) (2,074) (1,510) (3,638) - ------------------------------------------------------------------------------------------------------------------------------ Total net expenses 4,512,508 14,191,752 10,249,176 26,283,736 - ------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 2,313,479 13,096,688 14,245,827 41,561,732 - ------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 63,329,169 197,090,703 68,815,824 221,874,381 Foreign currency transactions 30,726 258,532 17,043 (15,410) Futures contracts -- -- 4,124,788 (872,886) Swap transactions -- -- 244,830 (793,303) Options contracts written (Note 8) -- -- (2,159,477) 1,991,238 - ------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 63,359,895 197,349,235 71,043,008 222,184,020 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 41,009,369 57,942,017 257,357,774 (90,675,460) - ------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 104,369,264 255,291,252 328,400,782 131,508,560 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 106,682,743 $ 268,387,940 $ 342,646,609 $ 173,070,292 ============================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 96 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - LARGE CAP RIVERSOURCE VP - MID CAP VALUE FUND GROWTH FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 154,582 $ 428,966 $ 3,040,998 $ 3,608,016 Interest 3,780 13,246 198,553 298,963 Income distributions from affiliated money market fund (Note 10) 21,872 -- 420,840 -- Fee income from securities lending (Note 6) -- -- 21,831 59,715 Less foreign taxes withheld (1,383) (911) -- -- - ------------------------------------------------------------------------------------------------------------------------------ Total income 178,851 441,301 3,682,222 3,966,694 - ------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 45,636 102,616 1,403,857 3,286,046 Distribution fee 9,508 22,190 290,864 636,199 Transfer agency fee 4,563 5,785 139,610 228,311 Administrative services fees and expenses 4,563 10,525 136,195 315,127 Custodian fees 14,980 45,710 20,533 25,155 Compensation of board members -- -- 6,092 10,464 Printing and postage 120 6,902 38,600 132,220 Professional fees 13,600 19,500 17,406 24,000 Other 616 462 1,557 7,132 - ------------------------------------------------------------------------------------------------------------------------------ Total expenses 93,586 213,690 2,054,714 4,664,654 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (13,724) (33,151) -- -- - ------------------------------------------------------------------------------------------------------------------------------ 79,862 180,539 2,054,714 4,664,654 Earnings and bank fee credits on cash balances (Note 2) (2,308) (14,675) (878) (2,103) - ------------------------------------------------------------------------------------------------------------------------------ Total net expenses 77,554 165,864 2,053,836 4,662,551 - ------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 101,297 275,437 1,628,386 (695,857) - ------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 313,050 907,987 19,889,194 57,781,721 Foreign currency transactions (74) (13) -- -- - ------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 312,976 907,974 19,889,194 7,781,721 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,816,288 652,685 36,768,984 (134,694,999) - ------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 2,129,264 1,560,659 56,658,178 (76,913,278) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 2,230,561 $ 1,836,096 $ 58,286,564 $ (77,609,135) ============================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 97 STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - MID CAP VALUE FUND RIVERSOURCE VP - S&P 500 INDEX FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 2,118,170 $ 892,633 $ 2,335,998 $ 7,106,205 Interest 18,258 193,240 15,609 184,893 Income distributions from affiliated money market fund (Note 10) 135,804 -- 71,076 -- Less foreign taxes withheld (4,533) (2,487) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total income 2,267,699 1,083,386 2,422,683 7,291,098 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 706,423 376,310 275,378 952,722 Distribution fee 123,158 64,217 156,467 467,272 Transfer agency fee 59,114 26,287 75,102 112,578 Administrative services fees and expenses 59,114 30,695 75,101 241,657 Custodian fees 66,275 192,302 17,400 49,910 Compensation of board members 4,028 3,846 4,598 9,580 Printing and postage 9,644 13,332 7,765 86,625 Licensing fees -- -- 9,600 37,620 Professional fees 14,460 20,500 14,748 20,500 Other 10,202 11,321 3,946 10,600 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 1,052,418 738,810 640,105 1,989,064 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) -- (169,570) (20,495) (138,671) - ------------------------------------------------------------------------------------------------------------------------------------ 1,052,418 569,240 619,610 1,850,393 Earnings and bank fee credits on cash balances (Note 2) -- (10,858) (1,282) (1,725) - ------------------------------------------------------------------------------------------------------------------------------------ Total net expenses 1,052,418 558,382 618,328 1,848,668 - ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 1,215,281 525,004 1,804,355 5,442,430 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 216,882 1,871,650 2,430,585 503,641 Foreign currency transactions (190) 3 -- -- Futures contracts -- -- 388,567 98,928 Reimbursement from affiliate (Note 2) -- -- -- 216,040 - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 216,692 1,871,653 2,819,152 818,609 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,273,477 3,607,327 28,958,806 24,008,898 - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 21,490,169 5,478,980 31,777,958 24,827,507 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 22,705,450 $ 6,003,984 $ 33,582,313 $ 30,269,937 ==================================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 98 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - SHORT DURATION U.S. RIVERSOURCE VP - SELECT VALUE FUND GOVERNMENT FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 162,816 $ 755,963 $ -- $ -- Interest 4,265 110,040 7,115,828 21,167,809 Income distributions from affiliated money market fund (Note 10) 19,090 -- 66,423 -- Less foreign taxes withheld (327) (24,447) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total income 185,844 841,556 7,182,251 21,167,809 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 65,150 186,844 726,456 2,635,745 Distribution fee 11,278 32,221 189,183 605,679 Transfer agency fee 5,413 8,047 90,805 147,668 Administrative services fees and expenses 5,413 15,197 105,941 347,525 Custodian fees 3,043 20,130 21,000 75,700 Compensation of board members 3,768 7,430 5,040 10,163 Printing and postage 1,552 7,867 12,375 130,065 Professional fees 13,639 19,500 15,801 22,000 Other 647 8,648 2,874 10,116 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 109,903 305,884 1,169,475 3,984,661 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) (10,426) (27,598) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ 99,477 278,286 1,169,475 3,984,661 Earnings and bank fee credits on cash balances (Note 2) -- -- (600) (3,400) - ------------------------------------------------------------------------------------------------------------------------------------ Total net expenses 99,477 278,286 1,168,875 3,981,261 - ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 86,367 563,270 6,013,376 17,186,548 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 2,509,809 464,367 731,036 (4,443,647) Foreign currency transactions 28 146 -- -- Futures contracts -- -- (545,229) (175,211) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 2,509,837 464,513 185,807 (4,618,858) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (691,997) 588,316 925,784 (292,799) - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 1,817,840 1,052,829 1,111,591 (4,911,657) - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 1,904,207 $ 1,616,099 $ 7,124,967 $ 12,274,891 ==================================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 99 STATEMENTS OF OPERATIONS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - SMALL CAP RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND VALUE FUND PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 DEC. 31, 2006(a) AUG. 31, 2006 INVESTMENT INCOME Income: Dividends $ 892,516 $ 2,266,698 $ 2,282,918 $ 5,518,622 Interest 15,120 125,725 49,516 2,879,398 Income distributions from affiliated money market fund (Note 10) 27,411 -- 931,993 -- Fee income from securities lending (Note 6) 12,686 37,231 72,824 41,806 Less foreign taxes withheld (882) (1,616) (8,436) (19,685) - ------------------------------------------------------------------------------------------------------------------------------------ Total income 946,851 2,428,038 3,328,815 8,420,141 - ------------------------------------------------------------------------------------------------------------------------------------ Expenses (Note 2): Investment management services fee 518,341 1,726,941 1,916,016 4,896,261 Distribution fee 90,523 292,753 239,741 635,371 Transfer agency fee 43,450 70,635 115,072 167,723 Administrative services fees and expenses 57,935 190,322 152,063 419,119 Custodian fees 38,700 93,869 72,000 232,090 Compensation of board members 4,359 9,130 5,417 10,246 Printing and postage 13,311 53,150 9,890 117,620 Professional fees 14,231 20,000 14,996 20,500 Other 3,447 15,541 14,032 10,090 - ------------------------------------------------------------------------------------------------------------------------------------ Total expenses 784,297 2,472,341 2,539,227 6,509,020 Expenses waived/reimbursed by the Investment Manager and its affiliates (Note 2) -- -- (128,641) (188,431) - ------------------------------------------------------------------------------------------------------------------------------------ 784,297 2,472,341 2,410,586 6,320,589 Earnings and bank fee credits on cash balances (Note 2) -- (350) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total net expenses 784,297 2,471,991 2,410,586 6,320,589 - ------------------------------------------------------------------------------------------------------------------------------------ Investment income (loss) -- net 162,554 (43,953) 918,229 2,099,552 - ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (Note 3) 9,593,410 27,954,706 17,563,027 61,012,764 Foreign currency transactions -- -- 12,896 (1) Futures contracts 20,096 (21,863) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net realized gain (loss) on investments 9,613,506 27,932,843 17,575,923 61,012,763 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 7,437,971 (17,484,891) 37,232,926 (7,054,058) - ------------------------------------------------------------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 17,051,477 10,447,952 54,808,849 53,958,705 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 17,214,031 $ 10,403,999 $ 55,727,078 $ 56,058,257 ==================================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 100 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS RiverSource Variable Portfolio Funds
RIVERSOURCE VP - BALANCED FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net 16,440,039 $ 59,260,355 $ 60,950,168 Net realized gain (loss) on investments 50,912,281 135,574,586 161,959,485 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 86,221,470 (29,065,213) 20,254,609 - ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 153,573,790 165,769,728 243,164,262 - ------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (12,783,193) (58,821,263) (61,685,753) Net realized gain (114,232,567) (70,774,753) - - ------------------------------------------------------------------------------------------------------------------------- Total distributions (127,015,760) (129,596,016) (61,685,753) - ------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 11,786,573 24,249,895 33,994,949 Reinvestment of distributions at net asset value 140,084,455 131,268,246 61,564,207 Payments for redemptions (154,122,329) (582,529,038) (503,321,951) - ------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (2,251,301) (427,010,897) (407,762,795) - ------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 24,306,729 (390,837,185) (226,284,286) Net assets at beginning of period 2,046,489,140 2,437,326,325 2,663,610,611 - ------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $2,070,795,869 $ 2,046,489,140 $ 2,437,326,325 ========================================================================================================================= Undistributed (excess of distributions over) net investment income $ 3,552,008 $ (236,516) $ (303,746) - -------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - CASH MANAGEMENT FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 15,787,190 $ 30,181,937 $ 13,365,919 Net realized gain (loss) on investments 1,627 (798) 1,275 - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 15,788,817 30,181,139 13,367,194 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (15,787,190) (30,181,937) (13,366,319) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 167,038,584 546,130,014 278,245,964 Reinvestment of distributions at net asset value 15,952,725 28,008,968 12,094,809 Payments for redemptions (126,563,119) (262,906,070) (375,917,897) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 56,428,190 311,232,912 (85,577,124) - -------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 56,429,817 311,232,114 (85,576,249) Net assets at beginning of period 998,837,241 687,605,127 773,181,376 - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 1,055,267,058 $ 998,837,241 $ 687,605,127 ========================================================================================================================== (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 101 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - CORE BOND FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 897,191 $ 2,392,742 $ 1,429,788 Net realized gain (loss) on investments 387,240 (948,839) 298,041 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (139,404) (522,771) (8,029) - ------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,145,027 921,132 1,719,800 - ------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (904,887) (2,410,884) (1,450,986) Net realized gain - (122,686) - - ------------------------------------------------------------------------------------------------------------------------- Total distributions (904,887) (2,533,570) (1,450,986) - ------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 9,253,741 27,670,096 26,946,369 Reinvestment of distributions at net asset value 919,732 2,463,965 1,374,055 Payments for redemptions (7,068,430) (23,763,653) (6,193,096) - ------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 3,105,043 6,370,408 22,127,328 - ------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 3,345,183 4,757,970 22,396,142 Net assets at beginning of period 62,697,761 57,939,791 35,543,649 - ------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 66,042,944 $ 62,697,761 $ 57,939,791 ========================================================================================================================= Undistributed net investment income $ 8,636 $ 345 $ 11,000 - ------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - DIVERSIFIED BOND FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 38,012,688 $ 81,114,674 $ 63,237,383 Net realized gain (loss) on investments 24,281,986 (27,350,065) 14,152,346 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,617,556) (15,056,707) (4,469,293) - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 57,677,118 38,707,902 72,920,436 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (38,353,400) (81,269,698) (66,121,267) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 431,618,712 683,564,631 266,496,135 Reinvestment of distributions at net asset value 37,071,891 78,244,071 65,971,457 Payments for redemptions (68,416,103) (218,296,083) (211,228,785) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 400,274,500 543,512,619 121,238,807 - -------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 419,598,218 500,950,823 128,037,976 Net assets at beginning of period 2,325,220,746 1,824,269,923 1,696,231,947 - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $2,744,818,964 $ 2,325,220,746 $ 1,824,269,923 ========================================================================================================================== Undistributed (excess of distributions over) net investment income $ 349,619 $ (52,767) $ (137,182) - -------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 102 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 14,411,516 $ 36,705,321 $ 20,778,925 Net realized gain (loss) on investments 26,714,189 208,910,959 74,275,731 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 242,752,342 53,554,454 176,095,823 - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 283,878,047 299,170,734 271,150,479 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (10,731,641) (36,257,011) (19,986,713) Net realized gain (196,331,636) (72,944,061) -- - -------------------------------------------------------------------------------------------------------------------------- Total distributions (207,063,277) (109,201,072) (19,986,713) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 321,817,764 979,162,771 586,505,709 Reinvestment of distributions at net asset value 217,051,599 105,737,678 17,749,939 Payments for redemptions (46,282,984) (77,265,424) (19,307,264) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 492,586,379 1,007,635,025 584,948,384 - -------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 569,401,149 1,197,604,687 836,112,150 Net assets at beginning of period 2,876,685,884 1,679,081,197 842,969,047 - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 3,446,087,033 $ 2,876,685,884 $ 1,679,081,197 ========================================================================================================================== Undistributed (excess of distributions over) net investment income $ 3,542,176 $ (153,938) $ (460,246) - -------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - EMERGING MARKETS FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (555,606) $ 2,321,853 $ 588,832 Net realized gain (loss) on investments 34,522,376 56,057,002 13,536,065 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 55,618,639 15,075,906 16,517,176 - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 89,585,409 73,454,761 30,642,073 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income -- (1,549,963) (502,237) Net realized gain (59,114,993) (12,706,732) (2,148,317) - -------------------------------------------------------------------------------------------------------------------------- Total distributions (59,114,993) (14,256,695) (2,650,554) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 48,109,995 219,084,079 121,975,171 Reinvestment of distributions at net asset value 59,836,290 13,767,635 2,508,714 Payments for redemptions (17,855,029) (56,934,726) (6,438,923) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 90,091,256 175,916,988 118,044,962 - -------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 120,561,672 235,115,054 146,036,481 Net assets at beginning of period 427,075,938 191,960,884 45,924,403 - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 547,637,610 $ 427,075,938 $ 191,960,884 ========================================================================================================================== Undistributed (excess of distributions over) net investment income $ (137,137) $ (104) $ 86,481 - -------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 103 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - FUNDAMENTAL VALUE FUND PERIOD ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006(b) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 849,838 $ 358,659 Net realized gain (loss) on investments 371,461 54,527 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 26,525,481 3,938,541 - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 27,746,780 4,351,727 - ---------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (851,138) (298,866) Net realized gain (493,817) -- Tax return of capital (169,045) -- - ---------------------------------------------------------------------------------------------------------- Total distributions (1,514,000) (298,866) - ---------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 138,433,669 228,064,714 Reinvestment of distributions at net asset value 1,793,853 19,013 Payments for redemptions (1,297,466) (2,440,614) - ---------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 138,930,056 225,643,113 - ---------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 165,162,836 229,695,974 Net assets at beginning of period (Note 1) 231,707,350 2,011,376(c) - ---------------------------------------------------------------------------------------------------------- Net assets at end of period $ 396,870,186 $ 231,707,350 ========================================================================================================== Undistributed net investment income $ -- $ 8,006 - ---------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006. (b) For the period from May 1, 2006 (date the Fund became available) to Aug. 31, 2006. (c) Initial Capital of $1,999,909 was contributed on April 25, 2006. The Fund had an increase in net assets resulting from operations of $11,467 during the period from April 25, 2006 to May 1, 2006 (date the Fund became available).
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - GLOBAL BOND FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006 (a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 7,773,986 $ 17,366,196 $ 12,976,102 Net realized gain (loss) on investments 1,740,737 (1,168,509) 14,431,701 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 6,466,660 (5,952,008) 955,738 - -------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 15,981,383 10,245,679 28,363,541 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (7,832,430) (18,091,431) (23,132,048) Net realized gain -- (2,563,332) -- - -------------------------------------------------------------------------------------------------------------------------- Total distributions (7,832,430) (20,654,763) (23,132,048) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 95,843,642 173,048,742 160,817,306 Reinvestment of distributions at net asset value 7,860,471 20,444,404 23,811,853 Payments for redemptions (22,468,463) (65,938,591) (23,514,676) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 81,235,650 127,554,555 161,114,483 - -------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 89,384,603 117,145,471 166,345,976 Net assets at beginning of period 692,437,787 575,292,316 408,946,340 - -------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 781,822,390 $ 692,437,787 $ 575,292,316 ========================================================================================================================== Excess of distributions over net investment income $ (417,435) $ (461,035) $ (544,665) - -------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 104 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005(b) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,755,441 $ 10,765,394 $ 1,170,024 Net realized gain (loss) on investments (6,575,653) (8,658,497) 9,718 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,783,356 7,996,039 853,992 - ----------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (3,036,856) 10,102,936 2,033,734 - ----------------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (12,794,329) (5,620,360) (1,175,862) Net realized gain (20,316) (300,000) (3,185) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (12,814,645) (5,920,360) (1,179,047) - ----------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 186,134,405 344,618,188 115,848,581 Reinvestment of distributions at net asset value 12,814,645 6,150,441 948,966 Payments for redemptions (4,556,010) (68,198,235) (6,253,997) - ----------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 194,393,040 282,570,394 110,543,550 - ----------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 178,541,539 286,752,970 111,398,237 Net assets at beginning of period (Note 1) 403,149,933 116,396,963 4,998,726(c) - ----------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 581,691,472 $ 403,149,933 $ 116,396,963 =================================================================================================================================== Undistributed (excess of distributions over) net investment income $ (18,528,196) $ (913,655) $ 782 - ----------------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) 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).
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - GROWTH FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,214,668 $ 6,180,127 $ 1,227,109 Net realized gain (loss) on investments (6,757,887) 33,570,953 25,738,738 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 55,051,567 (20,509,288) 17,284,007 - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 49,508,348 19,241,792 44,249,854 - --------------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (433,302) (6,205,001) (1,085,812) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 12,990,391 340,599,317 109,153,959 Reinvestment of distributions at net asset value 1,698,705 5,106,809 1,123,472 Payments for redemptions (35,554,412) (139,123,483) (22,493,936) - --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (20,865,316) 206,582,643 87,783,495 - --------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 28,209,730 219,619,434 130,947,537 Net assets at beginning of period 611,520,559 391,901,125 260,953,588 - --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 639,730,289 $ 611,520,559 $ 391,901,125 ================================================================================================================================= Undistributed (excess of distributions over) net investment income $ 792,279 $ (1) $ -- - --------------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 105 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - HIGH YIELD BOND FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 29,048,892 $ 86,625,275 $ 80,408,765 Net realized gain (loss) on investments 4,636,729 1,041,488 33,067,201 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 30,113,325 (19,241,545) (6,289,026) - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 63,798,946 68,425,218 107,186,940 - --------------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (32,472,664) (84,302,446) (80,490,774) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 31,504,551 108,481,722 146,257,335 Reinvestment of distributions at net asset value 31,619,562 84,408,337 80,093,618 Payments for redemptions (70,361,695) (231,902,028) (135,588,640) - --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (7,237,582) (39,011,969) 90,762,313 - --------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 24,088,700 (54,889,197) 117,458,479 Net assets at beginning of period 1,191,586,168 1,246,475,365 1,129,016,886 - --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 1,215,674,868 $1,191,586,168 $ 1,246,475,365 ================================================================================================================================= Undistributed net investment income $ 1,658,951 $ 6,391,280 $ 4,068,451 - --------------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - INCOME OPPORTUNITIES FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 7,336,085 $ 6,741,235 $ 1,470,969 Net realized gain (loss) on investments 1,457,589 (259,128) 305,821 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 6,365,184 (1,116,480) 147,007 - --------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 15,158,858 5,365,627 1,923,797 - --------------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (7,335,970) (6,749,350) (1,466,967) Net realized gain (31,000) (260,728) (121,799) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (7,366,970) (7,010,078) (1,588,766) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 139,352,580 219,849,955 36,842,482 Reinvestment of distributions at net asset value 6,430,587 5,943,278 1,456,121 Payments for redemptions (2,747,604) (10,078,764) (9,664,775) - --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 143,035,563 215,714,469 28,633,828 - --------------------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 150,827,451 214,070,018 28,968,859 Net assets at beginning of period 258,632,895 44,562,877 15,594,018 - --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 409,460,346 $ 258,632,895 $ 44,562,877 ================================================================================================================================= Undistributed (excess of distributions over) net investment income $ -- $ (115) $ 8,000 - --------------------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 106 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - INTERNATIONAL OPPORTUNITY FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 2,313,479 $ 13,096,688 $ 13,302,264 Net realized gain (loss) on investments 63,359,895 197,349,235 106,053,373 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 41,009,369 57,942,017 107,127,444 - --------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 106,682,743 268,387,940 226,483,081 - --------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (10,550,737) (18,190,610) (14,185,535) Tax return of capital (550,893) -- -- - --------------------------------------------------------------------------------------------------------------------- Total distributions (11,101,630) -- -- - --------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 12,823,084 36,872,876 93,707,558 Reinvestment of distributions at net asset value 13,036,623 19,471,353 13,916,731 Payments for redemptions (76,952,544) (224,639,217) (109,415,941) - --------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (51,092,837) (168,294,988) (1,791,652) - --------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 44,488,276 81,902,342 210,505,894 Net assets at beginning of period 1,266,240,763 1,184,338,421 973,832,527 - --------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 1,310,729,039 $ 1,266,240,763 $ 1,184,338,421 ===================================================================================================================== Undistributed (excess of distributions over) net investment income $ (3,212,601) $ 3,023,480 $ (612,581) - --------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - LARGE CAP EQUITY FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 14,245,827 $ 41,561,732 $ 28,694,801 Net realized gain (loss) on investments 71,043,008 222,184,020 211,236,490 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 257,357,774 (90,675,460) 57,887,507 - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 342,646,609 173,070,292 297,818,798 - -------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (9,238,610) (41,430,783) (28,626,032) - -------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 4,467,676 142,011,461 200,687,349 Fund merger (Note 12) N/A 1,796,173,392 N/A Reinvestment of distributions at net asset value 20,150,261 36,474,860 27,520,509 Payments for redemptions (353,589,722) (883,733,698) (521,735,962) - -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (328,971,785) 1,090,926,015 (293,528,104) - -------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 4,436,214 1,222,565,524 (24,335,338) Net assets at beginning of period 3,732,943,214 2,510,377,690 2,534,713,028 - -------------------------------------------------------------------------------------------------------------------- Net assets at end of period $3,737,379,428 $3,732,943,214 $2,510,377,690 ==================================================================================================================== Undistributed (excess of distributions over) net investment income $ 4,048,156 $ (1,037,776) $ (114,369) - -------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 107 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - LARGE CAP VALUE FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 101,297 $ 275,437 $ 151,942 Net realized gain (loss) on investments 312,976 907,974 357,850 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,816,288 652,685 625,405 - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,230,561 1,836,096 1,135,197 - -------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (93,000) (272,854) (151,392) Net realized gain (1,171,000) (384,490) (61,040) - -------------------------------------------------------------------------------------------------------------------- Total distributions (1,264,000) (657,344) (212,432) - -------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 3,146,898 6,343,011 7,390,064 Reinvestment of distributions at net asset value 1,330,100 640,197 180,662 Payments for redemptions (794,645) (2,270,395) (955,062) - -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 3,682,353 4,712,813 6,615,664 - -------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 4,648,914 5,891,565 7,538,429 Net assets at beginning of period 20,712,185 14,820,620 7,282,191 - -------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 25,361,099 $ 20,712,185 $ 14,820,620 ==================================================================================================================== Undistributed (excess of distributions over) net investment income $ 3,711 $ (2,762) $ (2,179) - -------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) RiverSource Variable Portfolio Funds
RIVERSOURCE VP - MID CAP GROWTH FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,628,386 $ (695,857) $ (795,020) Net realized gain (loss) on investments 19,889,194 57,781,721 19,870,302 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 36,768,984 (134,694,999) 31,461,353 - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 58,286,564 (77,609,135) 50,536,635 - -------------------------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (1,596,565) -- -- Net realized gain (26,857,455) (20,773,397) -- - -------------------------------------------------------------------------------------------------------------------- Total distributions (28,454,020) (20,773,397) -- - -------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 2,340,116 23,445,984 20,390,489 Fund merger (Note 12) N/A 636,833,949 N/A Reinvestment of distributions at net asset value 28,454,020 20,773,397 -- Payments for redemptions (79,739,127) (128,972,794) (40,608,349) - -------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (48,944,991) 552,080,536 (20,217,860) - -------------------------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (19,112,447) 453,698,004 30,318,775 Net assets at beginning of period 708,902,570 255,204,566 224,885,791 - -------------------------------------------------------------------------------------------------------------------- Net assets at end of period $ 689,790,123 $ 708,902,570 $ 255,204,566 ==================================================================================================================== Undistributed net investment income $ 31,821 $ -- $ -- - -------------------------------------------------------------------------------------------------------------------- (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 108 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Riversource Variable Portfolio Funds
RIVERSOURCE VP - MID CAP VALUE FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005(b) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,215,281 $ 525,004 $ 8,844 Net realized gain (loss) on investments 216,692 1,871,653 34,448 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 21,273,477 3,607,327 437,214 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 22,705,450 6,003,984 480,506 - ------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (1,154,000) (525,371) (9,698) Net realized gain (3,412,000) (42,000) -- - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (4,566,000) (567,371) (9,698) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 122,106,187 218,979,676 4,671,932 Reinvestment of distributions at net asset value 4,912,322 228,962 1,787 Payments for redemptions (3,096,371) (3,349,899) (58,967) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 123,922,138 215,858,739 4,614,752 - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 142,061,588 221,295,352 5,085,560 Net assets at beginning of period 228,411,187 7,115,835 2,030,275(c) - ------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $ 370,472,775 $ 228,411,187 $ 7,115,835 ============================================================================================================================== Undistributed (excess of distributions over) net investment income $ (89,293) $ (33,276) $ 260 - ------------------------------------------------------------------------------------------------------------------------------ (a) For the period from Sept. 1, 2006 to Dec. 31, 2006. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. (c) Initial Capital of $1,999,940 was contributed on April 28, 2005. The Fund had an 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).
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Riversource Variable Portfolio Funds
RIVERSOURCE VP - S&P 500 INDEX FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 1,804,355 $ 5,442,430 $ 5,534,950 Net realized gain (loss) on investments 2,819,152 818,609 1,267,418 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 28,958,806 24,008,898 29,628,952 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 33,582,313 30,269,937 36,431,320 - ------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (1,326,916) (5,486,997) (5,503,403) Net realized gain (1,706,881) (924,016) -- - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (3,033,797) (6,411,013) (5,503,403) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 6,705,610 26,099,085 69,811,420 Reinvestment of distributions at net asset value 4,459,508 6,325,687 5,036,258 Payments for redemptions (16,647,916) (56,849,784) (21,521,879) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (5,482,798) (24,425,012) 53,325,799 - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 25,065,718 (566,088) 84,253,716 Net assets at beginning of period 366,784,535 367,350,623 283,096,907 - ------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $ 391,850,253 $ 366,784,535 $ 367,350,623 ============================================================================================================================== Undistributed (excess of distributions over) net investment income $ 548,565 $ 106,305 $ (18,268) - ------------------------------------------------------------------------------------------------------------------------------ (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 109 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Riversource Variable Portfolio Funds
RIVERSOURCE VP - SELECT VALUE FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 86,367 $ 563,270 $ 69,442 Net realized gain (loss) on investments 2,509,837 464,513 328,478 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (691,997) 588,316 1,579,596 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 1,904,207 1,616,099 1,977,516 - ------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (73,000) (560,309) (66,667) Net realized gain (2,629,000) (381,000) (54,328) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (2,702,000) (941,309) (120,995) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 1,566,722 5,315,492 13,500,858 Reinvestment of distributions at net asset value 2,743,998 915,187 117,486 Payments for redemptions (1,615,639) (3,796,870) (605,448) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 2,695,081 2,433,809 13,012,896 - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 1,897,288 3,108,599 14,869,417 Net assets at beginning of period 26,581,836 23,473,237 8,603,820 - ------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $ 28,479,124 $ 26,581,836 $ 23,473,237 ============================================================================================================================== Undistributed (excess of distributions over) net investment income $ 13,790 $ 395 $ (2,727) - ------------------------------------------------------------------------------------------------------------------------------ (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Riversource Variable Portfolio Funds
RIVERSOURCE VP - SHORT DURATION U.S.GOVERNMENT FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 6,013,376 $ 17,186,548 $ 13,334,726 Net realized gain (loss) on investments 185,807 (4,618,858) (3,161,382) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 925,784 (292,799) (3,182,742) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 7,124,967 12,274,891 6,990,602 - ------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (6,034,508) (17,299,564) (13,288,036) Net realized gain -- -- (148,999) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (6,034,508) (17,299,564) (13,437,035) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 15,800,741 68,741,323 53,612,824 Reinvestment of distributions at net asset value 6,230,452 16,861,634 13,354,736 Payments for redemptions (29,031,356) (102,138,539) (82,040,384) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (7,000,163) (16,535,582) (15,072,824) - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets (5,909,704) (21,560,255) (21,519,257) Net assets at beginning of period 462,923,335 484,483,590 506,002,847 - ------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $ 457,013,631 $ 462,923,335 $ 484,483,590 ============================================================================================================================== Undistributed (excess of distributions over) net investment income $ (83,879) $ (62,747) $ 38,457 - ------------------------------------------------------------------------------------------------------------------------------ (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ 110 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Riversource Variable Portfolio Funds
RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 162,554 $ (43,953) $ (611,525) Net realized gain (loss) on investments 9,613,506 27,932,843 30,020,831 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 7,437,971 (17,484,891) 17,135,003 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 17,214,031 10,403,999 46,544,309 - ------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (88,124) -- -- Net realized gain (28,180,273) (29,405,160) (9,460,720) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (28,268,397) (29,405,160) (9,460,720) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 2,034,365 8,328,492 24,255,001 Reinvestment of distributions at net asset value 28,268,396 29,405,160 9,460,720 Payments for redemptions (17,479,186) (36,148,584) (19,393,071) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 12,823,575 1,585,068 14,322,650 - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets ,769,209 (17,416,093) 51,406,239 Net assets at beginning of period 218,029,463 235,445,556 184,039,317 - ------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $ 219,798,672 $ 218,029,463 $ 235,445,556 ============================================================================================================================== Undistributed net investment income $ 2,340 $ 41,443 $ 53,169 - ------------------------------------------------------------------------------------------------------------------------------ (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Riversource Variable Portfolio Funds
RIVERSOURCE VP - SMALL CAP VALUE FUND PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006(a) AUG. 31, 2006 AUG. 31, 2005 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 918,229 $ 2,099,552 $ 385,585 Net realized gain (loss) on investments 17,575,923 61,012,763 31,279,549 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 37,232,926 (7,054,058) 22,038,842 - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 55,727,078 56,058,257 53,703,976 - ------------------------------------------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (780,445) (2,249,308) (148,562) Net realized gain (60,479,614) (31,668,050) (22,655,414) - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (61,260,059) (33,917,358) (22,803,976) - ------------------------------------------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS (NOTE 4) Proceeds from sales 43,367,594 140,632,418 137,742,641 Reinvestment of distributions at net asset value 61,717,079 33,460,338 22,803,976 Payments for redemptions (29,686,872) (59,579,246) (8,205,722) - ------------------------------------------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 75,397,801 114,513,510 152,340,895 - ------------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 69,864,820 136,654,409 183,240,895 Net assets at beginning of period 548,763,875 412,109,466 228,868,571 - ------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $ 618,628,695 $ 548,763,875 $ 412,109,466 ============================================================================================================================== Undistributed net investment income $ 337,561 $ 183,446 $ 169,285 - ------------------------------------------------------------------------------------------------------------------------------ (a) For the period from Sept. 1, 2006 to Dec. 31, 2006.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 111 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. RiverSource VP - Global Inflation Protected Securities Fund became available on Sept. 13, 2004. On Sept. 8, 2004, Ameriprise Financial, Inc. (Ameriprise Financial) 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. RiverSource VP - Fundamental Value Fund became available on May 1, 2006. On April 25, 2006, Ameriprise Financial purchased 199,991 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 invests primarily in a combination of common and preferred stocks, bonds and other debt securities. RiverSource 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 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 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 invests primarily in dividend-paying common and preferred stocks. RiverSource VP - Emerging Markets Fund invests primarily in equity securities of companies in emerging market countries. RiverSource VP - Fundamental Value Fund invests primarily in equity securities of U.S. companies. RiverSource VP - Global Bond Fund invests primarily in debt obligations securities of U.S. and foreign issuers. RiverSource VP - Global 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 invests primarily in common stocks and securities convertible into common stocks that appear to offer growth opportunities. RiverSource 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 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 invests primarily in equity securities of foreign issuers that are believed to offer strong growth potential. RiverSource 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. RiverSource 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 invests primarily in common stocks of mid-capitalization companies. RiverSource VP - Mid Cap Value Fund invests primarily in equity securities of mid-capitalization companies. RiverSource VP - S&P 500 Index Fund invests primarily in common stocks included in the Standard & Poor 500 Composite Stock Price Index (S&P 500). RiverSource VP - Select Value Fund invests primarily in equity securities of mid cap companies as well as companies with larger and smaller market capitalizations. RiverSource 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. - ------------------------------------------------------------------------------ 112 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund invests primarily in equity securities of small capitalization companies. RiverSource VP - Small Cap Value Fund invests primarily in equity securities of small capitalization 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. ILLIQUID SECURITIES At Dec. 31, 2006, investments in securities for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity 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 Dec. 31, 2006, was $3,380,686, $2,597,808, $8,925,940, $3,023,763, $4,238,015, $3,761,272, $7,787,257 and $547,445 representing 0.16%, 0.09%, 1.63%, 0.47%, 0.35%, 0.29%, 0.21% and 0.09% of net assets for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity 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 and other forward-commitments, 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 Dec. 31, 2006, the outstanding forward-commitments for the Funds are as follows:
WHEN-ISSUED OTHER FUND SECURITIES FORWARD-COMMITMENTS - ----------------------------------------------------------------------------------------- RiverSource VP - Balanced Fund $ 49,844,384 $ 3,030,596 RiverSource VP - Core Bond Fund 8,676,070 -- RiverSource VP - Diversified Bond Fund 278,936,745 46,739,464 RiverSource VP - Global Bond Fund 190,882 6,692,460 RiverSource VP - High Yield Bond Fund 6,304,144 -- RiverSource VP - Income Opportunities Fund 2,084,637 1,821,138 RiverSource VP - Short Duration U.S. Government Fund 32,215,025 -- - -----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 113 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. 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 Dec. 31, 2006, foreign currency holdings for RiverSource VP - Core Bond Fund consisted of European monetary units and British pounds, foreign currency holdings for RiverSource VP - Diversified Bond Fund consisted of European monetary units and British pounds, foreign currency holdings for RiverSource VP - Emerging Markets Fund consisted of multiple denominations, foreign currency holdings for RiverSource VP - Fundamental Value Fund consisted of multiple denominations, foreign currency holdings for RiverSource VP - Global Bond Fund consisted of multiple denominations, foreign currency holdings for RiverSource VP - Growth Fund consisted of European monetary units, foreign currency holdings for RiverSource VP - International Opportunity Fund consisted of multiple denominations, foreign currency holdings for RiverSource VP - Large Cap Equity Fund consisted of multiple denominations, primarily European monetary units, and foreign currency holdings for RiverSource VP - Select Value Fund consisted of British pounds and Canadian 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. - ------------------------------------------------------------------------------ 114 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 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 EQUITY SWAP TRANSACTIONS Certain Funds may enter into swap agreements to earn the total return on a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market. Under the terms of a total return equity swap agreement, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. The notional amounts of swap contracts are not recorded in the financial statements. Swap contracts are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk associated with the investment in the underlying securities and also the risk of the counterparty not fulfilling its obligations under the agreement. CMBS 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. CMBS total return swaps are bilateral financial contracts designed to replicate synthetically the total returns of collateralized mortgage-backed securities. Under the terms of the swaps, the Fund either receives or pays the total return on a reference security or index applied to a notional principal amount. In return, the Fund agrees 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). Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. It may not be possible for the Fund to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. Total return swaps are subject to the risk 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 Subchapter M of the Internal Revenue Code that applies 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 115 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 decrease paid-in capital by the following:
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - BALANCED CASH MANAGEMENT CORE BOND DIVERSIFIED FUND FUND FUND BOND - --------------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain (loss) $ 11,726,922 $ -- $ (15,987) $ 4,074,783 Undistributed net investment income 131,678 -- 15,987 743,098 - --------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital reduction (increase) $ 11,858,600 $ -- $ -- $ 4,817,881 - ---------------------------------------------------------------------------------------------------------------------------
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - DIVERSIFIED EMERGING FUNDAMENTAL GLOBAL BOND EQUITY INCOME MARKETS VALUE FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain (loss) $ (16,239) $ (418,469) $ 6,706 $(102,044) Undistributed net investment income 16,239 418,573 (6,706) 102,044 - --------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital reduction (increase) $ -- $ 104 $ -- $ -- - ---------------------------------------------------------------------------------------------------------------------------
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP GLOBAL INFLATION GROWTH HIGH YIELD INCOME PROTECTED SECURITIES FUND BOND OPPORTUNITIES FUND FUND FUND - ----------------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain (loss) $ 6,575,653 $ (10,914) $ (29,289) $ (10) Undistributed net investment income (6,575,653) 10,914 (1,308,557) -- - ----------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital reduction (increase) $ -- $ -- $(1,337,846) $ (10) - -----------------------------------------------------------------------------------------------------------------------------
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP- INTERNATIONAL LARGE CAP LARGE CAP MID CAP OPPORTUNITY EQUITY VALUE GROWTH FUND FUND FUND FUND - -------------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain (loss) $ 3,833,245 $ 20,753,534 $ 1,824 $ -- Undistributed net investment income 2,001,177 78,715 (1,824) -- - -------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital reduction (increase) $ 5,834,422 $ 20,832,249 $ -- $ -- - --------------------------------------------------------------------------------------------------------------------------
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - MID CAP S&P 500 SELECT SHORT DURATION VALUE INDEX VALUE U.S. GOVERNMENT FUND FUND FUND FUND - --------------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain (loss) $ 117,298 $ 35,179 $ (28) $ -- Undistributed net investment income (117,298) (35,179) 28 -- - --------------------------------------------------------------------------------------------------------------------------- Additional paid-in capital reduction (increase) $ -- $ -- $ -- $ -- - ---------------------------------------------------------------------------------------------------------------------------
RIVERSOURCE VP - RIVERSOURCE VP - SMALL CAP SMALL CAP ADVANTAGE VALUE FUND FUND - ------------------------------------------------------------------------------------- Accumulated net realized gain (loss) $ 166,465 $ (16,331) Undistributed net investment income (113,533) 16,331 - ------------------------------------------------------------------------------------- Additional paid-in capital reduction (increase) $ 52,932 $ -- - -------------------------------------------------------------------------------------
The tax character of distributions paid for the periods indicated is as follows:
PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006* AUG. 31, 2006 AUG. 31, 2005 - -------------------------------------------------------------------------------------- RIVERSOURCE VP - BALANCED FUND Distributions paid from: Ordinary income $ 12,783,193 $ 58,821,263 $ 61,685,753 Long-term capital gain 114,232,567 70,774,753 -- RIVERSOURCE VP - CASH MANAGEMENT FUND Distributions paid from: Ordinary income 15,787,190 30,181,937 13,366,319 Long-term capital gain -- -- --
- ------------------------------------------------------------------------------ 116 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT
PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006* AUG. 31, 2006 AUG. 31, 2005 - ----------------------------------------------------------------------------------------------------------------- RIVERSOURCE VP - CORE BOND FUND Distributions paid from: Ordinary income $ 904,887 $ 2,531,686 $ 1,450,986 Long-term capital gain -- 1,884 -- RIVERSOURCE VP - DIVERSIFIED BOND FUND Distributions paid from: Ordinary income 38,353,400 81,269,698 66,121,267 Long-term capital gain -- -- -- RIVERSOURCE VP - DIVERSIFIED EQUITY INCOME FUND Distributions paid from: Ordinary income 10,731,641 41,193,178 19,986,713 Long-term capital gain 196,331,636 68,007,894 -- RIVERSOURCE VP - EMERGING MARKETS FUND Distributions paid from: Ordinary income 38,535,254 11,128,027 692,060 Long-term capital gain 20,579,739 3,128,668 1,958,494 RIVERSOURCE VP - FUNDAMENTAL VALUE FUND Distributions paid from: Ordinary income 1,344,955 298,866(a) N/A Long-term capital gain -- -- N/A Tax return of capital 169,045 -- N/A RIVERSOURCE VP - GLOBAL BOND FUND Distributions paid from: Ordinary income 7,832,430 18,332,262 23,132,048 Long-term capital gain -- 2,322,501 -- RIVERSOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND Distributions paid from: Ordinary income 12,799,673 5,920,360 1,179,047(b) Long-term capital gain 14,972 -- -- RIVERSOURCE VP - GROWTH FUND Distributions paid from: Ordinary income 433,302 6,205,001 1,085,812 Long-term capital gain -- -- -- RIVERSOURCE VP - HIGH YIELD BOND FUND Distributions paid from: Ordinary income 32,472,664 84,302,446 80,490,774 Long-term capital gain -- -- -- RIVERSOURCE VP - INCOME OPPORTUNITIES FUND Distributions paid from: Ordinary income 7,366,970 6,948,160 1,588,766 Long-term capital gain -- 61,918 -- RIVERSOURCE VP - INTERNATIONAL OPPORTUNITY FUND Distributions paid from: Ordinary income 10,550,737 18,190,610 14,185,535 Long-term capital gain -- -- -- Tax return of capital 550,893 -- -- RIVERSOURCE VP - LARGE CAP EQUITY FUND Distributions paid from: Ordinary income 9,238,610 41,430,783 28,626,032 Long-term capital gain -- -- -- RIVERSOURCE VP - LARGE CAP VALUE FUND Distributions paid from: Ordinary income 413,000 484,993 211,363 Long-term capital gain 851,000 172,351 1,069 RIVERSOURCE VP - MID CAP GROWTH FUND Distributions paid from: Ordinary income 1,596,565 -- -- Long-term capital 26,857,455 20,773,397 --
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 117
PERIOD ENDED YEAR ENDED YEAR ENDED DEC. 31, 2006* AUG. 31, 2006 AUG. 31, 2005 - ----------------------------------------------------------------------------------------------------------------- RIVERSOURCE VP - MID CAP VALUE FUND Distributions paid from: Ordinary income $ 4,023,000 $ 564,971 $ 9,698(c) Long-term capital gain 543,000 2,400 -- RIVERSOURCE VP - S&P 500 INDEX FUND Distributions paid from: Ordinary income 1,492,168 5,486,997 5,503,403 Long-term capital gain 1,541,629 924,016 -- RIVERSOURCE VP - SELECT VALUE FUND Distributions paid from: Ordinary income 419,000 795,309 120,939 Long-term capital gain 2,283,000 146,000 56 RIVERSOURCE VP - SHORT DURATION U.S. GOVERNMENT FUND Distributions paid from: Ordinary income 6,034,508 17,299,564 13,288,036 Long-term capital gain -- -- 148,999 RIVERSOURCE VP - SMALL CAP ADVANTAGE FUND Distributions paid from: Ordinary income 4,668,406 7,295,152 -- Long-term capital gain 23,599,991 22,110,008 9,460,720 RIVERSOURCE VP - SMALL CAP VALUE FUND Distributions paid from: Ordinary income 22,811,776 11,611,903 9,597,221 Long-term capital gain 38,448,283 22,305,455 13,206,755 * For the period from Sept. 1, 2006 to Dec. 31, 2006. (a) For the period from May 1, 2006 (date the Fund became available) to Aug. 31, 2006. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005.
At Dec. 31, 2006, 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 $ 11,423,627 $ 34,973,637 $ 232,151,428 RiverSource VP - Cash Management Fund 3,772,176 (968) -- RiverSource VP - Core Bond Fund 211,032 (636,371) (346,732) RiverSource VP - Diversified Bond Fund 9,893,912 (140,432,282) (9,936,877) RiverSource VP - Diversified Equity Income Fund 16,082,634 26,442,535 540,575,712 RiverSource VP - Emerging Markets Fund 18,947,778 13,926,823 87,390,017 RiverSource VP - Fundamental Value Fund -- -- 30,474,160 RiverSource VP - Global Bond Fund 1,533,861 (527,777) 17,632,295 RiverSource VP - Global Inflation Protected Securities Fund 5,479,044 (1,165,851) (15,127,924) RiverSource VP - Growth Fund 781,994 (80,007,339) 42,474,153 RiverSource VP - High Yield Bond Fund 7,760,257 (217,387,621) 21,439,781 RiverSource VP - Income Opportunities Fund 3,455,750 -- 5,675,714 RiverSource VP - International Opportunity Fund -- (434,867,847) 286,832,389 RiverSource VP - Large Cap Equity Fund 3,970,349 (145,318,120) 384,781,936 RiverSource VP - Large Cap Value Fund 49,682 53,131 2,981,708 RiverSource VP - Mid Cap Growth Fund 31,821 6,582,833 (1,106,927,556) RiverSource VP - Mid Cap Value Fund 164,405 97,078 23,816,780 RiverSource VP - S&P 500 Index Fund 696,972 2,790,654 83,195,368 RiverSource VP - Select Value Fund 288,529 19,339 1,351,220 RiverSource VP - Short Duration U.S. Government Fund 1,409,033 (11,387,602) (2,676,587) RiverSource VP - Small Cap Advantage Fund 2,699,922 6,683,799 17,712,124 RiverSource VP - Small Cap Value Fund 10,870,872 7,613,411 65,153,008 - -----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ 118 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RECENT ACCOUNTING PRONOUNCEMENTS On Sept. 20, 2006, the Financial Accounting Standards Board ("FASB") released Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("SFAS 157"). SFAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of SFAS 157 is required for fiscal years beginning after Nov. 15, 2007 and interim periods within those fiscal years. The impact of SFAS 157 on the Fund's financial statements is being evaluated. In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 48 (FIN 48), "Accounting for Uncertainty in Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement 109, "Accounting for Income Taxes." FIN 48 prescribes a two-step process to recognize and measure a tax position taken or expected to be taken in a tax return. The first step is to determine whether a tax position has met the more-likely-than-not recognition threshold and the second step is to measure a tax position that meets the threshold to determine the amount of benefit to recognize. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after Dec. 15, 2006. Tax positions of each Fund are being evaluated to determine the impact, if any, to the Funds. The adoption of FIN 48 is not anticipated to have a material impact on the Funds. DIVIDENDS At Dec. 31, 2006, dividends declared for each Fund payable Jan. 3, 2007 are as follows:
FUND AMOUNT PER SHARE - ------------------------------------------------------------------------------ RiverSource VP - Cash Management Fund $0.004 RiverSource VP - Core Bond Fund 0.032 RiverSource VP - Diversified Bond Fund 0.038 RiverSource VP - Global Bond Fund 0.018 RiverSource VP - High Yield Bond Fund 0.044 RiverSource VP - Income Opportunities Fund 0.058 RiverSource VP - Short Duration U.S. Government Fund 0.031 - ------------------------------------------------------------------------------
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 - Fundamental Value 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 - S&P 500 Index Fund, RiverSource VP - Select Value Fund, RiverSource VP - Small Cap Advantage Fund and RiverSource VP - Small Cap Value 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. On March 16, 2006, an additional dividend was paid before the merger (see Note 12) to ensure that current shareholders of RiverSource VP - Large Cap Equity Fund and RiverSource VP - Mid Cap Growth Fund would not experience a dilution in their shares of the Fund's income or capital gains. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 119 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. The management fee is a percentage of each Fund's average daily net assets that declines as each Fund's net assets increase. The annual percentage range for each Fund is as follows:
CURRENT PERCENTAGE RANGE FUND PERCENTAGE RANGE PRIOR TO MARCH 1, 2006 - ---------------------------------------------------------------------------------------------------------- RiverSource VP - Balanced Fund 0.530% to 0.350% 0.630% to 0.550% RiverSource VP - Cash Management Fund 0.330% to 0.150% 0.510% to 0.440% RiverSource VP - Core Bond Fund 0.480% to 0.290% 0.630% to 0.555% RiverSource VP - Diversified Bond Fund 0.480% to 0.290% 0.610% to 0.535% RiverSource VP - Diversified Equity Income Fund 0.600% to 0.375% 0.560% to 0.470% RiverSource VP - Emerging Markets Fund 1.100% to 0.900% 1.170% to 1.095% RiverSource VP - Fundamental Value Fund 0.730% to 0.600% N/A RiverSource VP - Global Bond Fund 0.720% to 0.520% 0.840% to 0.780% RiverSource VP - Global Inflation Protected Securities Fund 0.440% to 0.250% 0.490% to 0.415% RiverSource VP - Growth Fund 0.600% to 0.375% 0.630% to 0.570% RiverSource VP - High Yield Bond Fund 0.590% to 0.360% 0.620% to 0.545% RiverSource VP - Income Opportunities Fund 0.610% to 0.380% 0.640% to 0.565% RiverSource VP - International Opportunity Fund 0.800% to 0.570% 0.870% to 0.795% RiverSource VP - Large Cap Equity Fund 0.600% to 0.375% 0.630% to 0.570% RiverSource VP - Large Cap Value Fund 0.600% to 0.375% 0.630% to 0.570% RiverSource VP - Mid Cap Growth Fund 0.700% to 0.475% 0.650% to 0.560% RiverSource VP - Mid Cap Value Fund 0.700% to 0.475% 0.730% to 0.610% RiverSource VP - S&P 500 Index Fund 0.220% to 0.120% 0.290% to 0.260% RiverSource VP - Select Value Fund 0.780% to 0.650% 0.810% to 0.720% RiverSource VP - Short Duration U.S. Government Fund 0.480% to 0.250% 0.610% to 0.535% RiverSource VP - Small Cap Advantage Fund 0.790% to 0.665% 0.790% to 0.650% RiverSource VP - Small Cap Value Fund 0.970% to 0.870% 1.020% to 0.920% - ----------------------------------------------------------------------------------------------------------
For the following Funds the fee may be adjusted upward or downward by a performance incentive adjustment with a maximum 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 are as follows:
FOR THE PERIOD FROM SEPT. 1, 2006 TO FOR THE YEAR DEC. 31, 2006 ENDED AUG. 31, 2006 FUND INDEX NAME INCREASE (DECREASE) INCREASE (DECREASE) - ------------------------------------------------------------------------------------------------------------------------------ RiverSource VP - Balanced Fund Lipper Balanced Funds Index $ 270,785 $ (926,803) RiverSource VP - Diversified Equity Income Fund Lipper Equity Income Funds Index 722,447 2,011,544 RiverSource VP - Emerging Markets Fund Lipper Emerging Markets Funds Index 68,528 12,891 RiverSource VP - Fundamental Value Fund Lipper Large-Cap Value Funds Index (11,517) -- RiverSource VP - Growth Fund Lipper Large-Cap Growth Funds Index 219,098 94,840 RiverSource VP - International Opportunity Fund Lipper International Large-Cap Core Funds Index 42,132 443,628 RiverSource VP - Large Cap Equity Fund Lipper Large-Cap Core Funds Index 97,489 (472,064) RiverSource VP - Large Cap Value Fund Lipper Large-Cap Value Funds Index -- (6,328) RiverSource VP - Mid Cap Growth Fund Lipper Mid-Cap Growth Funds Index (224,965) (211,720) RiverSource VP - Mid Cap Value Fund Lipper Mid-Cap Value Funds Index 16,744 14,432 RiverSource VP - Select Value Fund Lipper Multi-Cap Value Funds Index (5,226) (17,927) RiverSource VP - Small Cap Advantage Fund Lipper Small-Cap Core Funds Index (53,757) (123,175) RiverSource VP - Small Cap Value Fund Lipper Small-Cap Value Funds Index 89,900 (82,048) - ------------------------------------------------------------------------------------------------------------------------------
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 Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, an indirect 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. - ------------------------------------------------------------------------------ 120 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT The Investment Manager has Subadvisory Agreements with Systematic Financial Management, L.P. (Systematic) and WEDGE Capital Management, L.L.P. (WEDGE), each of which subadvises a portion of the assets of RiverSource VP - Select Value Fund. Effective Sept. 29, 2006, Systematic and WEDGE replaced GAMCO Asset Management Inc. as subadvisers to the Fund. New investments in the Fund, net of any redemptions, are allocated in accordance with the Investment Manager's determination of the allocation that is in the best interests of the Fund's shareholders. Each subadviser's proportionate share of investments in the Fund will vary due to market fluctuations. The Investment Manager has Subadvisory Agreements with Barrow, Hanley, Mewhinney & Strauss, Inc., Donald Smith & Co., Inc., and Franklin Portfolio Associates LLC, and River Road Asset Management, LLC (River Road), each of 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. Effective April 24, 2006, River Road replaced Goldman Sachs Asset Management, L.P. and Royce & Associates, LLC as subadviser to the Fund. The Investment Manager has a Subadvisory Agreement with Davis Selected Advisers, L.P. to subadvise the assets of RiverSource VP - Fundamental Value Fund. Effective as of March 1, 2006, the Funds entered into a separate transfer agent agreement with RiverSource Service Corporation. The fee under this agreement is uniform for all RiverSource Variable Portfolio Funds at an annual rate of 0.06% of average daily net assets. The impact of moving transfer agent fees from the Investment Management Services Agreement fee schedules varies by each Fund and decreases the rate between 0.03% and 0.15% of average daily net assets. Effective Jan. 1, 2007, the Funds have an agreement with RiverSource Distributors, Inc. for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund pays RiverSource Distributors, Inc. a fee at an annual rate of up to 0.125% of each Fund's average daily net assets. Prior to Jan. 1, 2007, the Funds had an agreement with IDS Life Insurance Company for distribution services, and under a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund paid IDS Life Insurance Company a fee at an annual rate of up to 0.125% of each Fund's average daily net assets. The Funds have an Administrative Services Agreement with Ameriprise Financial. Under this 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 net assets increase. The percentage range for each Fund is as follows:
CURRENT PERCENTAGE RANGE FUND PERCENTAGE RANGE PRIOR TO OCT. 1, 2005 - --------------------------------------------------------------------------------------------------------- RiverSource VP - Balanced Fund 0.060% to 0.030% 0.040% to 0.020% RiverSource VP - Cash Management Fund 0.060% to 0.030% 0.030% to 0.020% RiverSource VP - Core Bond Fund 0.070% to 0.040% 0.050% to 0.025% RiverSource VP - Diversified Bond Fund 0.070% to 0.040% 0.050% to 0.025% RiverSource VP - Diversified Equity Income Fund 0.060% to 0.030% 0.040% to 0.020% RiverSource VP - Emerging Markets Fund 0.080% to 0.050% 0.100% to 0.050% RiverSource VP - Fundamental Value Fund 0.060% to 0.030% N/A RiverSource VP - Global Bond Fund 0.080% to 0.050% 0.060% to 0.040% RiverSource VP - Global Inflation Protected Securities Fund 0.070% to 0.040% 0.050% to 0.025% RiverSource VP - Growth Fund 0.060% to 0.030% 0.050% to 0.030% RiverSource VP - High Yield Bond Fund 0.070% to 0.040% 0.050% to 0.025% RiverSource VP - Income Opportunities Fund 0.070% to 0.040% 0.050% to 0.025% RiverSource VP - International Opportunity Fund 0.080% to 0.050% 0.060% to 0.035% RiverSource VP - Large Cap Equity Fund 0.060% to 0.030% 0.050% to 0.030% RiverSource VP - Large Cap Value Fund 0.060% to 0.030% 0.050% to 0.030% RiverSource VP - Mid Cap Growth Fund 0.060% to 0.030% 0.060% to 0.030% RiverSource VP - Mid Cap Value Fund 0.060% to 0.030% 0.050% to 0.020% RiverSource VP - S&P 500 Index Fund 0.060% to 0.030% 0.080% to 0.065% RiverSource VP - Select Value Fund 0.060% to 0.030% 0.060% to 0.035% RiverSource VP - Short Duration U.S. Government Fund 0.070% to 0.040% 0.050% to 0.025% RiverSource VP - Small Cap Advantage Fund 0.080% to 0.050% 0.060% to 0.035% RiverSource VP - Small Cap Value Fund 0.080% to 0.050% 0.080% to 0.055% - ---------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 121 Other expenses are for, among other things, certain expenses of the Funds or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Funds and the Board. For the period ended Dec. 31, 2006, these amounts are as follows:
FUND OTHER EXPENSES - ------------------------------------------------------------------------------- RiverSource VP - Balanced Fund $19,841 RiverSource VP - Cash Management Fund 9,574 RiverSource VP - Core Bond Fund 184 RiverSource VP - Diversified Bond Fund 22,179 RiverSource VP - Diversified Equity Income Fund 27,044 RiverSource VP - Emerging Markets Fund 3,385 RiverSource VP - Fundamental Value Fund 1,339 RiverSource VP - Global Bond Fund 6,314 RiverSource VP - Global Inflation Protected Securities Fund 43 RiverSource VP - Growth Fund 5,236 RiverSource VP - High Yield Bond Fund 11,362 RiverSource VP - Income Opportunities Fund 1,956 RiverSource VP - International Opportunity Fund 11,496 RiverSource VP - Large Cap Equity Fund 35,831 RiverSource VP - Large Cap Value Fund 616 RiverSource VP - Mid Cap Growth Fund 6,437 RiverSource VP - Mid Cap Value Fund 1,719 RiverSource VP - S&P 500 Index Fund 3,152 RiverSource VP - Select Value Fund -- RiverSource VP - Short Duration U.S. Government Fund 4,081 RiverSource VP - Small Cap Advantage Fund 1,655 RiverSource VP - Small Cap Value Fund 4,702 - -------------------------------------------------------------------------------
Compensation of Board members includes, for the former Board Chair, compensation as well as retirement benefits. Certain other aspects of the former Board Chair's compensation, including health benefits and payment of certain other expenses, are included under other expenses. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of 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. Professional fees include fees paid by each Fund for legal services and independent auditor services. In addition to the fees and expenses which each Fund bears directly, each Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and each Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred directly by each Fund will vary. For the period ended Dec. 31, 2006, the Investment Manager and its affiliates waived certain fees and expenses to 0.83% for RiverSource VP - Core Bond Fund, 0.72% for RiverSource VP - Global Inflation Protected Securities Fund, 1.05% for RiverSource VP - Large Cap Value Fund, 0.50% for RiverSource VP - S&P 500 Index Fund, 1.09% for RiverSource VP - Select Value Fund and 1.26% for RiverSource VP - Small Cap Value Fund. In addition, the Investment Manager and its affiliates have agreed to waive certain fees and expenses until Dec. 31, 2007, unless sooner terminated by the discretion of the Board (excluding certain expenses such as indirect operating expenses of acquired funds in which each Fund invests), such that net expenses, before giving effect to any applicable performance incentive adjustment, will not exceed the following percentage of each Fund's average daily net assets:
FUND PERCENTAGE - --------------------------------------------------------------------------- RiverSource VP - Core Bond Fund 0.830% RiverSource VP - Fundamental Value Fund 1.070% RiverSource VP - Global Inflation Protected Securities Fund 0.720% RiverSource VP - Income Opportunities Fund 0.990% RiverSource VP - Large Cap Value Fund 1.050% RiverSource VP - Mid Cap Growth Fund 1.000% RiverSource VP - Mid Cap Value Fund 1.080% RiverSource VP - S&P 500 Index Fund 0.495% - ---------------------------------------------------------------------------
- ------------------------------------------------------------------------------ 122 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT Effective as of Jan. 1, 2007, the Investment Manager and its affiliates have agreed to waive certain fees and expenses until Dec. 31, 2007, unless sooner terminated by the discretion of the Board (excluding certain expenses such as indirect operating expenses of acquired funds in which each Fund invests), such that net expenses, before giving effect to any performance incentive adjustment, will not exceed the following percentage of each Fund's average daily net assets:
FUND PERCENTAGE - -------------------------------------------------------------------------- RiverSource VP - Select Value Fund 1.000%* RiverSource VP - Small Cap Value Fund 1.200%* - -------------------------------------------------------------------------- * Percentage for the period from Sept. 1, 2006 to Dec. 31, 2006 was 1.150% and 1.210% for RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund, respectively.
For the year ended Aug. 31, 2006, the Investment Manager and its affiliates waived certain fees and expenses to 0.86% for RiverSource VP - Core Bond Fund, 1.07% for RiverSource VP - Fundamental Value Fund, 0.72% for RiverSource VP - Global Inflation Protected Securities Fund, 1.02% for RiverSource VP - Large Cap Value Fund, 1.11% for RiverSource VP - Mid Cap Value Fund, 0.495% for RiverSource VP - S&P 500 Index Fund, 1.08% for RiverSource VP - Select Value Fund and 1.24% for RiverSource VP - Small Cap Value Fund. In addition, the Investment Manager and its affiliates agreed to waive certain fees and expenses until Aug. 31, 2006, such that net expenses, before giving effect to any applicable performance incentive adjustment, would not exceed the following percentage of each Fund's average daily net assets:
FUND PERCENTAGE - -------------------------------------------------------------------------- RiverSource VP - Core Bond Fund 0.830%* RiverSource VP - Emerging Markets Fund 1.750% RiverSource VP - Global Inflation Protected Securities Fund 0.720%* RiverSource VP - Income Opportunities Fund 0.990% RiverSource VP - Large Cap Value Fund 1.050% RiverSource VP - Mid Cap Growth Fund 1.000%** 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 1.250%* - -------------------------------------------------------------------------- * Prior to Dec. 1, 2005 the percentage was 0.950%, 0.750% and 1.300% for RiverSource VP - Core Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund and RiverSource VP - Small Cap Value Fund, respectively. ** Prior to March 18, 2006 the percentage was 1.10%.
Effective as of April 25, 2006, the Investment Manager and its affiliates agreed to waive certain fees and expenses for RiverSource VP - Fundamental Value Fund until Aug. 31, 2006, such that net expenses, before giving effect to any performance incentive adjustment, would not exceed 1.07% of the Fund's average daily net assets. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 123 The Fund's custodian fees were reduced as a result of earnings and bank fee credits from overnight cash balances for the periods indicated and are as follows:
PERIOD ENDED YEAR ENDED DEC. 31, 2006 AUG. 31, 2006 FUND REDUCTION REDUCTION - ------------------------------------------------------------------------------------------- RiverSource VP - Balanced Fund $1,594 $2,918 RiverSource VP - Cash Management Fund 1,156 3,315 RiverSource VP - Core Bond Fund 573 2,769 RiverSource VP - Diversified Bond Fund 1,620 7,722 RiverSource VP - Diversified Equity Income Fund 524 1,987 RiverSource VP - Emerging Markets Fund 856 2,136 RiverSource VP - Fundamental Value Fund -- 548 RiverSource VP - Global Bond Fund 1,120 1,806 RiverSource VP - Global Inflation Protected Securities Fund 780 2,594 RiverSource VP - Growth Fund 600 1,518 RiverSource VP - High Yield Bond Fund 1,672 4,108 RiverSource VP - Income Opportunities Fund 750 3,680 RiverSource VP - International Opportunity Fund 880 2,074 RiverSource VP - Large Cap Equity Fund 1,510 3,638 RiverSource VP - Large Cap Value Fund 2,308 14,675 RiverSource VP - Mid Cap Growth Fund 878 2,103 RiverSource VP - Mid Cap Value Fund -- 10,858 RiverSource VP - S&P 500 Index Fund 1,282 1,725 RiverSource VP - Short Duration U.S. Government Fund 600 3,400 RiverSource VP - Small Cap Advantage Fund -- 350 - -------------------------------------------------------------------------------------------
The Funds also pay custodian fees to Ameriprise Trust Company, an affiliate of Ameriprise Financial. In addition, for the year ended Aug. 31, 2006, RiverSource VP - S&P 500 Index Fund received a one time transaction fee reimbursement of $216,040 by Ameriprise Trust Company. See "Financial Highlights" for additional information. 3. SECURITIES TRANSACTIONS For the period ended Dec. 31, 2006, cost of purchases and proceeds from sales of securities aggregated $1,626,238,359 and $1,570,521,628, 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 $ 783,383,619 $ 929,600,485 RiverSource VP - Core Bond Fund 74,716,340 70,702,680 RiverSource VP - Diversified Bond Fund 3,177,455,788 2,755,946,537 RiverSource VP - Diversified Equity Income Fund 472,063,944 170,331,923 RiverSource VP - Emerging Markets Fund 224,546,833 211,580,015 RiverSource VP - Fundamental Value Fund 143,600,394 9,227,891 RiverSource VP - Global Bond Fund 213,210,496 144,466,244 RiverSource VP - Global Inflation Protected Securities Fund 154,715,307 -- RiverSource VP - Growth Fund 180,235,850 207,043,599 RiverSource VP - High Yield Bond Fund 345,462,723 322,821,014 RiverSource VP - Income Opportunities Fund 226,783,094 90,053,635 RiverSource VP - International Opportunity Fund 253,502,190 300,888,388 RiverSource VP - Large Cap Equity Fund 767,999,595 1,151,132,836 RiverSource VP - Large Cap Value Fund 4,772,296 2,892,576 RiverSource VP - Mid Cap Growth Fund 164,745,048 246,011,362 RiverSource VP - Mid Cap Value Fund 131,349,106 11,569,084 RiverSource VP - S&P 500 Index Fund 7,033,531 16,497,893 RiverSource VP - Select Value Fund 30,078,474 29,929,475 RiverSource VP - Short Duration U.S. Government Fund 272,816,717 285,606,436 RiverSource VP - Small Cap Advantage Fund 160,860,764 177,044,881 RiverSource VP - Small Cap Value Fund 137,787,817 124,791,245 - ------------------------------------------------------------------------------------------------
Net realized gains and losses on investment sales are determined on an identified cost basis. Brokerage commissions paid to brokers affiliated with the subadvisers for RiverSource VP - Select Value Fund were $112 for the period ended Dec. 31, 2006. - ------------------------------------------------------------------------------ 124 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
PERIOD ENDED DEC. 31, 2006* - --------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - BALANCED CASH CORE FUND MANAGEMENT BOND FUND FUND - --------------------------------------------------------------------------------------------- Sold 745,197 167,098,286 942,086 Issued for reinvested distributions 9,132,978 15,958,427 93,532 Redeemed (9,766,916) (126,608,351) (721,222) - --------------------------------------------------------------------------------------------- Net increase (decrease) 111,259 56,448,362 314,396 - ---------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - --------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - BALANCED CASH CORE FUND MANAGEMENT BOND FUND FUND - --------------------------------------------------------------------------------------------- Sold 1,604,644 546,325,418 2,832,609 Issued for reinvested distributions 8,844,384 28,018,991 252,233 Redeemed (38,530,123) (263,000,076) (2,432,878) - --------------------------------------------------------------------------------------------- Net increase (decrease) (28,081,095) 311,344,333 651,964 - ---------------------------------------------------------------------------------------------
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 - ---------------------------------------------------------------------------------------------
PERIOD ENDED DEC. 31, 2006* - --------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - DIVERSIFIED DIVERSIFIED EMERGING BOND EQUITY INCOME MARKETS FUND FUND FUND - --------------------------------------------------------------------------------------------- Sold 41,333,529 20,716,476 2,830,869 Issued for reinvested distributions 3,545,702 14,243,085 3,607,990 Redeemed (6,549,782) (2,974,137) (1,049,305) - --------------------------------------------------------------------------------------------- Net increase (decrease) 38,329,449 31,985,424 5,389,554 - ---------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - --------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - DIVERSIFIED DIVERSIFIED EMERGING BOND EQUITY INCOME MARKETS FUND FUND FUND - --------------------------------------------------------------------------------------------- Sold 66,150,597 66,872,272 14,243,920 Issued for reinvested distributions 7,539,299 7,606,498 999,615 Redeemed (21,056,382) (5,235,880) (3,674,525) - --------------------------------------------------------------------------------------------- Net increase (decrease) 52,633,514 69,242,890 11,569,010 - ---------------------------------------------------------------------------------------------
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 - ---------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 125
PERIOD ENDED DEC. 31, 2006* - ------------------------------------------------------------------------------------------------ RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - FUNDAMENTAL GLOBAL GLOBAL INFLATION VALUE BOND PROTECTED SECURITIES FUND FUND FUND - ------------------------------------------------------------------------------------------------ Sold 13,209,495 8,876,320 18,635,892 Issued for reinvested distributions 169,453 725,298 1,289,058 Redeemed (124,558) (2,079,563) (454,877) - ------------------------------------------------------------------------------------------------ Net increase (decrease) 13,254,390 7,522,055 19,470,073 - ------------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - ------------------------------------------------------------------------------------------------ RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - FUNDAMENTAL GLOBAL GLOBAL INFLATION VALUE BOND PROTECTED SECURITIES FUND(a) FUND FUND - ------------------------------------------------------------------------------------------------ Sold 23,142,255 16,252,656 35,080,485 Issued for reinvested distributions 1,909 1,923,444 624,006 Redeemed (243,201) (6,199,573) (6,979,442) - ------------------------------------------------------------------------------------------------ Net increase (decrease) 22,900,963 11,976,527 28,725,049 - ------------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2005 - ------------------------------------------------------------------------------------------------ RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - FUNDAMENTAL GLOBAL GLOBAL INFLATION VALUE BOND PROTECTED SECURITIES FUND FUND FUND(b) - ------------------------------------------------------------------------------------------------ Sold N/A 14,405,822 11,437,594 Issued for reinvested distributions N/A 2,128,628 92,952 Redeemed N/A (2,121,377) (612,356) - ------------------------------------------------------------------------------------------------ Net increase (decrease) N/A 14,413,073 10,918,190 - ------------------------------------------------------------------------------------------------
PERIOD ENDED DEC. 31, 2006* - ------------------------------------------------------------------------------------------------ RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - GROWTH HIGH YIELD INCOME FUND BOND OPPORTUNITIES FUND FUND - ------------------------------------------------------------------------------------------------ Sold 1,795,840 4,649,214 13,653,726 Issued for reinvested distributions 241,573 4,684,842 631,708 Redeemed (4,955,872) (10,403,935) (268,671) - ------------------------------------------------------------------------------------------------ Net increase (decrease) (2,918,459) (1,069,879) 14,016,763 - ------------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - ------------------------------------------------------------------------------------------------ RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - GROWTH HIGH YIELD INCOME FUND BOND OPPORTUNITIES FUND FUND - ------------------------------------------------------------------------------------------------ Sold 49,500,097 16,227,622 21,779,525 Issued for reinvested distributions 747,698 12,636,235 586,469 Redeemed (21,266,893) (34,818,886) (984,015) - ------------------------------------------------------------------------------------------------ Net increase (decrease) 28,980,902 (5,955,029) 21,381,979 - ------------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2005 - ------------------------------------------------------------------------------------------------ RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - GROWTH HIGH YIELD INCOME FUND BOND OPPORTUNITIES FUND FUND - ------------------------------------------------------------------------------------------------ Sold 16,903,922 21,655,621 3,565,312 Issued for reinvested distributions 183,638 11,919,547 140,682 Redeemed (3,733,894) (20,228,641) (934,015) - ------------------------------------------------------------------------------------------------ Net increase (decrease) 13,353,666 13,346,527 2,771,979 - ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ 126 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT
PERIOD ENDED DEC. 31, 2006* - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - INTERNATIONAL LARGE CAP LARGE CAP OPPORTUNITY EQUITY VALUE FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 1,023,262 185,194 259,377 Issued for reinvested distributions 1,024,536 853,308 111,695 Redeemed (6,138,650) (14,753,800) (65,500) - -------------------------------------------------------------------------------------------- Net increase (decrease) (4,090,852) (13,715,298) 305,572 - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - INTERNATIONAL LARGE CAP LARGE CAP OPPORTUNITY EQUITY VALUE FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 3,290,061 6,446,961 563,345 Fund merger N/A 77,634,189 N/A Issued for reinvested distributions 1,754,001 1,647,637 58,492 Redeemed (19,700,173) (39,632,021) (201,307) - -------------------------------------------------------------------------------------------- Net increase (decrease) (14,656,111) 46,096,766 420,530 - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2005 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - INTERNATIONAL LARGE CAP LARGE CAP OPPORTUNITY EQUITY VALUE FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 10,041,363 9,638,209 691,507 Issued for reinvested distributions 1,545,947 1,352,452 17,147 Redeemed (11,718,071) (25,298,441) (88,533) - -------------------------------------------------------------------------------------------- Net increase (decrease) (130,761) (14,307,780) 620,121 - --------------------------------------------------------------------------------------------
PERIOD ENDED DEC. 31, 2006* - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - MID CAP MID CAP S&P 500 GROWTH VALUE INDEX FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 204,961 9,283,567 719,158 Issued for reinvested distributions 2,478,097 365,184 481,856 Redeemed (6,966,156) (235,125) (1,803,618) - -------------------------------------------------------------------------------------------- Net increase (decrease) (4,283,098) 9,413,626 (602,604) - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - MID CAP MID CAP S&P 500 GROWTH VALUE INDEX FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 1,916,243 17,680,414 3,049,759 Fund merger 51,642,855 N/A N/A Issued for reinvested distributions 1,683,389 18,726 742,959 Redeemed (11,079,161) (263,812) (6,584,030) - -------------------------------------------------------------------------------------------- Net increase (decrease) 44,163,326 17,435,328 (2,791,312) - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2005 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - MID CAP MID CAP S&P 500 GROWTH VALUE INDEX FUND FUND(c) FUND - -------------------------------------------------------------------------------------------- Sold 1,840,161 428,140 8,702,124 Issued for reinvested distributions -- 171 631,315 Redeemed (3,566,894) (5,284) (2,660,665) - -------------------------------------------------------------------------------------------- Net increase (decrease) (1,726,733) 423,027 6,672,774 - --------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 127
PERIOD ENDED DEC. 31, 2006* - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - SELECT SHORT DURATION SMALL CAP VALUE U.S. GOVERNMENT ADVANTAGE FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 130,952 1,559,918 144,790 Issued for reinvested distributions 241,551 615,472 2,176,662 Redeemed (135,982) (2,866,142) (1,248,454) - -------------------------------------------------------------------------------------------- Net increase (decrease) 236,521 (690,752) 1,072,998 - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - SELECT SHORT DURATION SMALL CAP VALUE U.S. GOVERNMENT ADVANTAGE FUND FUND FUND - -------------------------------------------------------------------------------------------- Sold 465,908 6,812,654 580,024 Issued for reinvested distributions 80,918 1,670,663 2,188,623 Redeemed (330,201) (10,142,070) (2,551,105) - -------------------------------------------------------------------------------------------- Net increase (decrease) 216,625 (1,658,753) 217,542 - --------------------------------------------------------------------------------------------
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 - --------------------------------------------------------------------------------------------
PERIOD ENDED DEC. 31, 2006* - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - SMALL CAP VALUE FUND - -------------------------------------------------------------------------------------------- Sold 2,823,228 Issued for reinvested distributions 4,206,725 Redeemed (1,923,250) - -------------------------------------------------------------------------------------------- Net increase (decrease) 5,106,703 - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2006 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - SMALL CAP VALUE FUND - -------------------------------------------------------------------------------------------- Sold 9,622,399 Issued for reinvested distributions 2,433,216 Redeemed (4,112,520) - -------------------------------------------------------------------------------------------- Net increase (decrease) 7,943,095 - --------------------------------------------------------------------------------------------
YEAR ENDED AUG. 31, 2005 - -------------------------------------------------------------------------------------------- RIVERSOURCE VP - SMALL CAP VALUE FUND - -------------------------------------------------------------------------------------------- - -Sold 9,958,388 Issued for reinvested distributions 1,666,706 Redeemed (593,056) - -------------------------------------------------------------------------------------------- Net increase (decrease) 11,032,038 - -------------------------------------------------------------------------------------------- * For the period from Sept. 1, 2006 to Dec. 31, 2006. (a) For the period from May 1, 2006 (date the Fund became available) to Aug. 31, 2006. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005.
- ------------------------------------------------------------------------------ 128 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 5. FORWARD FOREIGN CURRENCY CONTRACTS At Dec. 31, 2006, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund and RiverSource VP - International Opportunity Fund have entered into forward foreign currency exchange contracts that obligate the Funds 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 - ------------------------------------------------------------------------------------------------------------------- Jan. 2, 2007 1,254,821 1,457,000 $ -- $ 5,250 U.S. Dollar Canadian Dollar Jan. 3, 2007 5,604,788 4,262,520 21,737 -- U.S. Dollar European Monetary Unit Jan. 4, 2007 4,100,000 3,592,080 75,785 -- Canadian Dollar U.S. Dollar Jan. 4, 2007 699,315 82,947,106 -- 2,280 U.S. Dollar Japanese Yen Jan. 5, 2007 675,000 1,326,186 4,459 -- British Pound U.S. Dollar Jan. 5, 2007 4,522,758 536,385,547 -- 14,710 U.S. Dollar Japanese Yen Jan. 5, 2007 1,491 176,865 -- 5 U.S. Dollar Japanese Yen Jan. 8, 2007 20,995,000 27,970,379 250,905 -- European Monetary Unit U.S. Dollar Jan. 8, 2007 2,980,000 3,978,836 44,374 -- European Monetary Unit U.S. Dollar Jan. 8, 2007 2,880,000 3,787,776 -- 14,657 European Monetary Unit U.S. Dollar Jan. 18, 2007 8,161,512 950,000,000 -- 163,262 U.S. Dollar Japanese Yen - ------------------------------------------------------------------------------------------------------------------- Total $ 397,260 $ 200,164 - -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 129 RiverSource VP - Global Inflation Protected Securities Fund
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------------------------- Jan. 4, 2007 18,586,000 16,283,511 $ 343,546 $ -- Canadian Dollar U.S. Dollar Jan. 4, 2007 486,300 423,348 6,281 -- Canadian Dollar U.S. Dollar Jan. 5, 2007 47,130,000 92,597,254 311,335 -- British Pound U.S. Dollar Jan. 5, 2007 1,012,000 1,987,264 5,653 -- British Pound U.S. Dollar Jan. 5, 2007 1,400,000 2,749,852 8,492 -- British Pound U.S. Dollar Jan. 8, 2007 77,151,000 102,783,648 922,009 -- European Monetary Unit U.S. Dollar Jan. 8, 2007 1,554,000 2,068,638 16,909 -- European Monetary Unit U.S. Dollar Jan. 8, 2007 2,850,000 3,756,899 -- 5,926 European Monetary Unit U.S. Dollar Jan. 11, 2007 74,775,000 11,071,217 144,927 -- Swedish Krona U.S. Dollar Jan. 12, 2007 2,043,735,000 17,881,698 688,945 -- Japanese Yen U.S. Dollar Jan. 12, 2007 37,063,000 323,299 11,510 -- Japanese Yen U.S. Dollar - ------------------------------------------------------------------------------------------------------------------- Total $ 2,459,607 $ 5,926 - -------------------------------------------------------------------------------------------------------------------
RiverSource VP - International Opportunity Fund
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION - ------------------------------------------------------------------------------------------------------------------- Jan. 3, 2007 804,804 985,000 $ 3,567 $ -- U.S. Dollar Swiss Franc
6. LENDING OF PORTFOLIO SECURITIES In order to generate additional income, each Fund may lend securities representing up to one-third of the value of its total assets (which includes collateral for securities on loan) to broker-dealers, banks, or other institutional borrowers of securities. Each Fund receives collateral in the form of cash and U.S. government securities, equal to at least 100% of the value of securities loaned, which is marked to the market value of the loaned securities daily until the securities are returned, e.g., if the value of the securities on loan increases, additional cash collateral is provided by the borrower. The Investment Manager serves as securities lending agent for the Funds under the investment management services agreement pursuant to which each Fund has agreed to reimburse the Investment Manager for expenses incurred by it in connection with the lending program, and pursuant to guidelines adopted by and under the oversight of the Board. Presented below is information regarding securities on loan at Dec. 31, 2006.
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - BALANCED DIVERSIFIED DIVERSIFIED HIGH YIELD FUND BOND EQUITY INCOME BOND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------- Value of securities on loan to brokers $ 44,224,685 $100,528,280 $ 18,672,913 $ 1,540,000 - ------------------------------------------------------------------------------------------------------------------------- Collateral received for securities loaned: Cash $ 45,579,375 $103,523,750 $ 19,669,800 $ 1,616,000 U.S. government securities, at value -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Total collateral received for securities loaned $ 45,579,375 $103,523,750 $ 19,669,800 $ 1,616,000 - -------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------ 130 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT
RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - RIVERSOURCE VP - INTERNATIONAL LARGE CAP MID CAP SMALL CAP OPPORTUNITY EQUITY GROWTH ADVANTAGE FUND FUND FUND FUND - ------------------------------------------------------------------------------------------------------------------------- Value of securities on loan to brokers $7,968,310 $ 9,916,664 $4,553,934 $616,170 - ------------------------------------------------------------------------------------------------------------------------- Collateral received for securities loaned: Cash $8,673,000 $10,739,000 $4,678,800 $664,000 U.S. government securities, at value -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Total collateral received for securities loaned $8,673,000 $10,739,000 $4,678,800 $664,000 - -------------------------------------------------------------------------------------------------------------------------
RIVERSOURCE VP - SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- Value of securities on loan to brokers $15,612,752 - -------------------------------------------------------------------------------- Collateral received for securities loaned: Cash $16,505,900 U.S. government securities, at value -- - -------------------------------------------------------------------------------- Total collateral received for securities loaned $16,505,900 - --------------------------------------------------------------------------------
Cash collateral received is invested in an affiliated money market fund and short-term securities, including U.S. government securities or other high-grade debt obligations, which are included in the "Investments in securities." Income from securities lending for the periods indicated are as follows:
YEAR ENDED PERIOD ENDED DEC. 31, 2006 AUG. 31, 2006 FUND AMOUNT AMOUNT - -------------------------------------------------------------------------------- RiverSource VP - Balanced Fund $ 24,438 $191,300 RiverSource VP - Diversified Bond Fund 103,452 530,882 RiverSource VP - Diversified Equity Income Fund 64,983 217,630 RiverSource VP - Global Bond Fund 11,727 9,274 RiverSource VP - Growth Fund -- 48,444 RiverSource VP - High Yield Bond Fund 2,827 -- RiverSource VP - International Opportunity Fund 103,960 854,518 RiverSource VP - Large Cap Equity Fund 33,932 411,482 RiverSource VP - Mid Cap Growth Fund 21,831 59,715 RiverSource VP - Small Cap Advantage Fund 12,686 37,231 RiverSource VP - Small Cap Value Fund 72,824 41,806 - --------------------------------------------------------------------------------
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 Dec. 31, 2006, RiverSource VP - Balanced Fund's investments in securities included securities valued at $375,045 that were pledged as collateral to cover initial margin deposits on 355 open purchase interest rate futures contracts and 208 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Dec. 31, 2006 was $38,822,125 with a net unrealized loss of $432,338. The notional market value of the open sale interest rate futures contracts at Dec. 31, 2006 was $40,261,188 with a net unrealized gain of $189,580. See "Summary of significant accounting policies" and "Notes to investments in securities." At Dec. 31, 2006, RiverSource VP - Core Bond Fund's investments in securities included securities valued at $35,859 that were pledged as collateral to cover initial margin deposits on 35 open purchase interest rate futures contracts and six open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Dec. 31, 2006 was $3,772,938 with a net unrealized loss of $36,902. The notional market value of the open sale interest rate futures contracts at Dec. 31, 2006 was $1,224,188 with a net unrealized gain of $5,498. See "Summary of significant accounting policies" and "Notes to investments in securities." At Dec. 31, 2006, RiverSource VP - Diversified Bond Fund's investments in securities included securities valued at $1,142,602 that were pledged as collateral to cover initial margin deposits on 2,092 open purchase interest rate futures contracts and 102 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Dec. 31, 2006 was $223,340,188 with a net unrealized loss of $1,666,692. The notional market value of the open sale interest rate futures contracts at Dec. 31, 2006 was $20,811,188 with a net unrealized gain of $94,600. See "Summary of significant accounting policies" and "Notes to investments in securities." - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 131 At Dec. 31, 2006, RiverSource VP - Global Bond Fund's investments in securities included securities valued at $399,814 that were pledged as collateral to cover initial margin deposits on open purchase and open sale interest rate futures contracts. See "Summary of significant accounting policies" and "Notes to investments in securities." The terms of the open purchase and sale contracts are as follows:
NUMBER OF NOTIONAL UNREALIZED TYPE OF SECURITY CONTRACTS MARKET VALUE GAIN (LOSS) - ------------------------------------------------------------------------------------------------- PURCHASE CONTRACTS Euro-Bund, March 2007, 10-year (European Monetary Unit) 100 $ 15,315,955 $ (378,499) Japanese Govt Bond, March 2007, 10-year (Japanese Yen) 4 4,505,882 (11,709) U.S. Long Bond, March 2007, 20-year (U.S. Dollar) 55 6,129,063 (110,595) U.S. Treasury Note, March 2007, 2-year (U.S. Dollar) 142 28,972,438 (93,488) - ------------------------------------------------------------------------------------------------- Total $ 54,923,338 $ (594,291) - -------------------------------------------------------------------------------------------------
NUMBER OF NOTIONAL UNREALIZED SALE CONTRACTS CONTRACTS MARKET VALUE GAIN (LOSS) - ------------------------------------------------------------------------------------------------- U.S. Treasury Note, March 2007, 5-year (U.S. Dollar) 10 $ 1,050,625 $ 7,861 U.S. Treasury Note, March 2007, 10-year (U.S. Dollar) 216 23,213,250 410,541 - ------------------------------------------------------------------------------------------------- Total $ 24,263,875 $ 418,402 - -------------------------------------------------------------------------------------------------
At Dec. 31, 2006, RiverSource VP - Large Cap Equity Fund's investments in securities included securities valued at $6,400,320 that were pledged as collateral to cover initial margin deposits on 256 open purchase stock index futures contracts. The notional market value of the open purchase stock index futures contracts at Dec. 31, 2006 was $91,417,600 with a net unrealized gain of $243,621. See "Summary of significant accounting policies" and "Notes to investments in securities." At Dec. 31, 2006, RiverSource VP - S&P 500 Index Fund's investments in securities included securities valued at $577,226 that were pledged as collateral to cover initial margin deposits on 82 open purchase stock index futures contracts. The notional market value of the open purchase stock index futures contracts at Dec. 31, 2006 was $5,856,440 with a net unrealized gain of $2,707. See "Summary of significant accounting policies" and "Notes to investments in securities." At Dec. 31, 2006, RiverSource VP - Short Duration U.S. Government Fund's investments in securities included securities valued at $134,636 that were pledged as collateral to cover initial margin deposits on 277 open purchase interest rate futures contracts and 261 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Dec. 31, 2006 was $46,817,719 with a net unrealized loss of $203,980. The notional market value of the open sale interest rate futures contracts at Dec. 31, 2006 was $28,275,563 with a net unrealized gain of $500,273. See "Summary of significant accounting policies" and "Notes to investments in securities." 8. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written by RiverSource VP - Growth Fund during the period ended Dec. 31, 2006 are as follows:
CALLS - ----------------------------------------------------------------------------- CONTRACTS PREMIUMS - ----------------------------------------------------------------------------- Balance Aug. 31, 2006 300 $ 649,830 Opened 7,980 710,816 Closed (300) (649,830) - ----------------------------------------------------------------------------- Balance Dec. 31, 2006 7,980 $ 710,816 - -----------------------------------------------------------------------------
See "Summary of significant accounting policies." Contracts and premiums associated with options contracts written by RiverSource VP - Large Cap Equity Fund during the period ended Dec. 31, 2006 are as follows:
CALLS - ----------------------------------------------------------------------------- CONTRACTS PREMIUMS - ----------------------------------------------------------------------------- Balance Aug. 31, 2006 630 $ 1,364,618 Opened 15,268 1,360,071 Closed (630) (1,364,618) - ----------------------------------------------------------------------------- Balance Dec. 31, 2006 15,268 $ 1,360,071 - -----------------------------------------------------------------------------
See "Summary of significant accounting policies." - ------------------------------------------------------------------------------ 132 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 9. SWAP CONTRACTS At Dec. 31, 2006, the following Funds had open CBMS total return swap contracts: RiverSource VP - Balanced Fund
UNREALIZED TERMINATION NOTIONAL APPRECIATION DATE AMOUNT (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 0.40%. Counterparty: Wachovia Jan. 1, 2007 $ 8,575,000 $ (132,008) - ----------------------------------------------------------------------------------------------------------------------
RiverSource VP - Core Bond Fund
UNREALIZED TERMINATION NOTIONAL APPRECIATION DATE AMOUNT (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 0.40%. Counterparty: Wachovia Jan. 1, 2007 $ 750,000 $ (11,546) - ----------------------------------------------------------------------------------------------------------------------
RiverSource VP - Diversified Bond Fund
UNREALIZED TERMINATION NOTIONAL APPRECIATION DATE AMOUNT (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 0.40%. Counterparty: Wachovia Jan. 1, 2007 $30,390,000 $ (467,838) - ----------------------------------------------------------------------------------------------------------------------
RiverSource VP - Global Bond Fund
UNREALIZED TERMINATION NOTIONAL APPRECIATION DATE AMOUNT (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 0.40%. Counterparty: Wachovia Jan. 1, 2007 $ 8,785,000 $ (135,240) - ----------------------------------------------------------------------------------------------------------------------
At Dec. 31, 2006, the following Fund had open total return equity swap contracts: RiverSource VP - Large Cap Equity Fund
UNREALIZED TERMINATION NOTIONAL APPRECIATION DATE AMOUNT (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------- Receive total return on a basket of large cap industrial securities and pay a floating rate based on 1-month LIBOR plus 0.20%. Counterparty: Citigroup May 7, 2007 $ 6,100,000 $ (122,914) Receive total return on a basket of large cap health care securities and pay a floating rate based on 1-month LIBOR plus 0.20%. Counterparty: Merrill Lynch Oct. 17, 2007 7,023,600 113,612 - ---------------------------------------------------------------------------------------------------------------------- Total $ (9,302) - ----------------------------------------------------------------------------------------------------------------------
10. AFFILIATED MONEY MARKET FUND Each Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the RiverSource funds and other institutional clients of RiverSource Investments. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 133 11. BANK BORROWINGS Each Fund has a revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A. (JPMCB), 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. 19, 2006. 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 0.40% or the JPMCB Prime Commercial 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 0.06% per annum. Prior to this agreement, each Fund paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.07% per annum. None of the Funds had borrowings under the facility outstanding during the period ended Dec. 31, 2006 or during the year ended Aug. 31, 2006. 12. FUND MERGERS RiverSource VP - Large Cap Equity Fund At the close of business on March 17, 2006, RiverSource VP - Large Cap Equity Fund acquired the assets and assumed the identified liabilities of RiverSource VP - New Dimensions Fund. This reorganization was completed after shareholders approved the plan on Feb. 15, 2006. The aggregate net assets of RiverSource VP - Large Cap Equity Fund immediately before the acquisition were $2,554,119,500 and the combined net assets immediately after the acquisition were $4,350,292,892. The merger was accomplished by a tax-free exchange of 108,210,452 shares of RiverSource VP - New Dimensions Fund valued at $1,796,173,392. In exchange for the RiverSource VP - New Dimensions Fund shares and net assets, RiverSource VP - Large Cap Equity Fund issued 77,634,189 shares. RiverSource VP - New Dimensions Fund's net assets after adjustments for any permanent book-to-tax differences at the merger date were $1,796,173,392, which includes $1,758,785,888 of capital stock, $135,799,449 of unrealized appreciation, ($98,521,967) of accumulated net realized loss and $110,022 of undistributed net investment income. RiverSource VP - Mid Cap Growth Fund At the close of business on March 17, 2006, RiverSource VP - Mid Cap Growth Fund acquired the assets and assumed the identified liabilities of RiverSource VP - Strategy Aggressive Fund. This reorganization was completed after shareholders approved the plan on Feb. 15, 2006. The aggregate net assets of RiverSource VP - Mid Cap Growth Fund immediately before the acquisition were $263,887,643 and the combined net assets immediately after the acquisition were $900,721,592. The merger was accomplished by a tax-free exchange of 70,072,924 shares of RiverSource VP - Strategy Aggressive Fund valued at $636,833,949. In exchange for the RiverSource VP - Strategy Aggressive Fund shares and net assets, RiverSource VP - Mid Cap Growth Fund issued 51,642,855 shares. RiverSource VP - Strategy Aggressive Fund's net assets after adjustments for any permanent book-to-tax differences at the merger date were $636,833,949, which includes $1,733,718,560 of capital stock, $59,822,571 of unrealized appreciation, ($1,156,578,196) of accumulated net realized loss and ($128,986) of temporary book-to-tax differences. 13. CAPITAL LOSS CARRY-OVER For federal income tax purposes, capital loss carry-overs at Dec. 31, 2006 are as follows:
FUND CARRY-OVER - -------------------------------------------------------------------------------------- RiverSource VP - Balanced Fund $ 35,624,602 RiverSource VP - Cash Management Fund 968 RiverSource VP - Core Bond Fund 636,372 RiverSource VP - Diversified Bond Fund(a) 140,432,283 RiverSource VP - Global Bond Fund 527,778 RiverSource VP - Global Inflation Protected Securities Fund 1,165,851 RiverSource VP - Growth Fund 80,007,343 RiverSource VP - High Yield Bond Fund 217,387,619 RiverSource VP - International Opportunity Fund(a) 434,867,848 RiverSource VP - Large Cap Equity Fund(a) 145,318,120 RiverSource VP - Mid Cap Growth Fund 1,117,336,399 RiverSource VP - Short Duration U.S. Government Fund(a) 11,387,600 - -------------------------------------------------------------------------------------- (a) As a result of a 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.
- ------------------------------------------------------------------------------ 134 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 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 2010 - ------------------------------------------------------------------------------------------------------------------------------------ RiverSource VP - Balanced Fund $ -- $ 35,624,602 $ -- $ -- RiverSource VP - Cash Management Fund 818 -- -- -- RiverSource VP - Core Bond Fund -- -- -- -- RiverSource VP - Diversified Bond Fund 53,324,465 47,894,894 9,863,475 15,651,826 RiverSource VP - Global Bond Fund -- -- -- -- RiverSource VP - Global Inflation Protected Securities Fund -- -- -- -- RiverSource VP - Growth Fund -- -- -- 75,486,831 RiverSource VP - High Yield Bond Fund -- 9,616,792 100,694,093 106,316,241 RiverSource VP - International Opportunity Fund -- 17,527,276 304,876,014 90,583,080 RiverSource VP - Large Cap Equity Fund 27,959,838 34,622,634 7,516,387 75,219,261 RiverSource VP - Mid Cap Growth Fund -- 767,257,789 310,534,170 39,544,440 RiverSource VP - Short Duration U.S. Government Fund -- -- -- 68,450 - ------------------------------------------------------------------------------------------------------------------------------------
FUND 2011 2012 2013 2014 2015 - ------------------------------------------------------------------------------------------------------------------------------------ RiverSource VP - Balanced Fund $ -- $ -- $ -- $ -- $ -- RiverSource VP - Cash Management Fund -- -- 150 -- -- RiverSource VP - Core Bond Fund -- -- 171,449 394,277 70,646 RiverSource VP - Diversified Bond Fund 4,231,263 -- 7,546,166 -- 1,920,194 RiverSource VP - Global Bond Fund -- -- 122,441 185,503 219,834 RiverSource VP - Global Inflation Protected Securities Fund -- -- -- 1,165,851 -- RiverSource VP - Growth Fund -- -- -- 3,482,953 1,037,559 RiverSource VP - High Yield Bond Fund -- -- 760,493 -- -- RiverSource VP - International Opportunity Fund 21,881,478 -- -- -- -- RiverSource VP - Large Cap Equity Fund -- -- -- -- -- RiverSource VP - Mid Cap Growth Fund -- -- -- -- -- RiverSource VP - Short Duration U.S. Government Fund -- 4,186, 493 3,894,750 3,130,115 107,792 - ------------------------------------------------------------------------------------------------------------------------------------
The Funds, in connection with the mergers as described in Note 12, acquired the following capital loss carry-overs, which are limited by the Internal Revenue Code Section 382, and unrealized capital gains:
FUND CARRY-OVER - ------------------------------------------------------------------------------------------------------------------------------------ RiverSource VP - Large Cap Equity Fund $ 252,134,353 RiverSource VP - Mid Cap Growth Fund 1,130,500,468 - ------------------------------------------------------------------------------------------------------------------------------------
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. 14. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc., was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to our motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Discovery is currently set to end in March 2007. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource Investments, LLC (RiverSource Investments), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. In connection with these matters, the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain provisions of the federal and Minnesota securities laws by failing to adequately disclose market timing activities by allowing certain identified market timers to continue to market time contrary to disclosures in mutual fund and variable annuity product prospectuses. The Orders also alleged that AEFC failed to implement procedures to detect and prevent market timing in 401(k) plans for employees of AEFC and related companies and failed to adequately disclose that there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged that AEFC allowed inappropriate market timing to occur by failing to have written policies and procedures and failing to properly supervise its employees. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 135 As a result of the Orders, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to make presentations at least annually to its board of directors and the relevant mutual funds' board that include an overview of policies and procedures to prevent market timing, material changes to these policies and procedures and whether disclosures related to market timing are consistent with the SEC order and federal securities laws. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to complete and submit to the MDOC a compliance review of its procedures regarding market timing within one year of the MDOC Order, including a summary of actions taken to ensure compliance with applicable laws and regulations and certification by a senior officer regarding compliance and supervisory procedures. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. 15. CHANGE OF FUND'S FISCAL YEAR The By-Laws of RiverSource Variable Portfolio - Income Series, Inc., RiverSource Variable Portfolio - Investment Series, Inc., RiverSource Variable Portfolio - Managed Series, Inc., RiverSource Variable Portfolio - Managers Series, Inc., and RiverSource Variable Portfolio - Money Market Series, Inc. were amended on April 13, 2006, changing their fiscal year end from Aug. 31 to Dec. 31, effective Dec. 31, 2006. - ------------------------------------------------------------------------------ 136 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 16. 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)
PERIOD ENDED DEC.31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 15.44 $ 15.18 $ 14.17 $ 13.00 $ 12.32 $15.30 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .41 .35 .31 .31 .33 Net gains (losses) (both realized and unrealized) 1.04 .72 1.02 1.17 .82 (1.88) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.17 1.13 1.37 1.48 1.13 (1.55) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.41) (.36) (.31) (.31) (.34) Distributions from realized gains (.90) (.46) -- -- (.14) (1.09) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.00) (.87) (.36) (.31) (.45) (1.43) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 15.61 $ 15.44 $ 15.18 $ 14.17 $ 13.00 $12.32 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 2,071 $ 2,046 $ 2,437 $ 2,664 $ 2,416 $2,709 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) .84%(e) .77% .82% .78% .80% .77% - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 2.43%(e) 2.63% 2.34% 2.16% 2.48% 2.31% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 38% 130% 131% 133% 119% 103% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 7.73%(g) 7.76% 9.68% 11.39% 9.40% (10.91%) - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
RiverSource VP - Cash Management Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC.31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .04 .02 -- .01 .02 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.04) (.02) -- (.01) (.02) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 1,055 $ 999 $ 688 $ 773 $ 868 $ 1,123 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c) .60%(d) .67% .70% .69% .70% .69% - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 4.66%(d) 4.01% 1.88% .47% .72% 1.61% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(e) 1.54%(f) 4.01% 1.92% .48% .72% 1.59% - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (f) Not annualized.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 137 RiverSource VP - Core Bond Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC.31, YEAR ENDED AUG.31, 2006(b) 2006 2005 2004(c) Net asset value, beginning of period $ 9.77 $ 10.05 $ 10.01 $ 9.98 - ---------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .14 .39 .31 .14 Net gains (losses) (both realized and unrealized) .04 (.26) .04 .03 - ---------------------------------------------------------------------------------------------------------------------- Total from investment operations .18 .13 .35 .17 - ---------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.14) (.39) (.31) (.14) Distributions from realized gains -- (.02) -- -- - ---------------------------------------------------------------------------------------------------------------------- Total distributions (.14) (.41) (.31) (.14) - ---------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.81 $ 9.77 $ 10.05 $ 10.01 - ---------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 66 $ 63 $ 58 $ 36 - ---------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) .83%(g) .86% .95% .95%(g) - ---------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily daily net assets 4.28%(g) 3.97% 3.10% 2.33%(g) - ---------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 106% 319% 339% 221% - ---------------------------------------------------------------------------------------------------------------------- Total return(h) 1.85%(i) 1.38% 3.64% 1.67%(i) - ---------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 0.93% for the period ended Dec. 31, 2006 and 0.96%, 1.01% and 1.13% for the periods ended Aug. 31, 2006, 2005 and 2004, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
RiverSource VP - Diversified Bond Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG.31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 10.39 $ 10.66 $ 10.62 $ 10.40 $ 10.38 $ 10.61 - ------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .16 .43 .39 .38 .44 .56 Net gains (losses) (both realized and unrealized) .08 (.27) .06 .22 .02 (.23) - ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .24 .16 .45 .60 .46 .33 - ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.16) (.43) (.41) (.38) (.44) (.56) - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 10.47 $ 10.39 $ 10.66 $ 10.62 $ 10.40 $ 10.38 - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 2,745 $ 2,325 $ 1,824 $ 1,696 $ 1,765 $ 1,814 - ------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) .74%(e) .80% .82% .81% .81% .80% - ------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 4.57%(e) 4.15% 3.65% 3.60% 4.23% 5.41% - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 109% 292% 293% 295% 251% 167% - ------------------------------------------------------------------------------------------------------------------------------ Total return(f) 2.32%(g) 1.58% 4.27% 5.84% 4.50% 3.20% - ------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
- ------------------------------------------------------------------------------ 138 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC.31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 15.09 $ 13.83 $ 11.17 $ 9.65 $ 8.41 $ 10.20 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .23 .20 .17 .17 .13 Net gains (losses) (both realized and unrealized) 1.33 1.80 2.65 1.51 1.24 (1.75) - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.40 2.03 2.85 1.68 1.41 (1.62) - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.22) (.19) (.16) (.17) (.13) Distributions from realized gains (.96) (.55) -- -- -- (.04) - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.01) (.77) (.19) (.16) (.17) (.17) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 15.48 $ 15.09 $ 13.83 $ 11.17 $ 9.65 $ 8.41 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 3,446 $ 2,877 $ 1,679 $ 843 $ 370 $ 267 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) .91%(e) .91% .84% .86% .76% .87% - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.39%(e) 1.61% 1.66% 1.77% 2.13% 1.59% - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 5% 27% 25% 19% 39% 35% - ----------------------------------------------------------------------------------------------------------------------------------- Total return(f) 9.37%(g) 15.19% 25.59% 17.53% 17.00% (16.16%) - ----------------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
RiverSource VP - Emerging Markets Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 16.32 $ 13.14 $ 9.80 $ 8.44 $ 7.04 $ 6.68 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) .09 .06 .09 .04 .02 Net gains (losses) (both realized and unrealized) 3.21 3.85 3.72 1.39 1.38 .34 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 3.19 3.94 3.78 1.48 1.42 .36 - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income -- (.06) (.06) (.12) (.02) -- Distributions from realized gains (2.16) (.70) (.38) -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (2.16) (.76) (.44) (.12) (.02) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 17.35 $ 16.32 $ 13.14 $ 9.80 $ 8.44 $ 7.04 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 548 $ 427 $ 192 $ 46 $ 16 $ 10 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) 1.51%(e) 1.54% 1.55% 1.61%(f) 1.75%(f) 1.68%(f) - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets (.36%)(e) .68% .58% .65% .67% .31% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 46% 146% 120% 117% 191% 215% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(g) 20.17%(h) 30.97% 39.60% 17.63% 20.25% 5.45% - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager 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% and 2.36% for the years ended Aug. 31, 2004, 2003 and 2002, respectively. (g) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (h) Not annualized.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 139 RiverSource VP - Fundamental Value Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, 2006(b) PERIOD ENDED AUG. 31, 2006(c) Net asset value, beginning of period $ 10.03 $ 10.06 - ----------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 .02 Net gains (losses) (both realized and unrealized) .91 (.03) - ----------------------------------------------------------------------------------------------------------------------------- Total from investment operations .94 (.01) - ----------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.02) Distributions from realized gains (.02) -- Tax return of capital (.01) -- - ----------------------------------------------------------------------------------------------------------------------------- Total distributions (.05) (.02) - ----------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.92 $ 10.03 - ----------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 397 $ 232 - ----------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) 1.02%(f) 1.07%(f),( g) - ----------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .83%(f) 1.27%(f) - ----------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 3% 3% - ----------------------------------------------------------------------------------------------------------------------------- Total return(h) 9.30%(i) (.05%)(i) - ----------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from May 1, 2006 (date the Fund became available) to Aug. 31, 2006. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.15% for the period ended Aug. 31, 2006. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
RiverSource VP - Global Bond Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC.31, YEAR ENDED AUG.31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 10.79 $ 11.02 $ 10.82 $ 10.40 $ 10.02 $ 9.76 - -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .12 .30 .34 .35 .34 .38 Net gains (losses) (both realized and unrealized) .11 (.17) .39 .73 .61 .36 - -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .23 .13 .73 1.08 .95 .74 - -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.12) (.31) (.53) (.66) (.57) (.48) Distributions from realized gains -- (.05) -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.12) (.36) (.53) (.66) (.57) (.48) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.90 $ 10.79 $ 11.02 $ 10.82 $ 10.40 $ 10.02 - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 782 $ 692 $ 575 $ 409 $ 312 $ 233 - -------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.00%(e) 1.06% 1.08% 1.08% 1.09% 1.08% - -------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 3.22%(e) 2.85% 2.63% 2.76% 3.08% 3.92% - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 20% 65% 79% 105% 102% 46% - -------------------------------------------------------------------------------------------------------------------------------- Total return(f) 2.15%(g) 1.27% 6.75% 10.57% 9.56% 7.83% - -------------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
- ------------------------------------------------------------------------------ 140 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005(c) Net asset value, beginning of period $10.04 $10.19 $10.00 - -------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .06 .47 .32 Net gains (losses) (both realized and unrealized) (.10) (.26) .19 - -------------------------------------------------------------------------------------------------------------------- Total from investment operations (.04) .21 .51 - -------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.24) (.34) (.32) Distributions from realized gains -- (.02) -- - -------------------------------------------------------------------------------------------------------------------- Total distributions (.24) (.36) (.32) - -------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.76 $10.04 $10.19 - -------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 582 $ 403 $ 116 - -------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e) .72%(f) .72%(g) .75%(f),(g) - -------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.09%(f) 4.23% 3.42%(f) - -------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) --% 75% 29% - -------------------------------------------------------------------------------------------------------------------- Total return(h) (.49%)(i) 2.18% 5.22%(i) - -------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 0.77% and 0.87% for the periods ended Aug. 31, 2006 and 2005, respectively. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
RiverSource VP - Growth Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 6.93 $ 6.61 $ 5.69 $ 5.45 $5.00 $ 6.48 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 .06 .03 .02 .01 -- Net gains (losses) (both realized and unrealized) .57 .33 .91 .24 .45 (1.48) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .58 .39 .94 .26 .46 (1.48) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.01) (.07) (.02) (.02) (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 7.50 $ 6.93 $ 6.61 $ 5.69 $5.45 $ 5.00 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 640 $ 612 $ 392 $ 261 $ 223 $ 144 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets (c),(d) 1.01%(e) .91% .92% .85% .99% .81% - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .59%(e) 1.04% .42% .27% .20% --% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 30% 156% 154% 192% 199% 272% - ------------------------------------------------------------------------------------------------------------------------------------ Total return (f) 8.27%(g) 5.79% 16.74% 4.64% 9.29% (22.80%) - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 141 RiverSource VP - High Yield Bond Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 6.68 $ 6.76 $ 6.60 $ 6.22 $5.66 $ 6.83 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .16 .47 .44 .47 .48 .56 Net gains (losses) (both realized and unrealized) .19 (.09) .16 .38 .54 (1.17) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .35 .38 .60 .85 1.02 (.61) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.18) (.46) (.44) (.47) (.46) (.56) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 6.85 $ 6.68 $ 6.76 $ 6.60 $6.22 $ 5.66 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 1,216 $ 1,192 $ 1,246 $ 1,130 $ 843 $ 577 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) .88%(e) .87% .83% .82% .83% .83% - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 7.35%(e) 7.02% 6.58% 7.30% 8.31% 8.91% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 29% 106% 106% 139% 141% 135% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 5.43%(g) 5.76% 9.31% 14.03% 18.81% (9.33%) - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
RiverSource VP - Income Opportunities Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC.31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004(c) Net asset value, beginning of period $10.08 $ 10.39 $ 10.29 $ 9.93 - ------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .22 .64 .59 .15 Net gains (losses) (both realized and unrealized) .24 (.26) .18 .36 - ------------------------------------------------------------------------------------------------------------------------ Total from investment operations .46 .38 .77 .51 - ------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.22) (.64) (.59) (.15) Distributions from realized gains -- (.05) (.08) -- - ------------------------------------------------------------------------------------------------------------------------ Total distributions (.22) (.69) (.67) (.15) - ------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $10.32 $ 10.08 $ 10.39 $ 10.29 - ------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 409 $ 259 $ 45 $ 16 - ------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(d),(e) .90%(f) .96% .99%(g) .99%(f),(g) - ------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 6.72%(f) 6.39% 5.69% 6.03%(f) - ------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 29% 87% 93% 36% - ------------------------------------------------------------------------------------------------------------------------ Total return(h) 4.66%(i) 3.76% 7.73% 5.17%(i) - ------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates 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. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
- ------------------------------------------------------------------------------ 142 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - International Opportunity Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 12.24 $ 10.02 $ 8.23 $ 7.19 $7.00 $ 8.39 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .12 .11 .08 .08 .07 Net gains (losses) (both realized and unrealized) 1.04 2.27 1.80 1.05 .16 (1.35) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.06 2.39 1.91 1.13 .24 (1.28) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.10) (.17) (.12) (.09) (.05) (.07) Distributions from realized gains -- -- -- -- -- (.01) Excess distributions from net investment income -- -- -- -- -- (.03) Tax return of capital (.01) -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.11) (.17) (.12) (.09) (.05) (.11) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.19 $ 12.24 $ 10.02 $ 8.23 $7.19 $ 7.00 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 1,311 $ 1,266 $ 1,184 $ 974 $ 738 $ 873 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) 1.08%(e) 1.12% 1.04% .98% 1.06% 1.07% - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .55%(e) 1.04% 1.19% .99% 1.19% .83% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 20% 74% 90% 142% 102% 140% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 8.72%(g) 23.82% 23.29% 15.77% 3.48% (15.38%) - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
RiverSource VP - Large Cap Equity Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 22.91 $ 21.48 $ 19.32 $ 18.04 $16.48 $20.87 - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .29 .24 .14 .10 .10 Net gains (losses) (both realized and unrealized) 2.10 1.43 2.15 1.28 1.56 (2.83) - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.19 1.72 2.39 1.42 1.66 (2.73) - ------------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.06) (.29) (.23) (.14) (.10) (.09) Distributions from realized gains -- -- -- -- -- (1.57) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (.06) (.29) (.23) (.14) (.10) (1.66) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 25.04 $ 22.91 $ 21.48 $ 19.32 $18.04 $16.48 - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 3,737 $ 3,733 $ 2,510 $ 2,535 $1,982 $2,227 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) .83%(e) .82% .80% .85% .85% .80% - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 1.16%(e) 1.30% 1.13% .72% .62% .52% - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 21% 85% 132% 114% 115% 146% - ------------------------------------------------------------------------------------------------------------------------------------ Total return(f) 9.59%(g) 8.02% 12.42% 7.87% 10.16% (14.08%) - ------------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the acquired funds which it fees and expenses of the invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 143 RiverSource VP - Large Cap Value Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004(c) Net asset value, beginning of period $ 11.71 $10.99 $ 10.00 $ 9.99 - --------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .17 .14 .05 Net gains (losses) (both realized and unrealized) 1.13 .98 1.06 .02 - --------------------------------------------------------------------------------------------------------------- Total from investment operations 1.18 1.15 1.20 .07 - --------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.17) (.14) (.06) Distributions from realized gains (.61) (.26) (.07) -- - --------------------------------------------------------------------------------------------------------------- Total distributions (.66) (.43) (.21) (.06) - --------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 12.23 $11.71 $ 10.99 $10.00 - --------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 25 $ 21 $ 15 $ 7 - --------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.05%(g) 1.02% 1.05% 1.05%(g) - --------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.33%(g) 1.55% 1.37% 1.03%(g) - --------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 13% 49% 52% 24% - --------------------------------------------------------------------------------------------------------------- Total return(h) 10.15%(i) 10.75% 12.04% .69%(i) - --------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.23% for the period ended Dec. 31, 2006 and 1.20%, 2.55% and 2.85% for the periods ended Aug. 31, 2006, 2005 and 2004, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
RiverSource VP - Mid Cap Growth Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 10.96 $ 12.43 $ 10.11 $ 10.09 $ 8.54 $ 9.57 - ---------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .03 (.01) (.04) (.05) (.05) (.04) Net gains (losses) (both realized and unrealized) .91 (.44) 2.36 .07 1.60 (.99) - ---------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .94 (.45) 2.32 .02 1.55 (1.03) - ---------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) -- -- -- -- -- Distributions from realized gains (.45) (1.02) -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions (.48) (1.02) -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 11.42 $ 10.96 $ 12.43 $ 10.11 $ 10.09 $ 8.54 - ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 690 $ 709 $ 255 $ 225 $ 170 $ 72 - ---------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) .88%(e) .92% .82% .85% 1.06% 1.10%(f) - ---------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .70%(e) (.14%) (.32%) (.49%) (.71%) (.76%) - ---------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 24% 43% 34% 25% 19% 20% - ---------------------------------------------------------------------------------------------------------------------------------- Total return(g) 8.54%(h) (4.43%) 23.03% .13% 18.20% (10.77%) - ---------------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.39% for the year ended Aug. 31, 2002. (g) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (h) Not annualized.
- ------------------------------------------------------------------------------ 144 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Mid Cap Value Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005(c) Net asset value, beginning of period $ 12.65 $ 11.42 $ 10.15 - ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .09 .01 Net gains (losses) (both realized and unrealized) .98 1.27 1.28 - ------------------------------------------------------------------------------------------------------------ Total from investment operations 1.03 1.36 1.29 - ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.09) (.02) Distributions from realized gain (.14) (.04) -- - ------------------------------------------------------------------------------------------------------------ Total distributions (.19) (.13) (.02) - ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 13.49 $ 12.65 $ 11.42 - ------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 370 $ 228 $ 7 - ------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(d),(e) 1.07%(f) 1.11%(g) 1.08%(f),(g) - ------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets 1.23%(f) 1.02% .62%(f) - ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 4% 60% 7% - ------------------------------------------------------------------------------------------------------------ Total return(h) 8.07%(i) 11.93% 12.70%(i) - ------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) Adjusted to an annual basis. (g) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.44% and 2.97% for the periods ended Aug. 31, 2006 and 2005, respectively. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
RiverSource VP - S&P 500 Index Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC.31, YEAR ENDED AUG.31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 8.85 $ 8.30 $ 7.54 $ 6.88 $ 6.24 $ 7.71 - ----------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .13 .13 .09 .08 .07 Net gains (losses) (both realized and unrealized) .77 .57 .76 .66 .64 (1.47) - ----------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .81 .70 .89 .75 .72 (1.40) - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.13) (.13) (.09) (.08) (.07) Distributions from realized gains (.04) (.02) -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total distributions (.07) (.15) (.13) (.09) (.08) (.07) - ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 9.59 $ 8.85 $ 8.30 $ 7.54 $ 6.88 $ 6.24 - ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 392 $ 367 $ 367 $ 283 $ 171 $ 99 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d),(e) .50%(f) .50% .50% .49% .50% .50% - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 1.44%(f) 1.46% 1.65% 1.21% 1.31% 1.01% - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 2% 6% 5% --% 5% 72% - ----------------------------------------------------------------------------------------------------------------------------------- Total return(g) 9.27%(h) 8.38%(i) 11.98% 10.84% 11.51% (18.29%) - ----------------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 0.51% for the period ended Dec. 31, 2006 and 0.53%, 0.56%, 0.57%, 0.64% and 0.82% for the years ended Aug. 31, 2006, 2005, 2004, 2003 and 2002, respectively. (f) Adjusted to an annual basis. (g) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (h) Not annualized. (i) The Fund received a one time transaction fee reimbursement by Ameriprise Trust Company. Had the Fund not received this reimbursement, the total return would have been lower by 0.06%.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 145 RiverSource VP - Select Value Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004(c) Net asset value, beginning of period $ 11.72 $ 11.45 $ 9.95 $ 9.98 - ------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .25 .05 .02 Net gains (losses) (both realized and unrealized) .79 .44 1.55 (.03) - ------------------------------------------------------------------------------------------------------------------------- Total from investment operations .83 .69 1.60 (.01) - ------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.03) (.25) (.05) (.02) Distributions from realized gains (1.15) (.17) (.05) -- - ------------------------------------------------------------------------------------------------------------------------- Total distributions (1.18) (.42) (.10) (.02) - ------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 11.37 $ 11.72 $ 11.45 $ 9.95 - ------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 28 $ 27 $ 23 $ 9 - ------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(d),(e),(f) 1.09%(g) 1.08% 1.15% 1.15%(g) - ------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .95%(g) 2.19% .45% .50%(g) - ------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 112% 35% 31% 13% - ------------------------------------------------------------------------------------------------------------------------- Total return(h) 7.13%(i) 6.17% 16.18% (.11%)(i) - ------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (d) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (e) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.22% for the period ended Dec. 31, 2006 and 1.19%, 1.17% and 1.97% for the periods ended Aug. 31, 2006, 2005 and 2004, respectively. (g) Adjusted to an annual basis. (h) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (i) Not annualized.
RiverSource VP - Short Duration U.S. Government Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 10.11 $10.21 $10.34 $ 10.46 $ 10.55 $10.34 - ------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .13 .36 .27 .25 .27 .34 Net gains (losses) (both realized and unrealized) .02 (.10) (.13) (.07) (.05) .23 - ------------------------------------------------------------------------------------------------------------------------------- Total from investment operations .15 .26 .14 .18 .22 .57 - ------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.13) (.36) (.27) (.25) (.27) (.34) Distributions from realized gains -- -- -- (.05) (.04) (.02) - ------------------------------------------------------------------------------------------------------------------------------- Total distributions (.13) (.36) (.27) (.30) (.31) (.36) - ------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.13 $10.11 $10.21 $ 10.34 $ 10.46 $10.55 - ------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 457 $ 463 $ 484 $ 506 $ 479 $ 276 - ------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) .77%(e) .82% .83% .82% .82% .83% - ------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets 3.97%(e) 3.55% 2.67% 2.36% 2.47% 3.24% - ------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 58% 236% 171% 135% 179% 292% - ------------------------------------------------------------------------------------------------------------------------------- Total return(f) 1.55%(g) 2.61% 1.43% 1.70% 2.06% 5.42% - ------------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
- ------------------------------------------------------------------------------ 146 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 13.80 $15.11 $12.64 $ 11.25 $ 8.79 $ 10.13 - --------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .01 -- (.04) (.05) (.02) (.02) Net gains (losses) (both realized and unrealized) 1.11 .61 3.14 1.44 2.48 (1.32) - --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.12 .61 3.10 1.39 2.46 (1.34) - --------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- -- -- -- -- Distributions from realized gains (1.88) (1.92) (.63) -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Total distributions (1.89) (1.92) (.63) -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 13.03 $13.80 $15.11 $ 12.64 $11.25 $ 8.79 - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 220 $ 218 $ 235 $ 184 $ 102 $ 59 - --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average daily net assets(c),(d) 1.08%(e) 1.06% 1.07% 1.10% 1.19% 1.11% - --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average daily net assets .22%(e) (.02%) (.28%) (.42%) (.20%) (.21%) - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate (excluding short-term securities) 74% 132% 112% 104% 124% 156% - --------------------------------------------------------------------------------------------------------------------------------- Total return(f) 8.14%(g) 4.40% 24.88% 12.40% 27.96% (13.28%) - --------------------------------------------------------------------------------------------------------------------------------- (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized.
RiverSource VP - Small Cap Value Fund PER SHARE INCOME AND CAPITAL CHANGES(a)
PERIOD ENDED DEC. 31, YEAR ENDED AUG. 31, 2006(b) 2006 2005 2004 2003 2002 Net asset value, beginning of period $ 15.06 $14.46 $13.10 $11.39 $ 9.52 $ 9.84 - ------------------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .02 .06 .02 (.02) (.03) (.03) Net gains (losses) (both realized and unrealized) 1.46 1.61 2.53 1.92 1.95 (.29) - ------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 1.48 1.67 2.55 1.90 1.92 (.32) - ------------------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income (.02) (.06) (.01) -- (.01) -- Distributions from realized gains (1.63) (1.01) (1.18) (.19) (.04) -- - ------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.65) (1.07) (1.19) (.19) (.05) -- - ------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 14.89 $15.06 $14.46 $13.10 $11.39 $ 9.52 - ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $ 619 $ 549 $ 412 $ 229 $ 134 $ 63 - ------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average daily net assets(c),(d) 1.26%(e),(f) 1.24%(f) 1.28% 1.27% 1.55% 1.48% - ------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average daily net assets .48%(e) .41% .12% (.20%) (.43%) (.67%) - ------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate (excluding short-term securities) 23% 102% 65% 84% 87% 12% - ------------------------------------------------------------------------------------------------------------------------------ Total return(g) 9.99%(h) 12.28% 20.02% 16.78% 20.24% (3.19%) - ------------------------------------------------------------------------------------------------------------------------------ (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 1, 2006 to Dec. 31, 2006. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings and bank fee credits on cash balances. Includes the impact of a performance incentive adjustment fee, if any. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it may invest. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.32% for the period ended Dec. 31, 2006 and 1.28% for the year ended Aug. 31, 2006. (g) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (h) Not annualized.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 147 INVESTMENTS IN SECURITIES RiverSource VP - Balanced Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (63.2%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.6%) Boeing 77,470 $ 6,882,435 DRS Technologies 30,472 1,605,265 General Dynamics 55,376 4,117,206 Goodrich 124,372 5,665,145 Honeywell Intl 295,230 13,356,205 L-3 Communications Holdings 24,609 2,012,524 Lockheed Martin 77,307 7,117,655 Northrop Grumman 139,965 9,475,631 United Technologies 72,224 4,515,444 --------------- Total 54,747,510 - ------------------------------------------------------------------------------------------------- BEVERAGES (0.6%) Coca-Cola 85,901 4,144,723 PepsiCo 123,292 7,711,915 --------------- Total 11,856,638 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.1%) Amgen 18,772(b) 1,282,315 Biogen Idec 26,372(b) 1,297,239 --------------- Total 2,579,554 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.3%) American Standard Companies 33,126 1,518,827 Masco 131,049 3,914,434 --------------- Total 5,433,261 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (2.9%) Bank of New York 157,503 6,200,893 Franklin Resources 30,379 3,346,854 KKR Private Equity Investors LP Unit 86,648(o) 1,979,907 Legg Mason 13,615 1,294,106 Lehman Brothers Holdings 198,862 15,535,100 Merrill Lynch & Co 156,440 14,564,564 Morgan Stanley 184,469 15,021,311 State Street 46,603 3,142,906 --------------- Total 61,085,641 - ------------------------------------------------------------------------------------------------- CHEMICALS (0.9%) Ashland 32,067 2,218,395 Dow Chemical 214,199 8,555,108 Eastman Chemical 53,785 3,189,988 EI du Pont de Nemours & Co 66,581 3,243,161 RPM Intl 79,869 1,668,463 --------------- Total 18,875,115 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMERCIAL BANKS (2.4%) Commerce Bancorp 40,145(g) $ 1,415,914 Industrial & Commercial Bank of China Series H 763,000(b,c) 473,822 PNC Financial Services Group 86,930 6,436,297 US Bancorp 298,468 10,801,557 Wachovia 216,198 12,312,476 Wells Fargo & Co 515,624 18,335,589 --------------- Total 49,775,655 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.1%) Avery Dennison 36,329 2,467,829 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.7%) Alcatel-Lucent 24,906(c) 358,347 Alcatel-Lucent ADR 216,339(c) 3,076,341 Cisco Systems 277,679(b) 7,588,967 Corning 30,753(b) 575,389 Motorola 159,411 3,277,490 --------------- Total 14,876,534 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (1.4%) Hewlett-Packard 345,198 14,218,706 Intl Business Machines 155,024 15,060,581 --------------- Total 29,279,287 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (0.9%) American Express 95,017 5,764,681 Capital One Financial 170,314 13,083,522 --------------- Total 18,848,203 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.1%) Temple-Inland 62,703 2,886,219 - ------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (6.2%) Bank of America 954,170 50,943,136 Citigroup 898,183 50,028,793 JPMorgan Chase & Co 512,555 24,756,407 --------------- Total 125,728,336 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (3.3%) AT&T 249,137 8,906,648 BellSouth 481,328 22,675,362 Chunghwa Telecom ADR 159,711(c) 3,151,098 Citizens Communications 114,408 1,644,043 Embarq 56,156 2,951,559 Verizon Communications 708,268 26,375,900 Windstream 216,645 3,080,692 --------------- Total 68,785,302 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) ELECTRIC UTILITIES (1.8%) Entergy 104,845 $ 9,679,290 Exelon 196,006 12,130,812 FPL Group 41,478 2,257,233 PPL 98,010 3,512,678 Southern 247,697 9,130,111 --------------- Total 36,710,124 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Flextronics Intl 127,814(b,c) 1,467,305 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.7%) Baker Hughes 19,394 1,447,956 BJ Services 63,317 1,856,454 Cameron Intl 53,352(b) 2,830,324 Halliburton 85,345 2,649,962 Natl Oilwell Varco 21,054(b) 1,288,084 Transocean 18,658(b) 1,509,246 Weatherford Intl 89,921(b) 3,757,798 --------------- Total 15,339,824 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.7%) CVS 137,955 4,264,189 Safeway 62,939 2,175,172 Wal-Mart Stores 180,088 8,316,464 --------------- Total 14,755,825 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.7%) Cadbury Schweppes 145,565(c) 1,557,694 Campbell Soup 70,852 2,755,434 General Mills 48,495 2,793,312 Hershey 26,856 1,337,429 Kellogg 108,934 5,453,236 Kraft Foods Cl A 44,231(g) 1,579,047 --------------- Total 15,476,152 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.2%) ONEOK 93,081 4,013,653 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.4%) Bausch & Lomb 28,648 1,491,415 Baxter Intl 44,039 2,042,969 Boston Scientific 334,877(b) 5,753,187 --------------- Total 9,287,571 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.9%) Aetna 131,159 5,663,446 Cardinal Health 95,193 6,133,284 CIGNA 23,075 3,035,978 McKesson 27,634 1,401,044 UnitedHealth Group 46,642 2,506,075 --------------- Total 18,739,827 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 148 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Balanced Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HOTELS, RESTAURANTS & LEISURE (0.6%) Applebee's Intl 118,287 $ 2,918,140 Carnival Unit 16,968 832,280 Chipotle Mexican Grill Cl B 5,964(b) 310,128 Marriott Intl Cl A 111,008 5,297,302 McDonald's 89,141 3,951,621 --------------- Total 13,309,471 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.3%) DR Horton 129,354 3,426,588 Hovnanian Enterprises Cl A 66,593(b) 2,257,503 Standard-Pacific 26,560 711,542 --------------- Total 6,395,633 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.8%) Colgate-Palmolive 82,370 5,373,819 Procter & Gamble 81,815 5,258,250 Spectrum Brands 472,429(b) 5,149,476 --------------- Total 15,781,545 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (--%) Dynegy Cl A 7,914(b) 57,297 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.8%) 3M 74,589 5,812,721 General Electric 698,525 25,992,115 Tyco Intl 201,807(c) 6,134,933 --------------- Total 37,939,769 - ------------------------------------------------------------------------------------------------- INSURANCE (4.7%) ACE 202,772(c) 12,281,900 AFLAC 120,183 5,528,418 Allied World Assurance Holdings 41,154(c) 1,795,549 American Intl Group 501,721 35,953,328 Aon 119,912 4,237,690 Arch Capital Group 23,104(b,c) 1,562,061 Aspen Insurance Holdings 88,903(c) 2,343,483 Chubb 75,800 4,010,578 Endurance Specialty Holdings 65,511(c) 2,396,392 Hartford Financial Services Group 139,067 12,976,343 Max Re Capital 84,059(c) 2,086,344 Prudential Financial 81,212 6,972,862 XL Capital Cl A 42,073(c) 3,030,097 --------------- Total 95,175,045 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Liberty Media - Interactive Cl A 176,598(b,j) 3,809,219 - ------------------------------------------------------------------------------------------------- IT SERVICES (0.9%) Affiliated Computer Services Cl A 88,328(b) 4,313,940 Automatic Data Processing 105,311 5,186,567 Electronic Data Systems 202,351 5,574,769 First Data 137,578 3,510,991 --------------- Total 18,586,267 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) LEISURE EQUIPMENT & PRODUCTS (0.1%) Mattel 74,754 $ 1,693,926 - ------------------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (--%) PerkinElmer 30,731 683,150 - ------------------------------------------------------------------------------------------------- MACHINERY (0.9%) Caterpillar 86,440 5,301,366 Deere & Co 55,335 5,260,698 Flowserve 11,773(b) 594,183 Illinois Tool Works 31,778 1,467,826 Ingersoll-Rand Cl A 36,850(c) 1,441,941 ITT 38,292 2,175,751 Parker Hannifin 35,515 2,730,393 --------------- Total 18,972,158 - ------------------------------------------------------------------------------------------------- MEDIA (4.8%) Cablevision Systems Cl A 26,242(p) 747,372 Clear Channel Communications 20,920 743,497 Comcast Cl A 221,364(b) 9,370,338 Comcast Special Cl A 322,183(b) 13,493,023 EchoStar Communications Cl A 87,390(b) 3,323,442 Idearc 34,665(b) 993,152 Liberty Global Cl A 53,731(b) 1,566,259 Liberty Global Series C 45,025(b) 1,260,700 Liberty Media - Capital Series A 35,305(b,j) 3,459,184 News Corp Cl A 584,421 12,553,363 NTL 522,687 13,192,620 Time Warner 602,869 13,130,487 Viacom Cl B 258,817(b) 10,619,262 Vivendi 153,835(c) 6,012,670 Walt Disney 202,892 6,953,109 --------------- Total 97,418,478 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.2%) Alcan 22,190(c) 1,081,541 Alcoa 115,669 3,471,226 --------------- Total 4,552,767 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.8%) Federated Department Stores 49,551 1,889,380 JC Penney 60,184 4,655,834 Target 185,990 10,610,729 --------------- Total 17,155,943 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (0.7%) Dominion Resources 128,048 10,735,544 Xcel Energy 144,683 3,336,390 --------------- Total 14,071,934 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (6.8%) Anadarko Petroleum 84,317 3,669,476 BP ADR 20,821(c) 1,397,089 Chesapeake Energy 64,858 1,884,125 Chevron 384,804 28,294,638 ConocoPhillips 394,644 28,394,635
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (CONT.) Devon Energy 59,982 $ 4,023,593 Exxon Mobil 799,065 61,232,350 Newfield Exploration 23,108(b) 1,061,813 Royal Dutch Shell ADR 31,435(c) 2,225,284 Total 66,557(c) 4,801,287 XTO Energy 30,490 1,434,555 --------------- Total 138,418,845 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.7%) Bowater 145,543 3,274,718 Intl Paper 130,175 4,438,968 Weyerhaeuser 90,732 6,410,215 --------------- Total 14,123,901 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (3.0%) Bristol-Myers Squibb 350,583 9,227,345 GlaxoSmithKline ADR 46,268(c) 2,441,100 Merck & Co 272,937 11,900,053 Novartis ADR 56,781(c) 3,261,501 Pfizer 1,013,377 26,246,463 Schering-Plough 226,621 5,357,320 Watson Pharmaceuticals 75,359(b) 1,961,595 Wyeth 46,004 2,342,524 --------------- Total 62,737,901 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%) Apartment Investment & Management Cl A 48,746 2,730,751 Equity Office Properties Trust 130,966 6,308,632 HomeBanc 86,384 365,404 --------------- Total 9,404,787 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.9%) Advanced Micro Devices 158,634(b) 3,228,202 Agere Systems 84,485(b) 1,619,577 Atmel 128,792(b) 779,192 Credence Systems 93,747(b) 487,484 Cypress Semiconductor 222,363(b) 3,751,264 Infineon Technologies 105,704(b,c) 1,490,172 Infineon Technologies ADR 196,332(b,c) 2,754,538 Intel 197,392 3,997,188 Spansion Cl A 48,789(b) 725,005 --------------- Total 18,832,622 - ------------------------------------------------------------------------------------------------- SOFTWARE (1.6%) Cadence Design Systems 346,771(b) 6,210,669 Compuware 353,387(b) 2,943,714 McAfee 28,003(b) 794,725 Microsoft 504,528 15,065,206 Oracle 84,603(b) 1,450,095 Symantec 158,799(b) 3,310,959 TIBCO Software 272,073(b) 2,568,369 --------------- Total 32,343,737 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.3%) Circuit City Stores 59,346 1,126,387 Home Depot 78,892 3,168,303 Lowe's Companies 45,997 1,432,807 TJX Companies 47,889 1,365,794 --------------- Total 7,093,291 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 149 RiverSource VP - Balanced Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) THRIFTS & MORTGAGE FINANCE (2.1%) Countrywide Financial 481,589 $ 20,443,452 Fannie Mae 180,663 10,729,576 Freddie Mac 160,964 10,929,456 Washington Mutual 51,628 2,348,558 --------------- Total 44,451,042 - ------------------------------------------------------------------------------------------------- TOBACCO (1.2%) Altria Group 300,271 25,769,257 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.3%) ALLTEL 178,721 10,809,046 Sprint Nextel 578,152 10,921,291 Vodafone Group ADR 212,227(c) 5,895,666 --------------- Total 27,626,003 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,028,747,964) $ 1,309,419,353 - -------------------------------------------------------------------------------------------------
PREFERRED STOCKS & OTHER (--%)
ISSUER SHARES VALUE(a) Ion Media Networks 14.25% Pay-in-kind --(e) $ 1,262 Mexico Value Recovery Series E Rights 2,000,000(b,c) 26,000 TOTAL PREFERRED STOCKS & OTHER (Cost: $413) $ 27,262 - -------------------------------------------------------------------------------------------------
BONDS (34.8%)
ISSUER COUPON PRINCIPAL RATE AMOUNT VALUE(a) SOVEREIGN (0.1%) United Mexican States 09-27-34 6.75% $ 1,100,000(c) $ 1,188,000 - ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (7.5%) Federal Farm Credit Bank 10-10-08 4.25 3,480,000 3,434,770 Federal Home Loan Bank 02-08-08 4.63 745,000 740,451 02-13-08 5.25 5,645,000 5,647,969 06-18-08 5.13 10,930,000 10,933,804 Federal Home Loan Mtge Corp 06-15-08 3.88 8,710,000 8,561,669 10-15-08 5.13 2,645,000 2,648,388 03-15-09 5.75 2,700,000 2,741,569 07-15-09 4.25 800,000 786,451 Federal Natl Mtge Assn 01-15-08 4.63 16,455,000 16,352,222 10-15-08 4.50 14,610,000 14,479,650 U.S. Treasury 05-31-08 4.88 1,690,000 1,689,207 10-31-08 4.88 835,000 835,392 11-15-09 4.63 4,990,000 4,974,406 10-31-11 4.63 11,385,000(g) 11,343,638 11-30-11 4.50 17,900,000(g) 17,740,582 08-15-16 4.88 9,405,000(g,p) 9,517,418 11-15-16 4.63 6,505,000(g) 6,462,314 08-15-23 6.25 14,158,000(p) 16,296,085 02-15-26 6.00 5,725,000 6,492,957
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL RATE AMOUNT VALUE(a) U.S. GOVERNMENT OBLIGATIONS & AGENCIES (CONT.) U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38% $ 12,743,800(r) $ 12,707,657 --------------- Total 154,386,599 - ------------------------------------------------------------------------------------------------- ASSET-BACKED (1.1%) Capital Auto Receivables Asset Trust Series 2004-1 Cl CTFS 09-15-10 2.84 1,000,000 984,510 Capital Auto Receivables Asset Trust Series 2006-SN1A Cl A4B 03-20-10 5.43 2,325,000(d,m) 2,325,000 Capital Auto Receivables Asset Trust Series 2006-SN1A Cl D 04-20-11 6.15 625,000(d) 634,180 Citibank Credit Card Issuance Trust Series 2003-A3 Cl A3 03-10-10 3.10 2,450,000 2,389,117 College Loan Corporation Trust Collateralized Mtge Obligation Interest Only Series 2006-1 Cl AIO 07-25-08 5.62 3,925,000(n) 581,851 Countrywide Asset-backed Ctfs Series 2005-10 Cl AF6 02-25-36 4.92 1,365,000 1,329,844 Countrywide Asset-backed Ctfs Series 2006-4 Cl 1A1M 07-25-36 5.61 896,054(m) 897,093 Drive Auto Receivables Trust Series 2006-2 Cl A2 (MBIA) 07-15-11 5.30 1,675,000(d,i) 1,676,308 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 2,375,000(d,i) 2,404,536 Ford Credit Floorplan Master Owner Trust Series 2006-3 Cl A 06-15-11 5.53 2,500,000(m) 2,502,147 Hertz Vehicle Financing LLC Series 2004-1A Cl A3 (MBIA) 05-25-09 2.85 600,000(d,i) 584,085 Metris Master Trust Series 2005-1A Cl D 03-21-11 7.25 400,000(d,m) 399,393 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-2 Cl AIO 08-25-11 5.89 2,325,000(n) 555,005 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 0.00 3,400,000(n) 999,328 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 925,000 913,925 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 1,220,000 1,215,401
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL RATE AMOUNT VALUE(a) ASSET-BACKED (CONT.) Residential Asset Securities Series 2006-KS1 Cl A2 02-25-36 5.49% $ 2,595,000(m) $ 2,595,813 --------------- Total 22,987,536 - ------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (4.7%)(f) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 4.89 1,250,000 1,241,189 Banc of America Commercial Mtge Series 2005-4 Cl ASB 07-10-45 4.87 1,000,000 978,679 Banc of America Commercial Mtge Series 2006-2 Cl AAB 05-10-45 5.72 1,350,000 1,384,114 Banc of America Commercial Mtge Series 2006-4 Cl AAB 07-10-46 5.60 1,350,000 1,371,065 Banc of America Large Loan Series 2006-LAQ Cl E 02-09-21 5.73 900,000(d,m) 902,151 Banc of America Large Loan Series 2006-LAQ Cl F 02-09-21 5.79 1,000,000(d,m) 1,002,388 Banc of America Large Loan Series 2006-LAQ Cl G 02-09-21 5.88 700,000(d,m) 701,467 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 2,826,612 2,735,086 Bear Stearns Commercial Mtge Securities Series 2005-PW10 Cl A4 12-11-40 5.41 2,100,000 2,107,769 Bear Stearns Commercial Mtge Securities Series 2005-T20 Cl E 10-12-42 5.16 800,000 777,504 Bear Stearns Commercial Mtge Securities Series 2006-PW14 Cl A4 12-11-38 5.20 1,225,000 1,209,933 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 3,025,000 3,078,940 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 1,753,052(d) 1,721,318 Citigroup/Deutsche Bank Commercial Mtge Trust Series 2005-CD1 Cl ASB 07-15-44 5.23 775,000 774,901 Commercial Mtge Acceptance Series 1999-C1 Cl A2 06-15-31 7.03 2,443,610 2,519,316 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 5.66 600,000(d,m) 603,181 Credit Suisse Mtge Capital Ctfs Series 2006-C2 Cl A3 03-15-39 5.66 1,350,000 1,385,863
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 150 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Balanced Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) CS First Boston Mtge Securities Series 2001-CP4 Cl A4 12-15-35 6.18% $ 1,950,000 $ 2,014,565 CS First Boston Mtge Securities Series 2003-CPN1 Cl A2 03-15-35 4.60 850,000 819,501 Federal Natl Mtge Assn #745629 01-01-18 5.08 858,662 850,659 Federal Natl Mtge Assn Series 2002-M2 Cl C 08-25-12 4.72 299,534 293,292 GE Capital Commercial Mtge Series 2004-C2 Cl A2 03-10-40 4.12 2,050,000 1,983,929 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 2,650,000(d) 2,606,497 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 775,000 764,934 Greenwich Capital Commercial Funding Series 2006-GG7 Cl AAB 07-10-38 5.91 1,350,000 1,401,534 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 1,500,000 1,484,101 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 1,493,370 1,464,826 JPMorgan Chase Commercial Mtge Securities Series 2003-CB6 Cl A2 07-12-37 5.26 2,825,000 2,821,887 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 1,497,305 1,447,546 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 1,035,029 1,003,548 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 1,675,000 1,628,638 JPMorgan Chase Commercial Mtge Securities Series 2004-CBX Cl A3 01-12-37 4.18 1,000,000 972,006 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP2 Cl A1 07-15-42 4.33 2,109,549 2,074,362 JPMorgan Chase Commercial Mtge Securities Series 2006-CB16 Cl A4 05-12-45 5.55 4,975,000 5,046,448 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl A4 04-15-43 5.48 1,150,000 1,160,139 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl ASB 04-15-43 5.49 1,800,000 1,816,056 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP8 Cl A4 05-15-45 5.40 1,350,000 1,353,928
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) LB-UBS Commercial Mtge Trust Series 2002-C2 Cl A3 06-15-26 5.39% $ 2,500,000 $ 2,513,715 LB-UBS Commercial Mtge Trust Series 2002-C4 Cl A5 09-15-31 4.85 1,000,000 982,206 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 1,250,000 1,180,225 LB-UBS Commercial Mtge Trust Series 2004-C8 Cl A2 12-15-29 4.20 2,000,000 1,946,880 LB-UBS Commercial Mtge Trust Series 2005-C5 Cl AAB 09-15-30 4.93 1,975,000 1,937,515 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 5.87 1,075,000 1,114,396 LB-UBS Commercial Mtge Trust Series 2006-C7 Cl A3 11-15-38 5.35 1,175,000 1,174,971 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 1,287,109 1,234,929 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 1,175,000 1,148,548 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 1,250,000 1,212,063 Morgan Stanley Capital I Series 2005-T19 Cl AAB 06-12-47 4.85 2,425,000 2,374,346 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.80 850,000 877,447 Morgan Stanley Capital I Series 2006-XLF Cl A2 07-15-19 5.48 1,600,000(d,m) 1,600,823 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 3,225,000 3,327,682 Nomura Asset Securities Series 1998-D6 Cl A3 03-15-30 6.99 1,750,000 1,928,893 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 1,442,220 1,384,625 SBA CMBS Trust Series 2006-1A Cl B 11-15-36 5.45 1,050,000(d) 1,055,376 Wachovia Bank Commercial Mtge Trust Series 2003-C4 Cl A2 04-15-35 4.57 2,600,000 2,531,703 Wachovia Bank Commercial Mtge Trust Series 2003-C7 Cl A2 10-15-35 5.08 3,700,000(d) 3,649,892
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) Wachovia Bank Commercial Mtge Trust Series 2005-C18 Cl A4 04-15-42 4.94% $ 1,100,000 $ 1,070,590 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 1,250,000 1,239,905 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 1,100,000 1,115,170 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl A3 07-15-45 5.77 725,000 745,430 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 1,250,000 1,278,448 Wachovia Bank Commercial Mtge Trust Series 2006-C29 Cl A4 11-15-48 5.31 1,600,000 1,591,187 --------------- Total 97,720,225 - ------------------------------------------------------------------------------------------------- MORTGAGE-BACKED (16.3%) (F,Q) Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-12 Cl 2A1 03-25-36 5.71 2,307,182(k) 2,314,357 Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2006-1 Cl 2A1 03-25-36 5.97 2,627,534(k) 2,628,007 Banc of America Funding Collateralized Mtge Obligation Series 2006-A Cl 3A2 02-20-36 5.92 1,832,332(k) 1,835,502 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11 Cl 1A1 01-25-34 6.00 1,535,206 1,521,404 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11 Cl 4A1 01-25-19 4.75 1,081,688 1,045,857 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2006-9 Cl 1CB1 01-25-37 6.00 5,000,000(l) 5,019,531 Bank of America Funding Collateralized Mtge Obligation Series 2006-2N Cl N1 11-25-46 7.25 333,417(d) 330,511 Bear Stearns Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-8 Cl A4 08-25-35 5.09 1,575,000(d,k) 1,532,074 ChaseFlex Trust Collateralized Mtge Obligation Series 2005-2 Cl 2A2 06-25-35 6.50 2,301,704 2,335,511
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 151 RiverSource VP - Balanced Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11T1 Cl A1 07-25-18 4.75% $ 1,097,836 $ 1,061,470 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-54CB Cl 2A3 11-25-35 5.50 1,681,240 1,681,858 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-54CB Cl 3A7 11-25-35 5.50 1,698,603 1,699,223 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-64CB Cl 1A1 12-25-35 5.50 2,937,076 2,944,621 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 1,590,067 1,647,913 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-85CB Cl 2A2 02-25-36 5.50 1,084,110 1,083,641 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 2,500,000 2,524,208 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-2CB Cl A11 03-25-36 6.00 2,844,442 2,844,258 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-31CB Cl A16 11-25-36 6.00 1,700,000 1,717,221 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-43 CB Cl 1A4 02-25-37 6.00 3,500,000 3,519,551 Countrywide Home Loans Collateralized Mtge Obligation Series 2005-R2 Cl 2A1 06-25-35 7.00 1,930,871(d) 1,997,580 Countrywide Home Loans Collateralized Mtge Obligation Series 2006-HYB1 Cl 1A1 03-20-36 5.39 1,627,500(k) 1,617,995 CS First Boston Mtge Securities Collateralized Mtge Obligation Series 2005-12 Cl 3A1 01-25-36 7.00 2,613,893 2,669,064 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Interest Only Series 2005-AR5 Cl X1 08-19-45 6.38 15,482,626(n) 183,856
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Home Loan Mtge Corp 01-01-37 5.50% $ 7,000,000(l) $ 6,921,250 01-01-37 6.00 4,500,000(l) 4,532,355 Federal Home Loan Mtge Corp #1G2496 09-01-36 6.21 2,220,439(k) 2,239,734 Federal Home Loan Mtge Corp #A27373 10-01-34 6.50 607,872 619,733 Federal Home Loan Mtge Corp #A28602 11-01-34 6.50 1,105,810 1,127,388 Federal Home Loan Mtge Corp #B11835 01-01-19 5.50 536,199 536,877 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 2,397,279 2,383,194 Federal Home Loan Mtge Corp #C65869 04-01-32 6.00 1,420,377 1,435,201 Federal Home Loan Mtge Corp #C66871 05-01-32 6.50 3,622,067 3,712,952 Federal Home Loan Mtge Corp #C71514 07-01-32 6.50 156,076 159,583 Federal Home Loan Mtge Corp #C77689 03-01-33 6.50 384,513 395,494 Federal Home Loan Mtge Corp #C90598 10-01-22 6.50 415,160 425,382 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 2,479,659 2,512,359 Federal Home Loan Mtge Corp #D32310 11-01-22 8.00 17,733 18,543 Federal Home Loan Mtge Corp #D55755 08-01-24 8.00 68,533 72,207 Federal Home Loan Mtge Corp #D96300 10-01-23 5.50 350,116 348,644 Federal Home Loan Mtge Corp #D96348 10-01-23 5.50 5,444,476 5,421,581 Federal Home Loan Mtge Corp #E01127 02-01-17 6.50 326,856 334,517 Federal Home Loan Mtge Corp #E01419 05-01-18 5.50 1,482,283 1,484,762 Federal Home Loan Mtge Corp #E81009 07-01-15 7.50 136,090 141,772 Federal Home Loan Mtge Corp #E89496 04-01-17 6.00 3,054,661 3,098,220 Federal Home Loan Mtge Corp #E97591 06-01-18 5.50 341,138 341,881 Federal Home Loan Mtge Corp #E98725 08-01-18 5.00 3,502,239 3,450,099 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 1,763,119 1,736,763 Federal Home Loan Mtge Corp #G01410 04-01-32 7.00 548,150 563,519 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 2,238,349 2,269,960 Federal Home Loan Mtge Corp #G12101 11-01-18 5.00 171,247 168,621 Federal Home Loan Mtge Corp #G30216 04-01-22 6.50 4,383,794 4,495,531
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2590 Cl BI 02-15-14 2.28% $ 415,652(n) $ 17,222 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2718 Cl IA 10-15-22 20.00 1,828,687(n) 67,896 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2795 Cl IY 07-15-17 15.06 1,999,180(n) 196,243 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2576 Cl KJ 02-15-33 5.50 1,994,594 1,996,077 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2641 Cl KC 01-15-18 6.50 1,066,003 1,094,057 Federal Natl Mtge Assn 01-01-37 5.50 11,650,000(l) 11,511,656 01-01-37 6.00 17,000,000(l) 17,111,521 01-01-37 6.50 4,000,000(l) 4,075,000 Federal Natl Mtge Assn #190899 04-01-23 8.50 198,538 209,082 Federal Natl Mtge Assn #190944 05-01-24 6.00 820,201 829,719 Federal Natl Mtge Assn #190988 06-01-24 9.00 123,599 131,512 Federal Natl Mtge Assn #250322 08-01-25 7.50 16,769 17,514 Federal Natl Mtge Assn #250384 11-01-25 7.50 204,703 213,803 Federal Natl Mtge Assn #250495 03-01-26 7.00 275,339 284,367 Federal Natl Mtge Assn #252381 04-01-14 5.50 3,859,125 3,874,341 Federal Natl Mtge Assn #254259 04-01-17 5.50 646,641 648,184 Federal Natl Mtge Assn #254494 08-01-22 7.00 241,679 249,633 Federal Natl Mtge Assn #254675 01-01-23 6.50 367,129 376,335 Federal Natl Mtge Assn #254708 02-01-23 7.00 121,451 125,448 Federal Natl Mtge Assn #254916 09-01-23 5.50 2,466,421 2,454,608 Federal Natl Mtge Assn #304279 02-01-25 8.50 110,339 118,431 Federal Natl Mtge Assn #309341 05-01-25 8.50 27,322 29,326 Federal Natl Mtge Assn #313049 08-01-11 8.50 230,183 234,466
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 152 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Balanced Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #323606 03-01-29 6.50% $ 55,881 $ 57,357 Federal Natl Mtge Assn #433310 08-01-28 6.50 616,757 633,050 Federal Natl Mtge Assn #440730 12-01-28 6.00 215,404 218,990 Federal Natl Mtge Assn #505122 07-01-29 7.00 856,044 882,538 Federal Natl Mtge Assn #50553 04-01-22 8.00 101,807 107,477 Federal Natl Mtge Assn #510587 08-01-29 7.00 246,160 253,778 Federal Natl Mtge Assn #540041 02-01-29 7.00 603,760 623,558 Federal Natl Mtge Assn #545489 03-01-32 6.50 225,276 230,628 Federal Natl Mtge Assn #545684 05-01-32 7.50 170,949 178,009 Federal Natl Mtge Assn #545885 08-01-32 6.50 311,582 318,789 Federal Natl Mtge Assn #555375 04-01-33 6.00 4,180,199 4,235,459 Federal Natl Mtge Assn #555376 04-01-18 4.50 967,321 935,448 Federal Natl Mtge Assn #555458 05-01-33 5.50 1,688,282 1,672,986 Federal Natl Mtge Assn #555528 04-01-33 6.00 5,232,283 5,280,030 Federal Natl Mtge Assn #555734 07-01-23 5.00 1,681,544 1,638,249 Federal Natl Mtge Assn #555740 08-01-18 4.50 2,592,007 2,505,742 Federal Natl Mtge Assn #615135 11-01-16 6.00 163,203 165,632 Federal Natl Mtge Assn #642346 05-01-32 7.00 956,645 984,089 Federal Natl Mtge Assn #643381 06-01-17 6.00 174,119 176,677 Federal Natl Mtge Assn #645277 05-01-32 7.00 143,129 147,235 Federal Natl Mtge Assn #645569 06-01-32 7.00 808,365 831,555 Federal Natl Mtge Assn #646446 06-01-17 6.50 181,406 185,793 Federal Natl Mtge Assn #650105 08-01-17 6.50 839,524 859,828 Federal Natl Mtge Assn #662197 09-01-32 6.50 355,141 363,281 Federal Natl Mtge Assn #667604 10-01-32 5.50 405,929 401,874 Federal Natl Mtge Assn #670387 08-01-32 7.00 267,252 275,174 Federal Natl Mtge Assn #670711 10-01-32 7.00 246,315 253,381 Federal Natl Mtge Assn #673179 02-01-18 6.00 416,835 422,959 Federal Natl Mtge Assn #676511 12-01-32 7.00 141,399 145,456
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #678397 12-01-32 7.00% $ 1,061,145 $ 1,091,587 Federal Natl Mtge Assn #684601 03-01-33 6.00 3,315,726 3,361,128 Federal Natl Mtge Assn #687736 02-01-33 5.50 1,232,611 1,220,047 Federal Natl Mtge Assn #687887 03-01-33 5.50 1,747,787 1,732,482 Federal Natl Mtge Assn #688002 03-01-33 5.50 1,882,802 1,866,644 Federal Natl Mtge Assn #688034 03-01-33 5.50 1,685,475 1,671,097 Federal Natl Mtge Assn #689093 07-01-28 5.50 875,156 870,068 Federal Natl Mtge Assn #694546 03-01-33 5.50 866,498 857,665 Federal Natl Mtge Assn #694795 04-01-33 5.50 3,503,336 3,473,292 Federal Natl Mtge Assn #701937 04-01-33 6.00 1,989,913 2,006,691 Federal Natl Mtge Assn #703726 02-01-33 5.00 2,855,655 2,764,169 Federal Natl Mtge Assn #703818 05-01-33 6.00 1,802,233 1,820,023 Federal Natl Mtge Assn #709901 06-01-18 5.00 1,737,544 1,713,327 Federal Natl Mtge Assn #710823 05-01-33 5.50 1,893,139 1,876,449 Federal Natl Mtge Assn #720006 07-01-33 5.50 2,098,300 2,076,911 Federal Natl Mtge Assn #720070 07-01-23 5.50 2,460,207 2,448,424 Federal Natl Mtge Assn #720378 06-01-18 4.50 2,436,826 2,356,532 Federal Natl Mtge Assn #725232 03-01-34 5.00 6,490,623 6,278,569 Federal Natl Mtge Assn #725284 11-01-18 7.00 187,716 193,225 Federal Natl Mtge Assn #725425 04-01-34 5.50 6,748,301 6,679,958 Federal Natl Mtge Assn #725431 08-01-15 5.50 129,950 130,505 Federal Natl Mtge Assn #725684 05-01-18 6.00 2,968,938 3,014,284 Federal Natl Mtge Assn #725737 08-01-34 4.53 5,217,904(k) 5,184,719 Federal Natl Mtge Assn #725773 09-01-34 5.50 7,518,319 7,437,717 Federal Natl Mtge Assn #726940 08-01-23 5.50 294,080 292,650 Federal Natl Mtge Assn #730231 08-01-23 5.50 2,250,224 2,239,446 Federal Natl Mtge Assn #735057 01-01-19 4.50 2,177,216 2,105,476 Federal Natl Mtge Assn #735949 10-01-35 4.99 2,576,161(k) 2,565,955 Federal Natl Mtge Assn #737330 09-01-18 5.50 1,573,889 1,577,474
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #737374 09-01-18 5.50% $ 2,197,331 $ 2,203,095 Federal Natl Mtge Assn #745802 07-01-36 6.00 6,989,006 7,036,328 Federal Natl Mtge Assn #747642 11-01-28 5.50 376,058 373,872 Federal Natl Mtge Assn #747784 10-01-18 4.50 746,597 721,996 Federal Natl Mtge Assn #753074 12-01-28 5.50 1,780,244 1,769,896 Federal Natl Mtge Assn #753206 01-01-34 6.00 1,430,693 1,442,755 Federal Natl Mtge Assn #755056 12-01-23 5.50 1,930,502 1,921,256 Federal Natl Mtge Assn #755598 11-01-28 5.00 628,889 608,742 Federal Natl Mtge Assn #761031 01-01-34 5.00 451,008 436,329 Federal Natl Mtge Assn #765760 02-01-19 5.00 3,749,826 3,694,646 Federal Natl Mtge Assn #766641 03-01-34 5.00 2,072,981 2,003,887 Federal Natl Mtge Assn #768117 08-01-34 5.43 902,539(k) 887,949 Federal Natl Mtge Assn #779676 06-01-34 5.00 3,087,823 2,984,904 Federal Natl Mtge Assn #815264 05-01-35 5.22 3,378,980(k) 3,371,666 Federal Natl Mtge Assn #844257 11-01-35 5.09 2,750,519(k) 2,751,124 Federal Natl Mtge Assn #845070 12-01-35 5.09 1,847,672(k) 1,838,139 Federal Natl Mtge Assn #872916 06-01-36 6.50 3,906,235 4,006,789 Federal Natl Mtge Assn #886054 07-01-36 7.00 2,678,115 2,767,372 Federal Natl Mtge Assn #886461 08-01-36 6.19 1,959,242(k) 1,984,144 Federal Natl Mtge Assn #886464 08-01-36 6.50 2,952,820 3,008,493 Federal Natl Mtge Assn #900197 10-01-36 5.98 2,574,428(k) 2,590,467 Federal Natl Mtge Assn #901922 10-01-36 5.79 2,437,532(k) 2,454,290 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-24 Cl PI 12-25-12 20.00 251,510(n) 5,027 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-71 Cl IM 12-25-31 14.12 1,725,882(n) 270,145 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2004-84 Cl GI 12-25-22 12.17 839,398(n) 112,471
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 153 RiverSource VP - Balanced Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 367 Cl 2 01-25-36 8.45% $ 4,209,774(n) $ 991,928 Federal Natl Mtge Assn Collateralized Mtge Obligation Series 2003-133 Cl GB 12-25-26 8.00 757,588 798,376 Govt Natl Mtge Assn #3920 11-20-36 6.00 4,992,224 5,049,350 Govt Natl Mtge Assn #604708 10-15-33 5.50 1,768,447 1,761,989 Govt Natl Mtge Assn #619592 09-15-33 5.00 2,309,344 2,248,697 Govt Natl Mtge Assn #780394 12-15-08 7.00 433,452 437,428 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 20.00 127,283(n) 11,267 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2005-16 Cl 3A1B 01-19-36 5.69 2,472,236(k) 2,475,057 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-5 Cl 2A1B 07-19-46 5.58 1,308,819(k) 1,309,349 Harborview Nim Collateralized Mtge Obligation Series 2006-8A Cl N1 07-21-36 6.41 272,600(d) 271,578 IndyMac Index Mtge Loan Trust Collateralized Mtge Obligation Interest Only Series 2005-AR8 Cl AX1 04-25-35 4.50 35,627,699(n) 322,876 IndyMac Index Nim Collateralized Mtge Obligation Series 2006-AR6 Cl N1 06-25-46 6.65 654,648(d) 652,194 Lehman XS Net Interest Margin Nts Collateralized Mtge Obligation Series 2006-2N Cl A1 02-27-46 7.00 379,393(d) 379,628 Lehman XS Net Interest Margin Nts Series 2006-AR8 Cl A1 10-28-46 6.25 382,012(d) 380,484 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-2 Cl 4A1 02-25-19 5.00 1,710,398 1,669,246 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-4 Cl 2A1 05-25-34 6.00 1,944,309 1,919,519
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-7 Cl 8A1 08-25-19 5.00% $ 3,725,121 $ 3,604,688 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-8 Cl 7A1 09-25-19 5.00 1,781,232 1,724,803 Rali NIM Collateralized Mtge Obligation Series 2006-QO4 Cl N1 04-25-46 6.05 477,832(d) 475,742 Residential Accredit Loans Collateralized Mtge Obligation Series 2006-QS3 Cl 1A10 03-25-36 6.00 1,789,476 1,810,160 Sequoia Alternative Loan Trust Collateralized Mtge Obligation Series 2006-1 Cl A2 02-25-36 6.11 2,393,765 2,425,362 Structured Asset Securities Collateralized Mtge Obligation Series 2003-33H Cl 1A1 10-25-33 5.50 3,524,040 3,453,884 Washington Mutual Alternative Mtge Loan Trust Pass-Through Ctfs Collateralized Mtge Obligation Interest Only Series 2005-AR1 Cl X2 12-25-35 7.10 13,092,738(n) 117,630 Washington Mutual Collateralized Mtge Obligation Series 2003-AR10 Cl A7 10-25-33 4.06 2,400,000(k) 2,369,407 Washington Mutual Collateralized Mtge Obligation Series 2004-CB2 Cl 6A 07-25-19 4.50 191,624 181,621 Washington Mutual Collateralized Mtge Obligation Series 2005-AR14 Cl 2A1 12-25-35 5.30 1,390,345(k) 1,379,110 Washington Mutual Collateralized Mtge Obligation Series 2005-AR17 Cl A1C1 12-25-45 5.51 500,870(k) 500,969 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-10 Cl A1 10-25-35 5.00 3,897,011 3,747,210 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-5 Cl 2A1 05-25-35 5.50 3,399,394 3,339,905 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2006-AR6 Cl 5A1 03-25-36 5.11 2,941,728(k) 2,907,423 --------------- Total 338,423,974 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AEROSPACE & DEFENSE (--%) DRS Technologies 02-01-16 6.63% $ 280,000 $ 282,100 L-3 Communications 06-15-12 7.63 165,000 170,775 L-3 Communications Sr Sub Nts Series B 10-15-15 6.38 235,000 232,650 --------------- Total 685,525 - ------------------------------------------------------------------------------------------------- BANKING (0.7%) Bank of America Sub Nts 10-15-36 6.00 3,950,000 4,082,444 Citigroup Sub Nts 08-25-36 6.13 800,000 833,038 Manufacturers & Traders Trust Sub Nts 12-01-21 5.63 1,140,000(m) 1,130,448 Popular North America Sr Nts 10-01-08 3.88 5,725,000 5,576,918 Wells Fargo Bank Sub Nts 08-26-36 5.95 3,035,000 3,132,666 --------------- Total 14,755,514 - ------------------------------------------------------------------------------------------------- BROKERAGE (--%) LaBranche & Co Sr Nts 05-15-12 11.00 250,000 269,375 - ------------------------------------------------------------------------------------------------- CHEMICALS (0.1%) NewMarket Sr Nts 12-15-16 7.13 55,000(d) 55,000 Potash - Saskatchewan 12-01-36 5.88 1,535,000(c) 1,483,051 PQ 02-15-13 7.50 25,000 24,625 --------------- Total 1,562,676 - ------------------------------------------------------------------------------------------------- ELECTRIC (1.1%) Aquila Canada Finance 06-15-11 7.75 335,000(c) 353,505 Arizona Public Service 05-15-15 4.65 3,000,000 2,766,645 Baltimore Gas & Electric Sr Unsecured 10-01-36 6.35 700,000(d) 714,576 CMS Energy Sr Nts 01-15-09 7.50 450,000 464,063 Commonwealth Edison 1st Mtge 04-15-15 4.70 1,465,000 1,364,867 Commonwealth Edison 1st Mtge Series 104 08-15-16 5.95 955,000 965,512
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 154 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Balanced Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ELECTRIC (CONT.) Consumers Energy 1st Mtge 02-15-12 5.00% $ 753,000 $ 734,612 Consumers Energy 1st Mtge Series H 02-17-09 4.80 2,740,000 2,704,095 Duke Energy Indiana 10-15-35 6.12 2,055,000 2,064,482 Edison Mission Energy Sr Unsecured 06-15-13 7.50 190,000 198,550 Exelon 06-15-10 4.45 2,985,000 2,887,407 Florida Power 1st Mtge 07-15-11 6.65 575,000 602,720 Indiana Michigan Power Sr Nts 03-15-37 6.05 1,255,000 1,231,824 IPALCO Enterprises Secured 11-14-08 8.38 375,000 389,063 11-14-11 8.63 595,000 647,063 Midwest Generation LLC Series B 01-02-16 8.56 45,079 49,700 Northern States Power Sr Nts 08-01-09 6.88 1,455,000 1,506,137 NRG Energy 02-01-14 7.25 245,000 246,838 PacifiCorp 1st Mtge 06-15-35 5.25 270,000 247,146 Sierra Pacific Power Series M 05-15-16 6.00 945,000 947,062 Xcel Energy Sr Nts 07-01-08 3.40 710,000 689,176 --------------- Total 21,775,043 - ------------------------------------------------------------------------------------------------- ENTERTAINMENT (0.1%) United Artists Theatre Circuit 07-01-15 9.30 1,346,903(o) 1,400,779 - ------------------------------------------------------------------------------------------------- FOOD AND BEVERAGE (0.2%) Cadbury Schweppes US Finance LLC 10-01-08 3.88 3,585,000(d) 3,491,360 Cott Beverages USA 12-15-11 8.00 460,000 469,200 --------------- Total 3,960,560 - ------------------------------------------------------------------------------------------------- GAMING (--%) Mohegan Tribal Gaming Authority 02-15-15 6.88 95,000 95,238 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 165,000 163,763
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT GAMING (CONT.) Mohegan Tribal Gaming Authority Sr Sub Nts 04-01-12 8.00% $ 310,000 $ 322,787 Pokagon Gaming Authority Sr Nts 06-15-14 10.38 60,000(d) 65,700 --------------- Total 647,488 - ------------------------------------------------------------------------------------------------- GAS PIPELINES (0.1%) ANR Pipeline 03-15-10 8.88 440,000 461,600 Colorado Interstate Gas Sr Nts 03-15-15 5.95 160,000 157,866 11-15-15 6.80 290,000 301,537 Regency Energy Partners LP/Finance Sr Unsecured 12-15-13 8.38 115,000(d) 115,288 Southern Natural Gas 03-15-10 8.88 290,000 304,236 Southern Star Central Sr Nts 03-01-16 6.75 380,000 379,050 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 400,000 411,000 Transcontinental Gas Pipe Line Sr Unsecured 04-15-16 6.40 232,000 234,320 Williams Companies Sr Nts 07-15-19 7.63 638,000 682,659 --------------- Total 3,047,556 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.1%) Cardinal Health 06-15-15 4.00 2,080,000 1,844,189 Community Health Systems Sr Sub Nts 12-15-12 6.50 45,000 44,325 HCA Secured 11-15-14 9.13 40,000(d) 42,600 11-15-16 9.25 160,000(d) 170,800 Omnicare Sr Sub Nts 12-15-13 6.75 345,000 340,688 12-15-15 6.88 170,000 167,875 Triad Hospitals Sr Nts 05-15-12 7.00 225,000 228,938 Triad Hospitals Sr Sub Nts 11-15-13 7.00 250,000 251,563 --------------- Total 3,090,978 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT HEALTH CARE INSURANCE (0.1%) CIGNA Sr Unsecured 11-15-36 6.15% $ 1,725,000 $ 1,707,888 - ------------------------------------------------------------------------------------------------- INDEPENDENT ENERGY (0.3%) Chesapeake Energy 08-15-17 6.50 180,000 175,950 Denbury Resources Sr Sub Nts 12-15-15 7.50 35,000 35,525 EnCana Sr Nts 10-15-13 4.75 1,340,000(c) 1,274,166 Pioneer Natural Resources 05-01-18 6.88 715,000 695,488 Range Resources 03-15-15 6.38 110,000 107,250 05-15-16 7.50 50,000 51,250 XTO Energy 01-31-15 5.00 2,025,000 1,922,905 XTO Energy Sr Unsecured 06-30-15 5.30 1,780,000 1,722,138 --------------- Total 5,984,672 - ------------------------------------------------------------------------------------------------- LIFE INSURANCE (0.1%) Prudential Financial 12-14-36 5.70 3,065,000 2,973,891 - ------------------------------------------------------------------------------------------------- MEDIA CABLE (--%) Videotron Ltee 01-15-14 6.88 340,000(c) 342,125 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (0.2%) Clear Channel Communications Sr Nts 09-15-14 5.50 355,000 299,464 Dex Media East LLC/Finance 11-15-09 9.88 75,000 78,563 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 145,000 150,619 Gray Television 12-15-11 9.25 325,000 340,031 Idearc Sr Nts 11-15-16 8.00 205,000(d) 208,844 Lamar Media 01-01-13 7.25 107,000 109,006 News America 12-15-35 6.40 1,140,000 1,132,514 Radio One Series B 07-01-11 8.88 350,000 361,374 RH Donnelley Sr Disc Nts Series A-1 01-15-13 6.88 170,000 162,988
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 155 RiverSource VP - Balanced Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA NON CABLE (CONT.) Sinclair Broadcast Group 03-15-12 8.00% $ 175,000 $ 180,688 Sun Media 02-15-13 7.63 240,000(c) 243,300 --------------- Total 3,267,391 - ------------------------------------------------------------------------------------------------- METALS (0.1%) Reliance Steel & Aluminum 11-15-16 6.20 375,000(d) 372,512 11-15-36 6.85 835,000(d) 820,074 --------------- Total 1,192,586 - ------------------------------------------------------------------------------------------------- OIL FIELD SERVICES (0.1%) Halliburton Sr Unsecured 10-15-10 5.50 785,000 783,605 OPTI Canada 12-15-14 8.25 270,000(c,d) 276,075 Pride Intl Sr Nts 07-15-14 7.38 225,000 232,313 --------------- Total 1,291,993 - ------------------------------------------------------------------------------------------------- PAPER (--%) Cascades Sr Nts 02-15-13 7.25 20,000(c) 19,950 Georgia-Pacific 01-15-17 7.13 650,000(d) 648,375 Norampac Sr Nts 06-01-13 6.75 40,000(c) 38,900 --------------- Total 707,225 - ------------------------------------------------------------------------------------------------- RETAILERS (0.4%) Home Depot Sr Unsecured 03-01-16 5.40 885,000 865,571 12-16-36 5.88 3,050,000 2,993,037 May Department Stores 07-15-09 4.80 2,620,000 2,578,198 United Auto Group 03-15-12 9.63 190,000 199,738 United Auto Group Sr Sub Nts 12-15-16 7.75 255,000(d) 255,319 Wal-Mart Stores 09-01-35 5.25 450,000 413,235 --------------- Total 7,305,098 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT TECHNOLOGY (--%) NXP Funding LLC Secured 10-15-13 8.12% $ 260,000(c,d,m) $ 263,900 - ------------------------------------------------------------------------------------------------- WIRELESS (0.4%) American Tower Sr Nts 10-15-12 7.13 65,000 66,788 Nextel Communications Series F 03-15-14 5.95 9,030,000 8,793,558 --------------- Total 8,860,346 - ------------------------------------------------------------------------------------------------- WIRELINES (1.0%) Qwest 03-15-12 8.88 330,000 367,538 Qwest Sr Unsecured 10-01-14 7.50 235,000 249,100 Telecom Italia Capital 10-01-15 5.25 4,730,000(c) 4,418,336 TELUS 06-01-11 8.00 5,017,500(c) 5,486,821 Valor Telecommunications Enterprises LLC/Finance 02-15-15 7.75 60,000 64,575 Verizon New York Series A 04-01-12 6.88 4,470,000 4,634,124 Verizon Pennsylvania Series A 11-15-11 5.65 4,385,000 4,404,733 Windstream Sr Nts 08-01-16 8.63 445,000(d) 487,275 --------------- Total 20,112,502 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $724,261,066) $ 719,911,445 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (0.3%)(s)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AUTOMOTIVE (--%) Ford Motor Tranche B Term Loan 11-29-13 8.36% $ 375,000(l) $ 375,645 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.1%) HCA Tranche B Term Loan 11-14-13 7.86 2,160,000 2,182,961 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (0.1%) VNU Tranche B Term Loan 08-09-13 8.13 1,040,000(c,l) 1,047,155 - ------------------------------------------------------------------------------------------------- PAPER (0.1%) Georgia Pacific 2nd Lien Tranche C Term Loan 12-23-13 8.35 1,260,000(l) 1,261,890 - ------------------------------------------------------------------------------------------------- RETAILERS (--%) Michaels Stores Tranche B Term Loan 10-31-13 8.38 600,000 603,348 - ------------------------------------------------------------------------------------------------- TECHNOLOGY (--%) West Corp Tranche B Term Loan 10-24-13 8.10 710,000(l) 710,334 - ------------------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $6,165,596) $ 6,181,333 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (5.6%)(h)
SHARES VALUE(a) RiverSource Short-Term Cash Fund $ 115,755,906(t) $ 115,755,906 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $115,755,906) $ 115,755,906 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,874,930,945)(u) $ 2,151,295,299 =================================================================================================
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 156 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 Dec. 31, 2006, 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 Dec. 31, 2006, the value of these securities amounted to $35,874,084 or 1.7% 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 Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (h) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 2.2% of net assets. See Note 6 to the financial statements. 3.4% of net assets is the Fund's cash equivalent position. (i) The following abbreviations are used in the portfolio security description to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation MBIA -- MBIA Insurance Corporation (j) 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. (k) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (l) At Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $52,874,980. (m) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (n) 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 Dec. 31, 2006. (o) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
SECURITY ACQUISITION COST DATES ------------------------------------------------------------------------------------------------ KKR Private Equity Investors LP Unit 05-01-06 $ 2,149,737 United Artists Theatre Circuit 9.30% 2015 12-08-95 thru 08-12-96 1,323,459
(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, March 2007, 20-year $ 16,900,000 U.S. Treasury Note, March 2007, 10-year 18,600,000 SALE CONTRACTS U.S. Treasury Note, March 2007, 2-year 37,200,000 U.S. Treasury Note, March 2007, 5-year 2,200,000
(q) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitment at Dec. 31, 2006:
SECURITY PRINCIPAL SETTLEMENT PROCEEDS VALUE AMOUNT DATE RECEIVABLE ------------------------------------------------------------------------------------------------ Federal Natl Mtge Assn 01-01-22 5.00% $ 3,000,000 01-17-07 $2,968,125 $2,948,436
(r) 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. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 157 RiverSource VP - Balanced Fund NOTES TO INVESTMENTS IN SECURITIES (CONTINUED) (s) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. (t) Affiliated Money Market Fund -- See Note 10 to the financial statements. (u) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $1,883,613,742 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 286,835,226 Unrealized depreciation (19,153,669) ------------------------------------------------------------------------- Net unrealized appreciation $ 267,681,557 -------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 158 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Cash Management Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) CERTIFICATES OF DEPOSIT (8.3%)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY Bank of New York 02-14-07 4.80% $ 5,000,000 $ 5,000,000 BNP Paribas 03-16-07 5.30 10,000,000 10,000,000 Canadian Imperial Bank of Commerce NY 01-29-07 4.62 5,000,000 5,000,000 Credit Suisse First Boston NY 03-29-07 5.01 3,000,000 3,000,000 06-26-07 5.55 10,000,000 10,000,000 DEPFA Bank 01-26-07 5.11 5,000,000 5,000,000 Deutsche Bank 01-16-07 4.59 5,000,000 5,000,000 Deutsche Bank NY 12-12-07 5.39 13,000,000 13,000,000 12-13-07 5.40 7,000,000 7,000,000 Natexis Banques Populair NY 01-23-07 4.62 5,000,000 5,000,000 05-03-07 5.14 5,000,000 5,000,000 Natixis 12-14-07 5.40 10,000,000 10,000,000 Wells Fargo Bank 05-03-07 5.09 5,000,000 5,000,000 - ------------------------------------------------------------------------------------------------- TOTAL CERTIFICATES OF DEPOSIT (Cost: $88,000,000) $88,000,000 - -------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (88.8%)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY ASSET-BACKED (62.3%) Amsterdam Funding 01-05-07 4.50% $ 7,100,000(c) $ 7,093,799 05-02-07 5.25 8,000,000(c) 7,857,867 BA Credit Card Trust 01-03-07 4.22 12,000,000(c) 11,992,973 01-04-07 4.39 9,000,000(c) 8,993,425 02-05-07 5.16 8,500,000(c) 8,453,961 02-15-07 5.19 8,000,000(c) 7,945,010 03-05-07 5.23 4,000,000(c) 3,962,011 Beta Finance 02-20-07 5.19 2,000,000 1,984,833 Bryant Park Funding LLC 01-08-07 4.72 2,000,000(c) 1,997,380 01-11-07 4.86 15,000,000(c) 14,973,700 01-22-07 5.12 2,099,000(c) 2,091,866 02-05-07 5.15 3,000,000(c) 2,983,782 03-27-07 5.23 7,000,000(c) 6,911,695 CAFCO LLC 02-13-07 5.21 12,250,000(c) 12,168,997 CC USA 03-08-07 5.21 4,500,000 4,455,545
COMMERCIAL PAPER (CONTINUED)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY ASSET-BACKED (CONT.) Chesham Finance LLC 02-09-07 5.16% $ 7,000,000 $ 6,958,146 02-23-07 5.25 8,000,000 7,935,222 02-27-07 5.22 10,000,000 9,913,794 02-28-07 5.23 5,000,000 4,956,083 03-05-07 5.22 4,100,000 4,061,135 03-07-07 5.24 4,000,000 3,960,805 04-12-07 5.25 4,000,000 3,940,260 Cheyne Finance LLC 01-11-07 4.87 1,000,000 998,243 02-06-07 5.16 7,000,000 6,961,061 03-08-07 5.22 1,000,000 990,093 03-12-07 5.22 5,000,000 4,947,600 03-16-07 5.23 4,000,000 3,955,751 04-13-07 5.27 15,500,000 15,265,364 04-20-07 5.34 7,000,000(b) 6,999,676 Citibank Credit Card Issue Trust (Dakota Nts) 01-09-07 4.77 10,000,000(c) 9,985,444 01-17-07 4.99 6,000,000(c) 5,984,250 02-08-07 5.16 17,000,000(c) 16,900,644 Citigroup Funding 03-21-07 5.26 10,000,000 9,881,650 CRC Funding LLC 01-02-07 4.00 10,000,000(c) 9,995,558 Cullinan Finance 01-10-07 4.82 2,571,000 2,566,876 01-12-07 4.89 9,000,000 8,982,905 02-16-07 5.18 25,500,000 25,321,399 03-15-07 5.31 3,000,000(b) 2,999,873 Deer Valley Funding LLC 02-07-07 5.18 5,000,000 4,971,400 02-09-07 5.20 10,000,000 9,939,753 02-27-07 5.24 3,371,000 3,341,830 02-28-07 5.25 24,000,000 23,788,566 Ebury Finance LLC 01-16-07 5.14 7,000,000 6,982,051 02-02-07 5.15 10,000,000 9,950,133 03-06-07 5.24 1,100,000 1,089,382 03-20-07 5.25 8,800,000 8,697,236 03-21-07 5.26 7,000,000 6,917,155 Fairway Finance 02-12-07 5.31 10,000,000(b) 9,999,817 Five Finance 01-05-07 4.50 10,000,000 9,991,258 01-16-07 4.99 1,000,000 997,511 01-22-07 5.04 8,000,000 7,973,218 01-24-07 5.05 6,300,000 6,277,119 02-02-07 5.13 3,300,000 3,283,638 03-01-07 5.20 9,050,000 8,969,646 Galaxy Funding 02-01-07 5.13 10,000,000(c) 9,951,783 02-13-07 5.17 12,000,000(c) 11,921,250
COMMERCIAL PAPER (CONTINUED)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY ASSET-BACKED (CONT.) Gemini Securitization 01-08-07 4.74% $ 3,337,000(c) $ 3,332,612 01-11-07 4.85 7,000,000(c) 6,987,750 01-16-07 4.97 8,000,000(c) 7,980,167 Grampian Funding LLC 01-18-07 5.00 10,000,000(c) 9,972,292 02-02-07 5.13 7,000,000(c) 6,965,292 K2 (USA) LLC 01-10-07 4.81 6,400,000 6,389,753 Nelnet Student Asset Funding LLC 01-04-07 4.41 3,986,000 3,983,071 01-05-07 4.50 3,000,000 2,997,375 01-08-07 4.77 10,000,000 9,986,775 01-09-07 4.81 10,000,000 9,985,333 01-18-07 5.03 5,000,000 4,986,067 02-07-07 5.17 5,000,000 4,971,454 Nieuw Amsterdam 01-30-07 5.20 4,641,000(c) 4,619,659 Park Avenue Receivables 01-23-07 5.13 5,000,000 4,982,267 Park Granada LLC 01-05-07 4.66 4,000,000(c) 3,996,380 01-12-07 4.93 6,000,000(c) 5,988,517 01-29-07 5.22 5,000,000(c) 4,977,625 Park Sienna LLC 01-02-07 4.04 7,500,000(c) 7,496,638 05-18-07 5.30 8,000,000(c) 7,838,451 06-15-07 5.32 5,000,000(c) 4,878,925 Ranger Funding LLC 01-22-07 5.13 5,000,000(c) 4,982,974 Scaldis Capital LLC 01-25-07 5.12 10,000,000(c) 9,961,722 01-30-07 5.11 8,779,000(c) 8,739,312 03-19-07 5.25 7,489,000(c) 7,402,556 Sedna Finance 01-08-07 4.72 7,000,000 6,990,830 01-10-07 4.82 2,000,000 1,996,792 05-08-07 5.21 3,000,000 3,000,000 09-20-07 5.33 22,000,000(b) 21,999,204 Solitaire Funding LLC 01-10-07 4.81 10,000,000(c) 9,983,989 01-12-07 4.88 10,000,000(c) 9,981,042 01-18-07 5.01 12,000,000(c) 11,966,687 02-22-07 5.20 2,000,000(c) 1,984,250 04-19-07 5.26 3,000,000(c) 2,952,150 Thames Asset Global Securitization 01-05-07 4.50 5,000,000(c) 4,995,629 Thunder Bay Funding LLC 01-22-07 5.13 3,874,000(c) 3,860,808 --------------- Total 657,485,770 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 159 RiverSource VP - Cash Management Fund COMMERCIAL PAPER (CONTINUED)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY BANKING (13.3%) Bank of America 01-19-07 5.01% $ 12,000,000 $ 11,965,033 01-31-07 5.10 7,000,000 6,967,396 02-15-07 5.18 15,000,000 14,897,188 03-09-07 5.21 7,000,000 6,929,831 Danske Bank 04-10-07 5.26 5,156,000(c) 5,080,346 DEPFA Bank 12-14-07 5.40 10,000,000(b) 10,000,000 Irish Life & Permanent 04-04-07 5.46 5,000,000(c) 4,928,288 01-18-08 5.39 5,000,000(b) 4,999,690 Natexis Banques Populaires 01-15-08 5.36 3,000,000(b) 3,000,000 02-08-08 5.37 5,000,000(b) 5,000,000 Northern Rock 11-02-07 5.39 5,000,000(b) 5,000,000 01-09-08 5.44 10,700,000(b) 10,700,000 Skandinaviska Enskilda Banken 01-09-08 5.34 5,000,000(b) 5,000,000 01-18-08 5.35 10,000,000(b) 10,000,000 UBS Stamford 11-28-07 5.38 8,000,000 8,000,000
COMMERCIAL PAPER (CONTINUED)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY BANKING (CONT.) Wells Fargo Bank 01-03-08 5.34% $ 5,000,000(b) $ 5,000,000 Westpac Banking 05-01-07 5.25 12,000,000(c) 11,788,533 01-11-08 5.39 10,700,000(b) 10,700,000 --------------- Total 139,956,305 - ------------------------------------------------------------------------------------------------- BROKERAGE (7.1%) Bear Stearns Companies 01-12-07 5.33 7,000,000(b) 7,000,000 02-21-07 5.19 15,000,000 14,884,063 01-15-08 5.39 5,000,000(b) 5,000,000 01-28-08 5.41 5,000,000(b) 5,000,000 Goldman Sachs Group 01-15-08 5.40 5,000,000(b) 5,000,000 Lehman Brothers Holdings 06-26-07 5.34 5,000,000(b,c) 5,000,000 01-22-08 5.50 8,000,000(b) 8,000,000 Merrill Lynch & Co 07-27-07 5.32 15,000,000(b) 15,000,000 01-15-08 5.36 5,000,000(b) 5,000,000 Morgan Stanley 06-04-07 5.28 5,400,000 5,278,554 --------------- Total 75,162,617 - ------------------------------------------------------------------------------------------------- NON CAPTIVE CONSUMER (1.7%) SLM 01-15-08 5.35 7,500,000(b) 7,500,000 01-18-08 5.36 10,000,000(b) 10,000,000 --------------- Total 17,500,000 - -------------------------------------------------------------------------------------------------
COMMERCIAL PAPER (CONTINUED)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY NON CAPTIVE DIVERSIFIED (3.5%) General Electric Capital 06-11-07 5.26% $ 3,900,000 $ 3,808,706 01-24-08 5.31 10,000,000(b) 10,000,000 General Electric Capital Services 02-06-07 5.13 13,000,000 12,928,096 04-05-07 5.23 10,000,000 9,861,067 --------------- Total 36,597,869 - ------------------------------------------------------------------------------------------------- OTHER FINANCIAL INSTITUTIONS (0.5%) HSBC Finance 01-24-08 5.38 5,000,000(b) 5,000,000 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (0.5%) Eli Lilly 12-31-07 5.34 5,000,000(b) 5,000,000 - ------------------------------------------------------------------------------------------------- TOTAL COMMERCIAL PAPER (Cost: $936,702,561) $ 936,702,561 - -------------------------------------------------------------------------------------------------
BONDS (3.0%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT U.S. GOVERNMENT OBLIGATIONS & AGENCIES U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38% $ 31,859,500(d) $ 31,858,885 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $31,858,885) $ 31,858,885 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,056,561,446)(e) $ 1,056,561,446 ================================================================================================= 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 Dec. 31, 2006. 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. (c) 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 Dec. 31, 2006, the value of these securities amounted to $340,807,989 or 32.3% of net assets. (d) 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. (e) Also represents the cost of securities for federal income tax purposes at Dec. 31, 2006.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 160 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Core Bond Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (106.6%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT SOVEREIGN (0.1%) United Mexican States 09-27-34 6.75% $ 85,000(c) $ 91,800 - ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (31.1%) Federal Farm Credit Bank 10-10-08 4.25 225,000 222,076 Federal Home Loan Bank 01-18-08 4.63 580,000 576,787 02-13-08 5.25 375,000 375,197 Federal Home Loan Mtge Corp 08-17-07 4.00 780,000 774,024 06-15-08 3.88 910,000 894,503 10-15-08 5.13 85,000 85,109 03-15-09 5.75 120,000 121,848 07-12-10 4.13 197,000 191,977 Federal Natl Mtge Assn 05-15-07 3.88 1,250,000 1,243,663 09-15-07 4.25 675,000 670,316 01-15-08 4.63 1,200,000 1,192,505 06-15-08 5.25 1,555,000 1,558,078 10-15-08 4.50 585,000 579,781 U.S. Treasury 09-30-07 4.00 1,215,000 1,205,603 11-30-07 4.25 810,000 804,431 10-31-08 4.88 640,000 640,300 10-31-11 4.63 1,060,000 1,056,149 11-30-11 4.50 1,865,000 1,848,389 08-15-16 4.88 1,180,000(j) 1,194,105 11-15-16 4.63 1,425,000 1,415,649 11-15-18 9.00 140,000 192,511 08-15-23 6.25 1,347,000(j) 1,550,418 02-15-26 6.00 748,000 848,337 U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38 1,274,380(k) 1,270,766 --------------- Total 20,512,522 - ------------------------------------------------------------------------------------------------- ASSET-BACKED (2.6%) Capital Auto Receivables Asset Trust Series 2004-1 Cl CTFS 09-15-10 2.84 50,000 49,226 Capital Auto Receivables Asset Trust Series 2006-SN1A Cl A4B 03-20-10 5.43 200,000(d,i) 200,000 Countrywide Asset-backed Ctfs Series 2005-10 Cl AF6 02-25-36 4.92 30,000 29,227 Countrywide Asset-backed Ctfs Series 2006-4 Cl 1A1M 07-25-36 5.61 68,055(i) 68,134 Drive Auto Receivables Trust Series 2006-2 Cl A2 (MBIA) 07-15-11 5.30 150,000(d,e) 150,117
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ASSET-BACKED (CONT.) Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78% $ 225,000(d,e) $ 227,798 Ford Credit Floorplan Master Owner Trust Series 2006-3 Cl A 06-15-11 5.53 500,000(i) 500,430 Franklin Auto Trust Series 2004-1 Cl A3 (MBIA) 03-15-12 4.15 25,000(e) 24,726 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-2 Cl AIO 08-25-11 5.89 200,000(g) 47,742 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 0.00 300,000(g) 88,176 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 55,000 54,341 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 90,000 89,661 Residential Asset Securities Series 2006-KS1 Cl A2 02-25-36 5.49 190,000(i) 190,059 WFS Financial Owner Trust Series 2004-1 Cl D 08-22-11 3.17 23,744 23,539 --------------- Total 1,743,176 - ------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (12.8%)(f) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 4.89 75,000 74,471 Banc of America Commercial Mtge Series 2005-4 Cl ASB 07-10-45 4.87 100,000 97,868 Banc of America Commercial Mtge Series 2006-2 Cl AAB 05-10-45 5.72 125,000 128,159 Banc of America Commercial Mtge Series 2006-4 Cl AAB 07-10-46 5.60 125,000 126,950 Banc of America Large Loan Series 2006-LAQ Cl E 02-09-21 5.73 75,000(d,i) 75,179 Banc of America Large Loan Series 2006-LAQ Cl F 02-09-21 5.79 75,000(d,i) 75,179
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) Banc of America Large Loan Series 2006-LAQ Cl G 02-09-21 5.88% $ 50,000(d,i) $ 50,105 Bear Stearns Commercial Mtge Securities Series 2004-PWR5 Cl A3 07-11-42 4.57 100,000 97,269 Bear Stearns Commercial Mtge Securities Series 2005-PW10 Cl A4 12-11-40 5.41 75,000 75,277 Bear Stearns Commercial Mtge Securities Series 2005-T20 Cl E 10-12-42 5.16 100,000 97,188 Bear Stearns Commercial Mtge Securities Series 2006-PW14 Cl A4 12-11-38 5.20 125,000 123,463 CDC Commercial Mtge Trust Series 2002-FX1 Cl A1 05-15-19 5.25 143,993 143,970 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 225,000 229,012 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 77,913(d) 76,503 Citigroup/Deutsche Bank Commercial Mtge Trust Series 2005-CD1 Cl ASB 07-15-44 5.23 50,000 49,994 Commercial Mtge Acceptance Series 1999-C1 Cl A2 06-15-31 7.03 205,537 211,905 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 5.66 50,000(d,i) 50,265 Credit Suisse Mtge Capital Ctfs Series 2006-C2 Cl A3 03-15-39 5.66 100,000 102,657 Credit Suisse Mtge Capital Ctfs Series 2006-C4 Cl A3 09-15-39 5.47 200,000 201,237 CS First Boston Mtge Securities Series 2001-CP4 Cl A4 12-15-35 6.18 175,000 180,794 CS First Boston Mtge Securities Series 2003-CPN1 Cl A2 03-15-35 4.60 75,000 72,309 Federal Natl Mtge Assn #386768 01-01-11 4.23 95,726 92,549 Federal Natl Mtge Assn #555806 10-01-13 5.09 171,241 170,348 Federal Natl Mtge Assn #735029 09-01-13 5.28 145,208 145,193 Federal Natl Mtge Assn #745629 01-01-18 5.08 73,600 72,914
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 161 RiverSource VP - Core Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn Series 2002-M2 Cl C 08-25-12 4.72% $ 93,604 $ 91,654 GE Capital Commercial Mtge Series 2004-C2 Cl A2 03-10-40 4.12 50,000 48,389 GE Capital Commercial Mtge Series 2005-C1 Cl A5 06-10-48 4.77 100,000 96,463 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 175,000(d) 172,127 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 50,000 49,351 Greenwich Capital Commercial Funding Series 2006-GG7 Cl AAB 07-10-38 5.91 125,000 129,772 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 75,000 74,205 GS Mtge Securities II Series 2006-GG6 Cl A4 04-10-38 5.55 125,000 126,923 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 99,558 97,655 JPMorgan Chase Commercial Mtge Securities Series 2003-CB6 Cl A2 07-12-37 5.26 150,000 149,835 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 93,582 90,472 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 43,126 41,815 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 150,000 145,848 JPMorgan Chase Commercial Mtge Securities Series 2004-C2 Cl A2 05-15-41 5.09 100,000 99,560 JPMorgan Chase Commercial Mtge Securities Series 2004-CBX Cl A3 01-12-37 4.18 50,000 48,600 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP2 Cl A1 07-15-42 4.33 195,329 192,071 JPMorgan Chase Commercial Mtge Securities Series 2006-CB16 Cl A4 05-12-45 5.55 325,000 329,667 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl A4 04-15-43 5.48 100,000 100,882 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl ASB 04-15-43 5.49 125,000 126,115
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) JPMorgan Chase Commercial Mtge Securities Series 2006-LDP8 Cl A4 05-15-45 5.40% $ 125,000 $ 125,364 LB-UBS Commercial Mtge Trust Series 2002-C4 Cl A4 09-15-26 4.56 60,000 58,773 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 50,000 47,209 LB-UBS Commercial Mtge Trust Series 2004-C8 Cl A2 12-15-29 4.20 75,000 73,008 LB-UBS Commercial Mtge Trust Series 2005-C5 Cl AAB 09-15-30 4.93 175,000 171,679 LB-UBS Commercial Mtge Trust Series 2006-C3 Cl AAB 03-15-39 5.64 120,000 121,997 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 5.87 200,000 207,329 LB-UBS Commercial Mtge Trust Series 2006-C7 Cl A3 11-15-38 5.35 100,000 99,997 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 60,678 58,218 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 75,000 73,312 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 75,000 72,724 Morgan Stanley Capital I Series 2005-T19 Cl AAB 06-12-47 4.85 175,000 171,345 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.80 75,000 77,422 Morgan Stanley Capital I Series 2006-XLF Cl A2 07-15-19 5.48 150,000(d,i) 150,077 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 225,000 232,163 Nomura Asset Securities Series 1998-D6 Cl A3 03-15-30 6.99 150,000 165,334 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 260,401 250,001 SBA CMBS Trust Series 2006-1A Cl B 11-15-36 5.45 100,000(d) 100,512 Wachovia Bank Commercial Mtge Trust Series 2003-C4 Cl A2 04-15-35 4.57 225,000 219,090
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) Wachovia Bank Commercial Mtge Trust Series 2003-C7 Cl A2 10-15-35 5.08% $ 325,000(d) $ 320,598 Wachovia Bank Commercial Mtge Trust Series 2005-C18 Cl A4 04-15-42 4.94 100,000 97,326 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 100,000 99,192 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 100,000 101,379 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl A3 07-15-45 5.77 75,000 77,113 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 100,000 102,276 Wachovia Bank Commercial Mtge Trust Series 2006-C29 Cl A4 11-15-48 5.31 150,000 149,174 --------------- Total 8,454,774 - ------------------------------------------------------------------------------------------------- MORTGAGE-BACKED (48.3%)(f) Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-12 Cl 2A1 03-25-36 5.71 159,116(h) 159,611 Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2006-1 Cl 2A1 03-25-36 5.97 189,183(h) 189,217 Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2006-2 Cl CB1 05-25-36 6.23 512(h) 517 American Home Mtge Assets Collateralized Mtge Obligation Series 2006-2 Cl 2A2 09-25-46 5.55 372,607(h) 371,715 American Home Mtge Assets Collateralized Mtge Obligation Series 2006-3 Cl 3A2 10-25-46 5.61 271,046(h) 271,810 Banc of America Funding Collateralized Mtge Obligation Series 2006-A Cl 3A2 02-20-36 5.92 124,932(h) 125,148 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11 Cl 4A1 01-25-19 4.75 65,557 63,385 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2006-9 Cl 1CB1 01-25-37 6.00 500,000(b) 501,953
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 162 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Core Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Bear Stearns Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-8 Cl A4 08-25-35 5.09% $ 150,000(d,h) $ 145,912 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11T1 Cl A1 07-25-18 4.75 36,595 35,382 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-54CB Cl 2A3 11-25-35 5.50 114,054 114,096 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-54CB Cl 3A7 11-25-35 5.50 118,017 118,060 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-64CB Cl 1A1 12-25-35 5.50 230,770 231,363 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 87,366 90,545 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-85CB Cl 2A2 02-25-36 5.50 82,392 82,357 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 190,000 191,840 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-2CB Cl A11 03-25-36 6.00 218,803 218,789 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-31CB Cl A16 11-25-36 6.00 350,000 353,546 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-43CB Cl 1A4 02-25-37 6.00 350,000 351,955 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-OA8 Cl 1A2 07-25-46 5.58 386,190(i) 387,155 Countrywide Home Loans Collateralized Mtge Obligation Series 2005-HYB1 Cl 6A1 03-25-35 5.16 288,697(h) 285,392 Countrywide Home Loans Collateralized Mtge Obligation Series 2005-R2 Cl 2A1 06-25-35 7.00 119,070(d) 123,184
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Countrywide Home Loans Collateralized Mtge Obligation Series 2006-HYB1 Cl 1A1 03-20-36 5.39% $ 125,192(h) $ 124,461 Countrywide Home Loans Collateralized Mtge Obligation Series 2006-OA5 Cl 2A2 04-25-46 5.65 250,057(h) 250,177 CS First Boston Mtge Securities Collateralized Mtge Obligation Series 2005-12 Cl 3A1 01-25-36 7.00 180,269 184,073 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Interest Only Series 2005-AR5 Cl X1 08-19-45 6.38 1,066,017(g) 12,659 Federal Home Loan Mtge Corp 01-01-37 5.50 1,000,000(b) 988,750 01-01-37 6.00 600,000(b) 604,314 Federal Home Loan Mtge Corp #1G2496 09-01-36 6.21 193,082(h) 194,760 Federal Home Loan Mtge Corp #1J1445 01-01-37 5.92 400,000(h) 401,750 Federal Home Loan Mtge Corp #B11452 12-01-18 6.00 148,109 150,114 Federal Home Loan Mtge Corp #B11835 01-01-19 5.50 119,155 119,306 Federal Home Loan Mtge Corp #B12280 02-01-19 5.50 142,624 142,805 Federal Home Loan Mtge Corp #C46101 08-01-29 6.50 286,235 293,664 Federal Home Loan Mtge Corp #C90613 01-01-23 5.00 53,249 51,851 Federal Home Loan Mtge Corp #C90683 06-01-23 5.00 105,035 102,278 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 48,621 49,262 Federal Home Loan Mtge Corp #D96348 10-01-23 5.50 151,085 150,449 Federal Home Loan Mtge Corp #G01410 04-01-32 7.00 84,331 86,695 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2795 Cl IY 07-15-17 15.06 216,128(g) 21,215 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2641 Cl KC 01-15-18 6.50 54,667 56,106 Federal Natl Mtge Assn 01-01-22 5.00 550,000(b) 540,547 01-01-22 5.50 1,215,000(b) 1,214,622 01-01-37 5.00 650,000(b) 627,453 01-01-37 5.50 2,375,000(b) 2,346,798 01-01-37 6.00 1,775,000(b) 1,786,645
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #252440 05-01-29 7.00% $147,041 $151,592 Federal Natl Mtge Assn #254560 11-01-32 5.00 22,048 21,335 Federal Natl Mtge Assn #255364 09-01-34 6.00 547,896 552,003 Federal Natl Mtge Assn #255788 06-01-15 5.50 334,033 335,026 Federal Natl Mtge Assn #323715 05-01-29 6.00 76,290 77,159 Federal Natl Mtge Assn #545869 07-01-32 6.50 46,083 47,222 Federal Natl Mtge Assn #545874 08-01-32 6.50 129,273 132,524 Federal Natl Mtge Assn #555340 04-01-33 5.50 147,956 146,680 Federal Natl Mtge Assn #555528 04-01-33 6.00 450,702 454,815 Federal Natl Mtge Assn #615135 11-01-16 6.00 176,803 179,435 Federal Natl Mtge Assn #645569 06-01-32 7.00 406,766 418,435 Federal Natl Mtge Assn #650009 09-01-31 7.50 16,664 17,396 Federal Natl Mtge Assn #667604 10-01-32 5.50 184,513 182,670 Federal Natl Mtge Assn #677089 01-01-33 5.50 170,670 168,966 Federal Natl Mtge Assn #677695 02-01-33 6.50 312,066 318,901 Federal Natl Mtge Assn #683116 02-01-33 6.00 298,516 301,240 Federal Natl Mtge Assn #704610 06-01-33 5.50 176,749 174,947 Federal Natl Mtge Assn #720378 06-01-18 4.50 60,921 58,913 Federal Natl Mtge Assn #724867 06-01-18 5.00 111,260 109,735 Federal Natl Mtge Assn #725232 03-01-34 5.00 405,664 392,411 Federal Natl Mtge Assn #725284 11-01-18 7.00 33,521 34,504 Federal Natl Mtge Assn #725424 04-01-34 5.50 1,002,585 992,365 Federal Natl Mtge Assn #725425 04-01-34 5.50 443,967 439,471 Federal Natl Mtge Assn #725431 08-01-15 5.50 89,620 90,004 Federal Natl Mtge Assn #725719 07-01-33 4.84 76,387(h) 74,896 Federal Natl Mtge Assn #725737 08-01-34 4.53 82,172(h) 81,649 Federal Natl Mtge Assn #725773 09-01-34 5.50 563,471 557,431 Federal Natl Mtge Assn #735949 10-01-35 4.99 248,577(h) 247,592 Federal Natl Mtge Assn #743455 10-01-18 5.50 186,797 187,204
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 163 RiverSource VP - Core Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #743579 11-01-33 5.50% $ 104,625 $ 103,559 Federal Natl Mtge Assn #745802 07-01-36 6.00 606,685 610,792 Federal Natl Mtge Assn #747784 10-01-18 4.50 210,995 204,042 Federal Natl Mtge Assn #749745 11-01-18 4.50 277,167 268,034 Federal Natl Mtge Assn #753074 12-01-28 5.50 139,082 138,273 Federal Natl Mtge Assn #759330 01-01-19 6.50 140,095 143,405 Federal Natl Mtge Assn #759342 01-01-34 6.50 102,308 105,128 Federal Natl Mtge Assn #761031 01-01-34 5.00 171,773 166,182 Federal Natl Mtge Assn #763754 02-01-29 5.50 153,632 152,645 Federal Natl Mtge Assn #763798 03-01-34 5.50 244,133 241,729 Federal Natl Mtge Assn #765760 02-01-19 5.00 133,595 131,629 Federal Natl Mtge Assn #791447 10-01-34 6.00 337,488 340,018 Federal Natl Mtge Assn #815264 05-01-35 5.22 321,808(h) 321,111 Federal Natl Mtge Assn #829227 08-01-35 6.00 400,277 403,075 Federal Natl Mtge Assn #844257 11-01-35 5.09 262,917(h) 262,975 Federal Natl Mtge Assn #845070 12-01-35 5.09 135,196(h) 134,498 Federal Natl Mtge Assn #850855 12-01-35 4.99 222,724(h) 221,160 Federal Natl Mtge Assn #872916 06-01-36 6.50 287,817 295,226 Federal Natl Mtge Assn #878661 02-01-36 5.50 411,016 404,390 Federal Natl Mtge Assn #881629 02-01-36 5.50 395,846 389,465 Federal Natl Mtge Assn #886291 07-01-36 7.00 192,156 198,561 Federal Natl Mtge Assn #886461 08-01-36 6.19 186,595(h) 188,966 Federal Natl Mtge Assn #900197 10-01-36 5.98 224,950(h) 226,352 Federal Natl Mtge Assn #901922 10-01-36 5.79 223,855(h) 225,394 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 367 Cl 2 01-25-36 8.45 514,528(g) 121,236 Govt Natl Mtge Assn #3920 11-20-36 6.00 499,222 504,935 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2005-16 Cl 3A1B 01-19-36 5.69 178,001(h) 178,204
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-5 Cl 2A1B 07-19-46 5.58% $ 116,859(h) $ 116,906 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-8 Cl 2A1B 08-21-46 5.60 391,537(h) 391,363 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-9 Cl 2AB2 11-19-36 5.60 512,821(h) 513,962 IndyMac Index Nim Collateralized Mtge Obligation Series 2006-AR6 Cl N1 06-25-46 6.65 67,143(d) 66,892 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-2 Cl 4A1 02-25-19 5.00 101,555 99,112 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-4 Cl 2A1 05-25-34 6.00 78,823 77,818 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-7 Cl 8A1 08-25-19 5.00 45,216 43,754 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-8 Cl 7A1 09-25-19 5.00 69,174 66,983 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2005-3 Cl 1A2 04-25-35 5.50 300,000 290,388 Residential Accredit Loans Collateralized Mtge Obligation Series 2006-QS3 Cl 1A10 03-25-36 6.00 156,579 158,389 Structured Asset Securities Collateralized Mtge Obligation Series 2003-33H Cl 1A1 10-25-33 5.50 229,586 225,015 Washington Mutual Collateralized Mtge Obligation Series 2003-AR10 Cl A7 10-25-33 4.06 125,000(h) 123,407 Washington Mutual Collateralized Mtge Obligation Series 2004-CB2 Cl 6A 07-25-19 4.50 216,933 205,609 Washington Mutual Collateralized Mtge Obligation Series 2005-AR14 Cl 2A1 12-25-35 5.30 113,963(h) 113,042
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Washington Mutual Collateralized Mtge Obligation Series 2005-AR17 Cl A1C1 12-25-45 5.51% $ 35,991(h) $ 35,998 Washington Mutual Collateralized Mtge Obligation Series 2005-AR8 Cl 2AB1 07-25-45 5.60 147,309(h) 147,376 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-10 Cl A1 10-25-35 5.00 292,276 281,041 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-5 Cl 2A1 05-25-35 5.50 191,216 187,870 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2006-AR6 Cl 5A1 03-25-36 5.11 260,960(h) 257,917 --------------- Total 31,944,033 - ------------------------------------------------------------------------------------------------- BANKING (1.7%) Bank of America Sub Nts 10-15-36 6.00 335,000 346,233 Popular North America Sr Nts 10-01-08 3.88 500,000 487,067 Wells Fargo Bank Sub Nts 08-26-36 5.95 250,000 258,045 --------------- Total 1,091,345 - ------------------------------------------------------------------------------------------------- CHEMICALS (0.2%) Potash - Saskatchewan 12-01-36 5.88 140,000(c) 135,262 - ------------------------------------------------------------------------------------------------- ELECTRIC (2.5%) Arizona Public Service 05-15-15 4.65 265,000 244,387 Baltimore Gas & Electric Sr Unsecured 10-01-36 6.35 55,000(d) 56,145 Commonwealth Edison 1st Mtge 04-15-15 4.70 135,000 125,773 Commonwealth Edison 1st Mtge Series 104 08-15-16 5.95 90,000 90,991 Consumers Energy 1st Mtge 02-15-12 5.00 70,000 68,291 Consumers Energy 1st Mtge Series H 02-17-09 4.80 290,000 286,199 Duke Energy Indiana 10-15-35 6.12 185,000 185,854
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 164 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Core Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ELECTRIC (CONT.) Exelon 06-15-10 4.45% $ 240,000 $ 232,153 Florida Power 1st Mtge 07-15-11 6.65 45,000 47,169 Indiana Michigan Power Sr Nts 03-15-37 6.05 110,000 107,969 Northern States Power Sr Nts 08-01-09 6.88 120,000 124,218 PacifiCorp 1st Mtge 06-15-35 5.25 25,000 22,884 Xcel Energy Sr Nts 07-01-08 3.40 55,000 53,387 --------------- Total 1,645,420 - ------------------------------------------------------------------------------------------------- FOOD AND BEVERAGE (0.4%) Cadbury Schweppes US Finance LLC 10-01-08 3.88 305,000(d) 297,033 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.3%) Cardinal Health 06-15-15 4.00 188,000 166,686 - ------------------------------------------------------------------------------------------------- HEALTH CARE INSURANCE (0.2%) CIGNA Sr Unsecured 11-15-36 6.15 145,000 143,562 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT INDEPENDENT ENERGY (0.7%) EnCana Sr Nts 10-15-13 4.75% $ 125,000(c) $ 118,859 XTO Energy 01-31-15 5.00 200,000 189,917 XTO Energy Sr Unsecured 06-30-15 5.30 145,000 140,286 --------------- Total 449,062 - ------------------------------------------------------------------------------------------------- LIFE INSURANCE (0.4%) Prudential Financial 12-14-36 5.70 280,000 271,677 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (0.2%) News America 12-15-35 6.40 100,000 99,343 - ------------------------------------------------------------------------------------------------- METALS (0.2%) Reliance Steel & Aluminum 11-15-16 6.20 30,000(d) 29,801 11-15-36 6.85 75,000(d) 73,659 --------------- Total 103,460 - ------------------------------------------------------------------------------------------------- OIL FIELD SERVICES (0.1%) Halliburton Sr Unsecured 10-15-10 5.50 70,000 69,876 - ------------------------------------------------------------------------------------------------- RETAILERS (1.0%) Home Depot Sr Unsecured 03-01-16 5.40 95,000 92,914 12-16-36 5.88 280,000 274,771 May Department Stores 07-15-09 4.80 235,000 231,251 Wal-Mart Stores 09-01-35 5.25 35,000 32,140 --------------- Total 631,076 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT WIRELESS (1.2%) Nextel Communications Series F 03-15-14 5.95% $ 845,000 $ 822,875 - ------------------------------------------------------------------------------------------------- WIRELINES (2.7%) Telecom Italia Capital 10-01-15 5.25 435,000(c) 406,337 TELUS 06-01-11 8.00 465,000(c) 508,495 Verizon New York Series A 04-01-12 6.88 425,000 440,605 Verizon Pennsylvania Series A 11-15-11 5.65 400,000 401,800 --------------- Total 1,757,237 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $70,753,073) $ 70,430,219 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (6.1%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 4,060,302(l) $ 4,060,302 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $4,060,302) $ 4,060,302 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $74,813,375)(m) $ 74,490,521 =================================================================================================
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 165 RiverSource VP - Core Bond Fund NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $8,676,070. (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 Dec. 31, 2006, the value of foreign securities represented 1.9% 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 Dec. 31, 2006, the value of these securities amounted to $2,441,086 or 3.7% 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 MBIA -- MBIA Insurance Corporation (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 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 Dec. 31, 2006. (h) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (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. Long Bond, March 2007, 20-year $1,200,000 U.S. Treasury Note, March 2007, 5-year 1,500,000 U.S. Treasury Note, March 2007, 10-year 800,000 SALE CONTRACTS U.S. Treasury Note, March 2007, 2-year 1,200,000
(k) 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. (l) Affiliated Money Market Fund -- See Note 10 to the financial statements. (m) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $74,841,288 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 195,531 Unrealized depreciation (546,298) --------------------------------------------------------------------------- Net unrealized depreciation $(350,767) ---------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 166 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Diversified Bond Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (100.5%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT SOVEREIGN (0.1%) United Mexican States 09-27-34 6.75% $ 2,645,000(c) $ 2,856,600 - ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (21.9%) Federal Farm Credit Bank 10-10-08 4.25 7,115,000 7,022,526 Federal Home Loan Bank 01-18-08 4.63 17,110,000 17,015,211 02-08-08 4.63 16,985,000 16,881,290 02-13-08 5.25 22,300,000 22,311,730 06-18-08 5.13 21,590,000 21,597,513 Federal Home Loan Mtge Corp 08-17-07 4.00 24,340,000 24,153,507 06-15-08 3.88 17,200,000 16,907,084 10-15-08 5.13 10,505,000 10,518,457 03-15-09 5.75 4,940,000 5,016,056 07-12-10 4.13 2,480,000 2,416,770 Federal Natl Mtge Assn 09-15-07 4.25 21,845,000 21,693,396 01-15-08 4.63 36,450,000 36,222,333 06-15-08 5.25 57,745,000 57,859,335 10-15-08 4.50 8,050,000 7,978,178 U.S. Treasury 06-30-07 3.63 7,900,000(k) 7,846,920 11-30-07 4.25 3,645,000(k) 3,619,941 10-31-11 4.63 18,195,000(g) 18,128,898 11-30-11 4.50 74,885,000(g) 74,218,073 08-15-16 4.88 16,662,000(g) 16,861,161 11-15-16 4.63 52,370,000(g) 52,026,348 11-15-18 9.00 14,640,000 20,131,142 08-15-23 6.25 55,177,000(k) 63,509,609 02-15-26 6.00 27,950,000(k) 31,699,241 U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38 45,240,490(o) 45,112,180 --------------- Total 600,746,899 - ------------------------------------------------------------------------------------------------- ASSET-BACKED (2.4%) Capital Auto Receivables Asset Trust Series 2004-1 Cl CTFS 09-15-10 2.84 2,000,000 1,969,021 Capital Auto Receivables Asset Trust Series 2006-SN1A Cl A4B 03-20-10 5.43 7,475,000(b,d) 7,475,000 Capital Auto Receivables Asset Trust Series 2006-SN1A Cl D 04-20-11 6.15 1,975,000(d) 2,004,009 Citibank Credit Card Issuance Trust Series 2003-A3 Cl A3 03-10-10 3.10 300,000 292,545 College Loan Corporation Trust Collateralized Mtge Obligation Interest Only Series 2006-1 Cl AIO 07-25-08 5.62 9,725,000(l) 1,441,655
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ASSET-BACKED (CONT.) Countrywide Asset-backed Ctfs Series 2005-10 Cl AF6 02-25-36 4.92% $ 1,020,000 $ 993,730 Countrywide Asset-backed Ctfs Series 2006-4 Cl 1A1M 07-25-36 5.61 2,147,506(b) 2,149,996 Drive Auto Receivables Trust Series 2006-2 Cl A2 (MBIA) 07-15-11 5.30 5,725,000(d,n) 5,729,471 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 6,775,000(d,n) 6,859,254 Ford Credit Floorplan Master Owner Trust Series 2006-3 Cl A 06-15-11 5.53 16,100,000(b) 16,113,826 Hertz Vehicle Financing LLC Series 2004-1A Cl A3 (MBIA) 05-25-09 2.85 1,800,000(d,n) 1,752,256 Metris Master Trust Series 2005-1A Cl D 03-21-11 7.25 900,000(b,d) 898,635 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-2 Cl AIO 08-25-11 5.89 6,200,000(l) 1,480,014 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 0.00 11,400,000(l) 3,350,688 Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-4 Cl AIO 02-27-12 5.45 11,633,000(l) 3,235,603 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 1,815,000 1,793,268 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 2,755,000 2,744,614 Residential Asset Securities Series 2006-KS1 Cl A2 02-25-36 5.49 5,955,000(b) 5,956,864 --------------- Total 66,240,449 - ------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED (12.2%)(f) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 4.89 2,250,000 2,234,140 Banc of America Commercial Mtge Series 2005-4 Cl ASB 07-10-45 4.87 3,225,000 3,156,241
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) Banc of America Commercial Mtge Series 2006-2 Cl AAB 05-10-45 5.72% $ 3,750,000 $ 3,844,761 Banc of America Commercial Mtge Series 2006-4 Cl AAB 07-10-46 5.60 4,300,000 4,367,095 Banc of America Large Loan Series 2006-LAQ Cl E 02-09-21 5.73 2,175,000(b,d) 2,180,198 Banc of America Large Loan Series 2006-LAQ Cl F 02-09-21 5.79 2,425,000(b,d) 2,430,790 Banc of America Large Loan Series 2006-LAQ Cl G 02-09-21 5.88 1,700,000(b,d) 1,703,562 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 318,820 308,497 Bear Stearns Commercial Mtge Securities Series 2004-PWR5 Cl A3 07-11-42 4.57 1,790,000 1,741,122 Bear Stearns Commercial Mtge Securities Series 2005-T20 Cl E 10-12-42 5.16 1,700,000 1,652,196 Bear Stearns Commercial Mtge Securities Series 2006-PW14 Cl A4 12-11-38 5.20 4,675,000 4,617,498 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 17,400,000 17,710,267 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 3,116,536(d) 3,060,121 Citigroup/Deutsche Bank Commercial Mtge Trust Series 2005-CD1 Cl ASB 07-15-44 5.23 1,750,000 1,749,777 Commercial Mtge Acceptance Series 1999-C1 Cl A2 06-15-31 7.03 8,586,893 8,852,923 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 5.66 1,425,000(b,d) 1,432,556 Credit Suisse Mtge Capital Ctfs Series 2006-C2 Cl A3 03-15-39 5.66 6,700,000 6,877,986 Credit Suisse Mtge Capital Ctfs Series 2006-C4 Cl A3 09-15-39 5.47 10,000,000 10,061,854 CS First Boston Mtge Securities Series 2001-CP4 Cl A4 12-15-35 6.18 11,825,000 12,216,530 CS First Boston Mtge Securities Series 2003-CPN1 Cl A2 03-15-35 4.60 2,825,000 2,723,635
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 167 RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #385683 02-01-13 4.83% $ 3,070,118 $ 3,014,647 Federal Natl Mtge Assn #555806 10-01-13 5.09 901,268 896,568 Federal Natl Mtge Assn #735390 03-01-16 4.81 4,053,140 3,984,804 Federal Natl Mtge Assn #745629 01-01-18 5.08 2,796,785 2,770,719 GE Capital Commercial Mtge Series 2004-C2 Cl A2 03-10-40 4.12 5,150,000 4,984,016 GE Capital Commercial Mtge Series 2005-C1 Cl A5 06-10-48 4.77 2,200,000 2,122,184 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 5,625,000(d) 5,532,658 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88 1,625,000 1,603,893 Greenwich Capital Commercial Funding Series 2006-GG7 Cl AAB 07-10-38 5.91 6,025,000 6,254,994 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 3,000,000 2,968,201 GS Mtge Securities II Series 2006-GG6 Cl A4 04-10-38 5.55 4,975,000 5,051,536 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 3,225,679 3,164,025 JPMorgan Chase Commercial Mtge Securities Series 2003-CB6 Cl A2 07-12-37 5.26 5,975,000 5,968,417 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 1,871,631 1,809,433 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 1,811,300 1,756,209 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 5,425,000 5,274,844 JPMorgan Chase Commercial Mtge Securities Series 2004-C2 Cl A2 05-15-41 5.09 1,000,000 995,596 JPMorgan Chase Commercial Mtge Securities Series 2004-CBX Cl A3 01-12-37 4.18 1,950,000 1,895,412 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP2 Cl A1 07-15-42 4.33 4,062,835 3,995,067 JPMorgan Chase Commercial Mtge Securities Series 2006-CB16 Cl A4 05-12-45 5.55 15,850,000 16,077,632 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl A4 04-15-43 5.48 5,675,000 5,725,034
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl ASB 04-15-43 5.49% $ 4,425,000 $ 4,464,472 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP8 Cl A4 05-15-45 5.40 9,450,000 9,477,498 LB-UBS Commercial Mtge Trust Series 2006-C7 Cl A3 11-15-38 5.35 4,350,000 4,349,891 LB-UBS Commercial Mtge Trust Series 2002-C2 Cl A3 06-15-26 5.39 3,590,000 3,609,695 LB-UBS Commercial Mtge Trust Series 2002-C4 Cl A5 09-15-31 4.85 3,000,000 2,946,617 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 2,200,000 2,077,196 LB-UBS Commercial Mtge Trust Series 2004-C8 Cl A2 12-15-29 4.20 3,700,000 3,601,728 LB-UBS Commercial Mtge Trust Series 2005-C5 Cl AAB 09-15-30 4.93 5,775,000 5,665,391 LB-UBS Commercial Mtge Trust Series 2006-C3 Cl AAB 03-15-39 5.64 3,895,000 3,959,813 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 5.87 6,725,000 6,971,452 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 2,721,316 2,610,992 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 2,625,000 2,565,905 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 2,400,000 2,327,160 Morgan Stanley Capital I Series 2005-T19 Cl AAB 06-12-47 4.85 6,025,000 5,899,149 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.80 5,500,000 5,677,599 Morgan Stanley Capital I Series 2006-XLF Cl A2 07-15-19 5.48 5,000,000(b,d) 5,002,572 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 10,810,000 11,154,184 Nomura Asset Securities Series 1998-D6 Cl A3 03-15-30 6.99 16,965,000 18,699,239 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 2,604,009 2,500,018
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (CONT.) SBA CMBS Trust Series 2006-1A Cl B 11-15-36 5.45% $ 3,750,000(d) $ 3,769,200 Wachovia Bank Commercial Mtge Trust Series 2003-C4 Cl A2 04-15-35 4.57 11,250,000 10,954,484 Wachovia Bank Commercial Mtge Trust Series 2003-C7 Cl A2 10-15-35 5.08 12,800,000(d) 12,626,657 Wachovia Bank Commercial Mtge Trust Series 2005-C18 Cl A4 04-15-42 4.94 2,900,000 2,822,463 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 2,975,000 2,950,973 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 3,200,000 3,244,130 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl A3 07-15-45 5.77 4,300,000 4,421,172 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 6,000,000 6,136,551 Wachovia Bank Commercial Mtge Trust Series 2006-C29 Cl A4 11-15-48 5.31 6,175,000 6,140,987 --------------- Total 335,394,826 - ------------------------------------------------------------------------------------------------- MORTGAGE-BACKED (50.5%)(f) Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-12 Cl 2A1 03-25-36 5.71 5,250,827(m) 5,267,156 Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2006-1 Cl 2A1 03-25-36 5.97 6,243,022(m) 6,244,145 American Home Mtge Assets Collateralized Mtge Obligation Series 2006-2 Cl 2A2 09-25-46 5.55 12,948,101(m) 12,917,111 American Home Mtge Assets Collateralized Mtge Obligation Series 2006-3 Cl 3A2 10-25-46 5.61 7,950,673(m) 7,973,084 Banc of America Funding Collateralized Mtge Obligation Series 2006-A Cl 3A2 02-20-36 5.92 4,247,678(m) 4,255,027 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11 Cl 1A1 01-25-34 6.00 2,786,114 2,761,067 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11 Cl 4A1 01-25-19 4.75 2,048,652 1,980,791
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 168 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2004-3 Cl 1A1 04-25-34 6.00% $ 4,970,528 $ 4,972,084 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2006-9 Cl 1CB1 01-25-37 6.00 29,850,000(e) 29,966,602 Bank of America Funding Collateralized Mtge Obligation Series 2006-2N Cl N1 11-25-46 7.25 1,333,669(d) 1,322,043 Bear Stearns Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-8 Cl A4 08-25-35 5.09 5,650,000(d,m) 5,496,011 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2003-11T1 Cl A1 07-25-18 4.75 1,985,253 1,919,491 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-14 Cl 2A2 05-25-35 5.57 8,509,593(b) 8,509,148 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-54CB Cl 2A3 11-25-35 5.50 3,603,261 3,604,585 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-54CB Cl 3A7 11-25-35 5.50 3,675,390 3,676,730 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-64CB Cl 1A1 12-25-35 5.50 7,048,982 7,067,090 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 3,036,853 3,147,333 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-85CB Cl 2A2 02-25-36 5.50 2,588,856 2,587,734 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 7,000,000 7,067,782 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-2CB Cl A11 03-25-36 6.00 6,564,097 6,563,672 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-31CB Cl A16 11-25-36 6.00 13,075,000 13,207,450
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-43 CB Cl 1A4 02-25-37 6.00% $ 18,850,000 $ 18,955,295 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-OA8 Cl 1A2 07-25-46 5.58 12,551,189(b) 12,582,551 Countrywide Home Loans Collateralized Mtge Obligation Series 2005-R2 Cl 2A1 06-25-35 7.00 3,861,742(d) 3,995,159 Countrywide Home Loans Collateralized Mtge Obligation Series 2006-HYB1 Cl 1A1 03-20-36 5.38 3,651,442(m) 3,630,118 Countrywide Home Loans Collateralized Mtge Obligation Series 2006-HYB5 Cl 2A2 09-20-36 5.95 10,319,912(m) 10,383,999 Countrywide Home Loans Collateralized Mtge Obligation Series 2006-OA5 Cl 2A2 04-25-46 5.62 8,138,222(m) 8,142,135 CS First Boston Mtge Securities Collateralized Mtge Obligation Series 2003-29 Cl 8A1 11-25-18 6.00 2,139,269 2,140,265 CS First Boston Mtge Securities Collateralized Mtge Obligation Series 2005-12 Cl 3A1 01-25-36 7.00 5,786,619 5,908,755 Deutsche Bank Alternative Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR6 Cl A3 02-25-37 5.44 8,200,000(b) 8,202,378 Downey Savings & Loan Assn Mtge Loan Trust Collateralized Mtge Obligation Interest Only Series 2005-AR5 Cl X1 08-19-45 6.38 33,452,625(l) 397,250 Federal Home Loan Mtge Corp 01-01-37 5.50 31,000,000(e) 30,651,250 01-01-37 6.00 20,400,000(e) 20,546,676 Federal Home Loan Mtge Corp #1G2496 09-01-36 6.21 7,312,966(m) 7,376,516 Federal Home Loan Mtge Corp #1J1445 01-01-37 5.92 20,227,531(m) 20,316,026 Federal Home Loan Mtge Corp #A27373 10-01-34 6.50 757,762 772,548 Federal Home Loan Mtge Corp #B11452 12-01-18 6.00 1,454,275 1,473,961 Federal Home Loan Mtge Corp #C00356 08-01-24 8.00 112,578 118,612 Federal Home Loan Mtge Corp #C14412 09-01-28 6.00 1,327,741 1,343,820 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 1,041,675 1,035,554
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Home Loan Mtge Corp #C59161 10-01-31 6.00% $ 2,961,382 $ 2,992,288 Federal Home Loan Mtge Corp #C79930 06-01-33 5.50 2,756,247 2,729,882 Federal Home Loan Mtge Corp #C80198 08-01-24 8.00 65,569 69,084 Federal Home Loan Mtge Corp #C80253 01-01-25 9.00 63,559 68,756 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 4,327,247 4,384,312 Federal Home Loan Mtge Corp #D95319 03-01-22 6.00 440,135 446,245 Federal Home Loan Mtge Corp #D96300 10-01-23 5.50 350,116 348,644 Federal Home Loan Mtge Corp #E01127 02-01-17 6.50 2,876,328 2,943,747 Federal Home Loan Mtge Corp #E01419 05-01-18 5.50 1,529,970 1,532,529 Federal Home Loan Mtge Corp #E97591 06-01-18 5.50 340,336 341,077 Federal Home Loan Mtge Corp #E98725 08-01-18 5.00 4,779,330 4,708,176 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 3,967,017 3,907,718 Federal Home Loan Mtge Corp #G01108 04-01-30 7.00 2,245,675 2,314,277 Federal Home Loan Mtge Corp #G01427 12-01-31 6.50 678,417 694,330 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 559,587 567,490 Federal Home Loan Mtge Corp #G10198 05-01-07 9.00 374 375 Federal Home Loan Mtge Corp #G30225 02-01-23 6.00 5,513,959 5,590,512 Federal Home Loan Mtge Corp Collateralized Mtge Obligation 06-15-20 8.00 9,659 9,601 03-15-22 7.00 810,238 808,800 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2590 Cl BI 02-15-14 2.28 935,218(l) 38,749 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2718 Cl IA 10-15-22 20.00 3,047,812(l) 113,161 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2576 Cl KJ 02-15-33 5.50 5,128,645 5,132,458 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2641 Cl KC 01-15-18 6.50 1,995,339 2,047,851
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 169 RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn 01-01-22 5.50% $ 15,000,000(e) $ 14,995,320 01-01-22 6.00 11,000,000(e) 11,151,250 01-01-37 5.50 58,000,000(e) 57,311,250 01-01-37 6.00 100,350,000(e) 101,008,295 01-01-37 6.50 10,000,000(e) 10,187,500 Federal Natl Mtge Assn #125032 11-01-21 8.00 24,786 26,140 Federal Natl Mtge Assn #125474 02-01-27 7.50 684,433 714,690 Federal Natl Mtge Assn #190353 08-01-34 5.00 12,223,625 11,816,204 Federal Natl Mtge Assn #190764 09-01-07 8.50 3,009 3,007 Federal Natl Mtge Assn #190899 04-01-23 8.50 283,618 298,680 Federal Natl Mtge Assn #190988 06-01-24 9.00 306,034 325,628 Federal Natl Mtge Assn #253883 08-01-16 6.00 660,907 670,743 Federal Natl Mtge Assn #254224 02-01-17 7.00 940,947 967,377 Federal Natl Mtge Assn #254560 11-01-32 5.00 3,241,175 3,136,357 Federal Natl Mtge Assn #254675 01-01-23 6.50 158,398 162,370 Federal Natl Mtge Assn #254906 10-01-18 4.50 5,256,170 5,082,977 Federal Natl Mtge Assn #254916 09-01-23 5.50 4,343,047 4,322,245 Federal Natl Mtge Assn #255788 06-01-15 5.50 5,244,211 5,259,808 Federal Natl Mtge Assn #256171 03-01-26 6.00 24,106,134 24,367,224 Federal Natl Mtge Assn #256339 07-01-36 5.50 21,428,752 21,069,820 Federal Natl Mtge Assn #303727 02-01-11 6.00 87,188 88,082 Federal Natl Mtge Assn #442411 11-01-28 6.50 1,199,660 1,231,353 Federal Natl Mtge Assn #445254 12-01-13 5.50 1,915,288 1,923,480 Federal Natl Mtge Assn #446964 10-01-28 6.00 3,666,761 3,708,539 Federal Natl Mtge Assn #450370 01-01-29 6.50 1,752,665 1,798,967 Federal Natl Mtge Assn #484820 04-01-14 5.50 11,799 11,849 Federal Natl Mtge Assn #50553 04-01-22 8.00 93,853 99,080 Federal Natl Mtge Assn #510587 08-01-29 7.00 123,080 126,889 Federal Natl Mtge Assn #545339 11-01-31 6.50 101,451 104,294 Federal Natl Mtge Assn #545342 04-01-13 7.00 1,021,842 1,029,891 Federal Natl Mtge Assn #545869 07-01-32 6.50 1,474,642 1,511,110
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #545885 08-01-32 6.50% $ 3,115,820 $ 3,187,889 Federal Natl Mtge Assn #545910 08-01-17 6.00 1,705,539 1,734,071 Federal Natl Mtge Assn #555375 04-01-33 6.00 9,289,331 9,412,131 Federal Natl Mtge Assn #555376 04-01-18 4.50 210,874 203,925 Federal Natl Mtge Assn #555458 05-01-33 5.50 11,456,196 11,352,403 Federal Natl Mtge Assn #555528 04-01-33 6.00 25,441,538 25,673,708 Federal Natl Mtge Assn #555734 07-01-23 5.00 3,329,456 3,243,734 Federal Natl Mtge Assn #555740 08-01-18 4.50 1,913,148 1,849,476 Federal Natl Mtge Assn #576603 03-01-15 6.00 3,102,114 3,150,113 Federal Natl Mtge Assn #606882 10-01-31 7.00 465,012 478,507 Federal Natl Mtge Assn #609621 11-01-31 7.00 2,485,110 2,557,228 Federal Natl Mtge Assn #617746 08-01-32 6.50 206,833 211,574 Federal Natl Mtge Assn #626720 01-01-17 6.00 174,068 176,659 Federal Natl Mtge Assn #630599 05-01-32 7.00 3,250,745 3,344,002 Federal Natl Mtge Assn #634367 03-01-17 6.50 996,195 1,014,010 Federal Natl Mtge Assn #646938 06-01-32 7.00 1,524,484 1,568,218 Federal Natl Mtge Assn #647549 08-01-17 6.00 1,446,433 1,467,686 Federal Natl Mtge Assn #650159 10-01-32 6.50 2,441,478 2,515,516 Federal Natl Mtge Assn #652600 02-01-18 5.50 6,321,518 6,336,604 Federal Natl Mtge Assn #667604 10-01-32 5.50 5,992,292 5,932,439 Federal Natl Mtge Assn #667721 03-01-33 6.00 2,115,736 2,137,671 Federal Natl Mtge Assn #667787 02-01-18 5.50 761,506 762,960 Federal Natl Mtge Assn #669925 09-01-17 6.50 2,313,134 2,376,004 Federal Natl Mtge Assn #670382 09-01-32 6.00 6,008,877 6,063,711 Federal Natl Mtge Assn #670387 08-01-32 7.00 786,967 810,293 Federal Natl Mtge Assn #672289 12-01-17 5.50 510,020 511,557 Federal Natl Mtge Assn #678028 09-01-17 6.00 530,003 537,790 Federal Natl Mtge Assn #683116 02-01-33 6.00 298,516 301,240 Federal Natl Mtge Assn #684585 02-01-33 5.50 544,617 539,762
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #684586 03-01-33 6.00% $ 1,724,179 $ 1,741,212 Federal Natl Mtge Assn #684601 03-01-33 6.00 1,213,955 1,230,577 Federal Natl Mtge Assn #687051 01-01-33 6.00 5,679,867 5,711,225 Federal Natl Mtge Assn #687736 02-01-33 5.50 2,740,298 2,712,364 Federal Natl Mtge Assn #688691 03-01-33 5.50 557,077 551,398 Federal Natl Mtge Assn #689093 07-01-28 5.50 1,531,522 1,522,620 Federal Natl Mtge Assn #694316 03-01-18 5.50 1,727,013 1,731,402 Federal Natl Mtge Assn #694546 03-01-33 5.50 1,945,603 1,925,771 Federal Natl Mtge Assn #694628 04-01-33 5.50 2,333,029 2,313,507 Federal Natl Mtge Assn #694795 04-01-33 5.50 2,977,836 2,952,299 Federal Natl Mtge Assn #694988 03-01-33 5.50 5,968,729 5,911,356 Federal Natl Mtge Assn #695202 03-01-33 6.50 2,189,030 2,234,799 Federal Natl Mtge Assn #695220 04-01-33 5.50 170,566 168,827 Federal Natl Mtge Assn #705096 06-01-18 5.00 455,568 449,165 Federal Natl Mtge Assn #709901 06-01-18 5.00 2,837,988 2,798,434 Federal Natl Mtge Assn #711501 05-01-33 5.50 1,497,759 1,485,887 Federal Natl Mtge Assn #720006 07-01-33 5.50 4,088,995 4,047,313 Federal Natl Mtge Assn #720378 06-01-18 4.50 3,550,557 3,433,564 Federal Natl Mtge Assn #723687 08-01-28 5.50 2,198,373 2,185,595 Federal Natl Mtge Assn #725232 03-01-34 5.00 12,575,583 12,164,727 Federal Natl Mtge Assn #725284 11-01-18 7.00 107,266 110,414 Federal Natl Mtge Assn #725424 04-01-34 5.50 27,111,847 26,835,477 Federal Natl Mtge Assn #725425 04-01-34 5.50 15,094,884 14,942,011 Federal Natl Mtge Assn #725684 05-01-18 6.00 5,210,196 5,289,773 Federal Natl Mtge Assn #725719 07-01-33 4.84 3,246,428(m) 3,183,091 Federal Natl Mtge Assn #725737 08-01-34 4.53 3,081,440(m) 3,061,842 Federal Natl Mtge Assn #725773 09-01-34 5.50 18,675,054 18,474,843 Federal Natl Mtge Assn #725813 12-01-33 6.50 7,502,711 7,659,578 Federal Natl Mtge Assn #726940 08-01-23 5.50 58,816 58,530
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 170 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #730153 08-01-33 5.50% $ 596,219 $ 590,141 Federal Natl Mtge Assn #730231 08-01-23 5.50 6,626,486 6,594,748 Federal Natl Mtge Assn #731075 07-01-18 5.50 142,563 142,914 Federal Natl Mtge Assn #731417 09-01-18 5.50 1,665,434 1,669,421 Federal Natl Mtge Assn #732094 08-01-18 5.50 111,562 111,865 Federal Natl Mtge Assn #735057 01-01-19 4.50 4,438,032 4,291,797 Federal Natl Mtge Assn #735949 10-01-35 4.99 9,852,688(m) 9,813,654 Federal Natl Mtge Assn #737330 09-01-18 5.50 1,312,800 1,315,790 Federal Natl Mtge Assn #742840 10-01-18 5.50 1,221,226 1,223,997 Federal Natl Mtge Assn #743262 10-01-18 5.00 2,856,961 2,815,953 Federal Natl Mtge Assn #743455 10-01-18 5.50 4,500,583 4,510,406 Federal Natl Mtge Assn #745563 08-01-34 5.50 15,554,463 15,395,906 Federal Natl Mtge Assn #745802 07-01-36 6.00 24,267,383 24,431,693 Federal Natl Mtge Assn #747584 11-01-28 5.50 3,949,034 3,926,079 Federal Natl Mtge Assn #753919 12-01-33 4.95 3,322,652(m) 3,262,889 Federal Natl Mtge Assn #756844 02-01-19 5.00 2,167,423 2,133,097 Federal Natl Mtge Assn #759342 01-01-34 6.50 797,999 819,997 Federal Natl Mtge Assn #761031 01-01-34 5.00 458,060 443,151 Federal Natl Mtge Assn #763703 04-01-34 5.50 26,613,038(e) 26,327,726 Federal Natl Mtge Assn #765758 02-01-19 5.00 2,680,870 2,641,420 Federal Natl Mtge Assn #765760 02-01-19 5.00 267,189 263,257 Federal Natl Mtge Assn #776962 04-01-29 5.00 8,835,844 8,548,254 Federal Natl Mtge Assn #776987 04-01-29 5.00 301,517 291,703 Federal Natl Mtge Assn #779676 06-01-34 5.00 25,726,456 24,868,979 Federal Natl Mtge Assn #785738 11-01-19 5.00 9,616,794(e) 9,464,490 Federal Natl Mtge Assn #811114 02-01-35 5.50 21,622,798 21,375,832 Federal Natl Mtge Assn #837258 09-01-35 4.92 2,177,671(m) 2,184,705 Federal Natl Mtge Assn #844257 11-01-35 5.09 10,536,916(m) 10,539,233 Federal Natl Mtge Assn #845070 12-01-35 5.09 4,236,126(m) 4,214,270
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #850855 12-01-35 4.99% $ 8,400,139(m) $ 8,341,169 Federal Natl Mtge Assn #878661 02-01-36 5.50 15,755,608 15,501,627 Federal Natl Mtge Assn #881629 02-01-36 5.50 11,405,622 11,221,764 Federal Natl Mtge Assn #883201 07-01-36 6.50 3,970,390 4,072,604 Federal Natl Mtge Assn #885871 06-01-36 7.00 5,694,134 5,883,905 Federal Natl Mtge Assn #886404 08-01-36 6.50 11,358,498 11,572,653 Federal Natl Mtge Assn #886461 08-01-36 6.19 5,597,836(m) 5,668,984 Federal Natl Mtge Assn #886464 08-01-36 6.50 5,783,485 5,892,527 Federal Natl Mtge Assn #887096 07-01-36 5.81 12,788,642(m) 12,946,205 Federal Natl Mtge Assn #887589 07-01-36 6.50 8,152,973 8,362,821 Federal Natl Mtge Assn #900197 10-01-36 5.98 9,572,875(m) 9,632,514 Federal Natl Mtge Assn #901922 10-01-36 5.79 10,742,007(m) 10,815,858 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-24 Cl PI 12-25-12 20.00 565,898(l) 11,312 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-71 Cl IM 12-25-31 14.12 1,790,666(l) 280,286 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2004-84 Cl GI 12-25-22 12.17 1,678,796(l) 224,943 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 367 Cl 2 01-25-36 8.45 13,179,749(l) 3,105,478 Federal Natl Mtge Assn Collateralized Mtge Obligation Series 2003-133 Cl GB 12-25-26 8.00 1,555,048 1,638,771 Govt Natl Mtge Assn #3900 09-20-36 6.50 22,757,340 23,263,941 Govt Natl Mtge Assn #3920 11-20-36 6.00 18,815,482 19,030,788 Govt Natl Mtge Assn #604708 10-15-33 5.50 3,822,127 3,808,171 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-70 Cl IC 08-20-32 15.75 3,185,181(l) 534,551
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 20.00% $ 668,236(l) $ 59,154 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2005-16 Cl 3A1B 01-19-36 5.69 5,537,809(m) 5,544,128 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-12 Cl 2A11 12-19-36 5.44 17,943,317(m) 17,943,317 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-5 Cl 2A1B 07-19-46 5.58 3,624,493(m) 3,625,960 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-8 Cl 2A1B 08-21-46 5.60 13,597,836(m) 13,591,823 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-9 Cl 2AB2 11-19-36 5.60 17,826,636(m) 17,866,305 Harborview Nim Collateralized Mtge Obligation Series 2006-7A Cl N1 09-19-36 6.41 965,978(d,m) 961,148 Harborview Nim Collateralized Mtge Obligation Series 2006-8A Cl N1 07-21-36 6.41 978,154(d) 974,486 IndyMac Index Mtge Loan Trust Collateralized Mtge Obligation Interest Only Series 2005-AR8 Cl AX1 04-25-35 4.50 69,517,964(l) 630,007 IndyMac Index Mtge Loan Trust Collateralized Mtge Obligation Series 2005-AR25 Cl 1A21 12-25-35 5.88 5,291,954(m) 5,300,016 IndyMac Index Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR35 Cl 2A2 01-25-37 5.45 10,811,192(m) 10,815,516 IndyMac Index Nim Collateralized Mtge Obligation Series 2006-AR6 Cl N1 06-25-46 6.65 1,963,945(d) 1,956,581 Lehman XS Net Interest Margin Nts Collateralized Mtge Obligation Series 2006-2N Cl A1 02-27-46 7.00 916,532(d) 917,100 Lehman XS Net Interest Margin Nts Series 2006-AR8 Cl A1 10-28-46 6.25 1,187,522(d) 1,182,772
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 171 RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-2 Cl 4A1 02-25-19 5.00% $ 3,420,797 $ 3,338,492 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-7 Cl 8A1 08-25-19 5.00 2,326,896 2,251,668 Master Alternative Loans Trust Collateralized Mtge Obligation Series 2004-8 Cl 7A1 09-25-19 5.00 3,182,007 3,081,201 Rali NIM Collateralized Mtge Obligation Series 2006-QO4 Cl N1 04-25-46 6.05 1,219,296(d) 1,213,961 Residential Accredit Loans Collateralized Mtge Obligation Series 2006-QS3 Cl 1A10 03-25-36 6.00 4,428,953 4,480,145 Sequoia Alternative Loan Trust Collateralized Mtge Obligation Series 2006-1 Cl A2 02-25-36 6.11 5,604,449 5,678,428 Structured Adjustable Rate Mtge Loan Trust Collateralized Mtge Obligation Series 2006-5 Cl 4A1 06-25-36 5.97 7,858,639(m) 7,880,434 Structured Asset Securities Collateralized Mtge Obligation Series 2003-33H Cl 1A1 10-25-33 5.50 11,280,462 11,055,892 Washington Mutual Alternative Mtge Loan Trust Pass-Through Ctfs Collateralized Mtge Obligation Interest Only Series 2005-AR1 Cl X2 12-25-35 7.10 29,216,800(l) 262,495 Washington Mutual Collateralized Mtge Obligation Series 2003-AR10 Cl A7 10-25-33 4.06 4,425,000(m) 4,368,595 Washington Mutual Collateralized Mtge Obligation Series 2004-CB2 Cl 6A 07-25-19 4.50 2,313,951 2,193,163 Washington Mutual Collateralized Mtge Obligation Series 2005-AR14 Cl 2A1 12-25-35 5.30 7,772,256(m) 7,709,449 Washington Mutual Collateralized Mtge Obligation Series 2005-AR17 Cl A1C1 12-25-45 5.51 1,120,208(m) 1,120,430 Washington Mutual Collateralized Mtge Obligation Series 2005-AR8 Cl 2AB1 07-25-45 5.60 4,306,335(m) 4,308,300
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-10 Cl A1 10-25-35 5.00% $ 9,315,711 $ 8,957,615 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-5 Cl 2A1 05-25-35 5.50 7,508,411 7,377,014 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2006-AR6 Cl 5A1 03-25-36 5.11 9,560,616(m) 9,449,124 --------------- Total 1,383,236,925 - ------------------------------------------------------------------------------------------------- AEROSPACE & DEFENSE (0.1%) DRS Technologies 02-01-16 6.63 660,000 664,950 L-3 Communications 06-15-12 7.63 490,000 507,150 L-3 Communications Sr Sub Nts Series B 10-15-15 6.38 615,000 608,850 --------------- Total 1,780,950 - ------------------------------------------------------------------------------------------------- BANKING (1.9%) Bank of America Sub Nts 10-15-36 6.00 13,590,000 14,045,673 Citigroup Sub Nts 08-25-36 6.13 3,200,000 3,332,154 Manufacturers & Traders Trust Sub Nts 12-01-21 5.63 4,130,000(b) 4,095,396 Popular North America Sr Nts 10-01-08 3.88 19,770,000 19,258,629 Wells Fargo Bank Sub Nts 08-26-36 5.95 10,595,000 10,935,947 --------------- Total 51,667,799 - ------------------------------------------------------------------------------------------------- BROKERAGE (--%) LaBranche & Co Sr Nts 05-15-12 11.00 605,000 651,888 - ------------------------------------------------------------------------------------------------- CHEMICALS (0.2%) NewMarket Sr Nts 12-15-16 7.13 200,000(d) 200,000 Potash - Saskatchewan 12-01-36 5.88 5,745,000(c) 5,550,573 PQ 02-15-13 7.50 80,000 78,800 --------------- Total 5,829,373 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ELECTRIC (2.6%) Aquila Canada Finance 06-15-11 7.75% $ 645,000(c) $ 680,629 Arizona Public Service 05-15-15 4.65 9,620,000 8,871,707 Baltimore Gas & Electric Sr Unsecured 10-01-36 6.35 2,410,000(d) 2,460,183 CMS Energy Sr Nts 01-15-09 7.50 860,000 886,875 Commonwealth Edison 1st Mtge 04-15-15 4.70 5,535,000 5,156,683 Commonwealth Edison 1st Mtge Series 104 08-15-16 5.95 4,080,000 4,124,909 Consumers Energy 1st Mtge 02-15-12 5.00 3,260,000 3,180,394 Consumers Energy 1st Mtge Series H 02-17-09 4.80 10,300,000 10,165,028 Duke Energy Indiana 10-15-35 6.12 7,675,000 7,710,412 Edison Mission Energy Sr Unsecured 06-15-13 7.50 470,000 491,150 Exelon 06-15-10 4.45 9,060,000 8,763,792 Florida Power 1st Mtge 07-15-11 6.65 1,650,000 1,729,545 Indiana Michigan Power Sr Nts 03-15-37 6.05 4,565,000 4,480,698 IPALCO Enterprises Secured 11-14-08 8.38 265,000 274,938 11-14-11 8.63 1,765,000 1,919,438 Midwest Generation LLC Series B 01-02-16 8.56 107,689 118,727 Northern States Power Sr Nts 08-01-09 6.88 5,240,000 5,424,165 NRG Energy 02-01-14 7.25 575,000 579,313 01-15-17 7.38 195,000 195,488 PacifiCorp 1st Mtge 06-15-35 5.25 1,055,000 965,702 Sierra Pacific Power Series M 05-15-16 6.00 2,275,000 2,279,964 Xcel Energy Sr Nts 07-01-08 3.40 330,000 320,321 --------------- Total 70,780,061 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 172 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ENTERTAINMENT (0.1%) United Artists Theatre Circuit 07-01-15 9.30% $ 2,497,893(j) $ 2,597,808 - ------------------------------------------------------------------------------------------------- FOOD AND BEVERAGE (0.5%) Cadbury Schweppes US Finance LLC 10-01-08 3.88 12,285,000(d) 11,964,116 Cott Beverages USA 12-15-11 8.00 2,005,000 2,045,100 --------------- Total 14,009,216 - ------------------------------------------------------------------------------------------------- GAMING (0.1%) Mohegan Tribal Gaming Authority 02-15-15 6.88 1,085,000 1,087,713 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 290,000 287,825 Mohegan Tribal Gaming Authority Sr Sub Nts 04-01-12 8.00 380,000 395,675 Pokagon Gaming Authority Sr Nts 06-15-14 10.38 155,000(d) 169,725 --------------- Total 1,940,938 - ------------------------------------------------------------------------------------------------- GAS PIPELINES (0.3%) ANR Pipeline 03-15-10 8.88 880,000 923,199 Colorado Interstate Gas Sr Nts 03-15-15 5.95 295,000 291,066 11-15-15 6.80 645,000 670,659 Regency Energy Partners LP/Finance Sr Unsecured 12-15-13 8.38 395,000(d) 395,988 Southern Natural Gas 03-15-10 8.88 410,000 430,127 Southern Star Central Sr Nts 03-01-16 6.75 1,490,000 1,486,275 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 910,000 935,025 Transcontinental Gas Pipe Line Sr Unsecured 04-15-16 6.40 546,000 551,460 Williams Companies Sr Nts 07-15-19 7.63 1,599,000 1,710,930 --------------- Total 7,394,729 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.4%) Cardinal Health 06-15-15 4.00 7,850,000 6,960,045 Community Health Systems Sr Sub Nts 12-15-12 6.50 165,000 162,525 HCA Secured 11-15-14 9.13 130,000(d) 138,450 11-15-16 9.25 570,000(d) 608,475
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT HEALTH CARE (CONT.) Omnicare Sr Sub Nts 12-15-13 6.75% $ 850,000 $ 839,375 12-15-15 6.88 1,040,000 1,027,000 Triad Hospitals Sr Nts 05-15-12 7.00 435,000 442,613 Triad Hospitals Sr Sub Nts 11-15-13 7.00 550,000 553,438 --------------- Total 10,731,921 - ------------------------------------------------------------------------------------------------- HEALTH CARE INSURANCE (0.2%) CIGNA Sr Unsecured 11-15-36 6.15 6,435,000 6,371,165 - ------------------------------------------------------------------------------------------------- INDEPENDENT ENERGY (0.8%) Chesapeake Energy 08-15-17 6.50 620,000 606,050 Denbury Resources Sr Sub Nts 12-15-15 7.50 80,000 81,200 EnCana Sr Nts 10-15-13 4.75 5,200,000(c) 4,944,524 Pioneer Natural Resources 05-01-18 6.88 2,755,000 2,679,816 Range Resources 03-15-15 6.38 795,000 775,125 05-15-16 7.50 160,000 164,000 XTO Energy 01-31-15 5.00 9,385,000 8,911,837 XTO Energy Sr Unsecured 06-30-15 5.30 5,130,000 4,963,239 --------------- Total 23,125,791 - ------------------------------------------------------------------------------------------------- LIFE INSURANCE (0.4%) Prudential Financial 12-14-36 5.70 11,680,000 11,332,803 - ------------------------------------------------------------------------------------------------- MEDIA CABLE (--%) Videotron Ltee 01-15-14 6.88 855,000(c) 860,344 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (0.3%) Clear Channel Communications Sr Nts 09-15-14 5.50 1,255,000 1,058,668 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 335,000 347,981 Gray Television 12-15-11 9.25 25,000 26,156 Idearc Sr Nts 11-15-16 8.00 720,000(d) 733,500 Lamar Media 01-01-13 7.25 216,000 220,050
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA NON CABLE (CONT.) News America 12-15-35 6.40% $ 4,140,000 $ 4,112,816 Radio One Series B 07-01-11 8.88 535,000 552,388 RH Donnelley Sr Disc Nts Series A-1 01-15-13 6.88 595,000 570,456 Sinclair Broadcast Group 03-15-12 8.00 585,000 604,013 Sun Media 02-15-13 7.63 400,000(c) 405,500 --------------- Total 8,631,528 - ------------------------------------------------------------------------------------------------- METALS (0.2%) Reliance Steel & Aluminum 11-15-16 6.20 1,405,000(d) 1,395,678 11-15-36 6.85 3,050,000(d) 2,995,482 --------------- Total 4,391,160 - ------------------------------------------------------------------------------------------------- OIL FIELD SERVICES (0.2%) Halliburton Sr Unsecured 10-15-10 5.50 3,010,000 3,004,651 OPTI Canada 12-15-14 8.25 950,000(c,d) 971,375 Pride Intl Sr Nts 07-15-14 7.38 1,020,000 1,053,150 --------------- Total 5,029,176 - ------------------------------------------------------------------------------------------------- PAPER (0.1%) Cascades Sr Nts 02-15-13 7.25 90,000(c) 89,775 Georgia-Pacific 01-15-17 7.13 2,285,000(d) 2,279,288 Norampac Sr Nts 06-01-13 6.75 150,000(c) 145,875 --------------- Total 2,514,938 - ------------------------------------------------------------------------------------------------- RETAILERS (1.0%) Home Depot Sr Unsecured 03-01-16 5.40 3,390,000 3,315,576 12-16-36 5.88 11,740,000 11,520,743 May Department Stores 07-15-09 4.80 9,636,000 9,482,258 United Auto Group 03-15-12 9.63 490,000 515,113 United Auto Group Sr Sub Nts 12-15-16 7.75 910,000(d) 911,138 Wal-Mart Stores 09-01-35 5.25 1,530,000 1,404,997 --------------- Total 27,149,825 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 173 RiverSource VP - Diversified Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT TECHNOLOGY (--%) NXP Funding LLC Secured 10-15-13 8.12% $ 855,000(b,c,d) $ 867,825 - ------------------------------------------------------------------------------------------------- WIRELESS (1.2%) American Tower Sr Nts 10-15-12 7.13 160,000 164,400 Nextel Communications Series F 03-15-14 5.95 34,660,000 33,752,463 --------------- Total 33,916,863 - ------------------------------------------------------------------------------------------------- WIRELINES (2.8%) Qwest 03-15-12 8.88 695,000 774,056 Qwest Sr Unsecured 10-01-14 7.50 1,730,000 1,833,800 Telecom Italia Capital 10-01-15 5.25 17,950,000(c) 16,767,257 TELUS 06-01-11 8.00 19,070,000(c) 20,853,750 Valor Telecommunications Enterprises LLC/Finance 02-15-15 7.75 160,000 172,200 Verizon New York Series A 04-01-12 6.88 18,065,000 18,728,292
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT WIRELINES (CONT.) Verizon Pennsylvania Series A 11-15-11 5.65% $ 15,843,000 $ 15,914,294 Windstream Sr Nts 08-01-16 8.63 1,995,000(d) 2,184,525 --------------- Total 77,228,174 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $2,764,355,641) $ 2,757,279,974 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (0.8%)(p)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AUTOMOTIVE (--%) Ford Motor Tranche B Term Loan 11-29-13 8.36% $ 1,315,000(e) $ 1,317,262 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.3%) HCA Tranche B Term Loan 11-14-13 7.86 7,960,000 8,044,615 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (0.1%) VNU Tranche B Term Loan 08-09-13 8.13 3,760,000(c,e) 3,785,869 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT PAPER (0.2%) Georgia Pacific 2nd Lien Tranche C Term Loan 12-23-13 8.35% $ 4,380,000(e) $ 4,386,570 - ------------------------------------------------------------------------------------------------- RETAILERS (0.1%) Michaels Stores Tranche B Term Loan 10-31-13 8.38 2,100,000 2,111,718 - ------------------------------------------------------------------------------------------------- TECHNOLOGY (0.1%) West Corp Tranche B Term Loan 10-24-13 8.10 2,505,000(e) 2,506,177 - ------------------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $22,092,512) $ 22,152,211 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (13.4%)(h)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 367,744,020(i) $ 367,744,020 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $367,744,020) $ 367,744,020 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $3,154,192,173)(q) $ 3,147,176,205 ================================================================================================= 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 Dec. 31, 2006. (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 Dec. 31, 2006, the value of foreign securities represented 2.1% 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 Dec. 31, 2006, the value of these securities amounted to $108,751,948 or 4.0% of net assets. (e) At Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $325,676,209. (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 Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (h) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 3.8% of net assets. See Note 6 to the financial statements. 9.6% of net assets is the Fund's cash equivalent position. (i) Affiliated Money Market Fund -- See Note 10 to the financial statements. (j) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
ACQUISITION SECURITY DATE COST ------------------------------------------------------------------------ United Artists Theatre Circuit 9.30% 2015 12-08-95 $2,497,893
- ------------------------------------------------------------------------------ 174 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Bond Fund NOTES TO INVESTMENTS IN SECURITIES (k) 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, March 2007, 20-year $ 39,900,000 U.S. Treasury Note, March 2007, 5-year 127,500,000 U.S. Treasury Note, March 2007, 10-year 41,800,000 SALE CONTRACTS U.S. Treasury Note, March 2007, 2-year 20,400,000 (l) 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 Dec. 31, 2006. (m) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (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) 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. (p) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. (q) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $3,157,169,200 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 10,835,117 Unrealized depreciation (20,828,112) ------------------------------------------------------------------------ Net unrealized depreciation $ (9,992,995) ------------------------------------------------------------------------ HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 175 INVESTMENTS IN SECURITIES RiverSource VP - Diversified Equity Income Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (98.4%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.5%) Goodrich 265,004 $ 12,070,932 Honeywell Intl 443,503 20,064,076 United Technologies 329,224 20,583,084 --------------- Total 52,718,092 - ------------------------------------------------------------------------------------------------- AIRLINES (1.1%) AMR 529,696(b,d) 16,012,710 Continental Airlines Cl B 183,417(b) 7,565,951 UAL 55,965(b) 2,462,460 US Airways Group 213,000(b) 11,470,050 --------------- Total 37,511,171 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (0.1%) Ballard Power Systems 411,755(b,c,d) 2,342,886 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (0.5%) Ford Motor 1,645,838(d) 12,360,243 General Motors 197,929 6,080,379 --------------- Total 18,440,622 - ------------------------------------------------------------------------------------------------- BEVERAGES (0.5%) Coca-Cola 351,188 16,944,821 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (--%) Ameron Intl 2,628 200,700 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.6%) Bank of New York 631,558 24,864,439 Merrill Lynch & Co 226,454 21,082,867 Morgan Stanley 127,477 10,380,452 --------------- Total 56,327,758 - ------------------------------------------------------------------------------------------------- CHEMICALS (2.5%) Air Products & Chemicals 138,923 9,763,508 Arkema ADR 6,933(b,c) 355,906 Dow Chemical 687,517 27,459,429 EI du Pont de Nemours & Co 982,523 47,858,696 --------------- Total 85,437,539 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.5%) US Bancorp 377,360 13,656,658 Wachovia 389,455 22,179,462 Wells Fargo & Co 435,926 15,501,529 --------------- Total 51,337,649 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.6%) Pitney Bowes 138,191 6,383,042 Waste Management 397,830 14,628,209 --------------- Total 21,011,251 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (1.0%) Hewlett-Packard 842,414 34,699,033 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CONSTRUCTION & ENGINEERING (0.5%) Fluor 155,972 $ 12,735,113 Insituform Technologies Cl A 136,832(b) 3,538,476 --------------- Total 16,273,589 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.6%) Hanson ADR 250,531(c) 18,962,691 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (0.3%) Capital One Financial 146,462 11,251,211 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.2%) Packaging Corp of America 252,097 5,571,344 - ------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (6.3%) Bank of America 2,065,671 110,286,175 Citigroup 1,913,579 106,586,350 --------------- Total 216,872,525 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (7.7%) AT&T 2,549,285 91,136,922 BellSouth 1,021,776 48,135,867 BT Group 4,127,944(c) 24,370,032 Embarq 336,575 17,690,382 Telefonos de Mexico ADR Series L 1,811,301(c) 51,151,140 Verizon Communications 949,917 35,374,909 --------------- Total 267,859,252 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (2.9%) Edison Intl 182,485 8,299,418 Exelon 260,956 16,150,567 FirstEnergy 277,038 16,705,391 FPL Group 596,005 32,434,592 PPL 227,040 8,137,114 Southern 466,723 17,203,410 --------------- Total 98,930,492 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.8%) ABB ADR 607,575(c) 10,924,199 Cooper Inds Cl A 91,296 8,255,897 Energy Conversion Devices 70,996(b) 2,412,444 FuelCell Energy 210,743(b,d) 1,361,400 Hubbell Cl B 79,139 3,577,874 Plug Power 356,478(b) 1,386,699 --------------- Total 27,918,513 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (4.2%) Baker Hughes 520,785 38,881,808 GlobalSantaFe 463,394 27,238,299 Halliburton 1,297,347 40,282,625 Schlumberger 509,528 32,181,788 Tidewater 105,725 5,112,861 --------------- Total 143,697,381 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (0.4%) Wal-Mart Stores 323,381 $ 14,933,735 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.2%) Boston Scientific 437,509(b) 7,516,405 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (1.4%) Caremark Rx 170,204 9,720,350 CIGNA 92,441 12,162,463 Health Net 211,184(b) 10,276,214 Humana 128,769(b) 7,122,213 Tenet Healthcare 1,095,927(b) 7,638,611 --------------- Total 46,919,851 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.0%) Royal Caribbean Cruises 512,785 21,219,044 Starwood Hotels & Resorts Worldwide 139,658 8,728,625 Wyndham Worldwide 173,920(b) 5,568,918 --------------- Total 35,516,587 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Whirlpool 273,021 22,666,203 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (5.3%) 3M 334,073 26,034,309 General Electric 1,590,818 59,194,338 McDermott Intl 1,608,382(b) 81,802,308 Textron 166,590 15,621,144 --------------- Total 182,652,099 - ------------------------------------------------------------------------------------------------- INSURANCE (17.4%) ACE 1,192,250(c) 72,214,583 Allstate 620,254 40,384,738 American Intl Group 524,386 37,577,501 Aon 738,190 26,087,635 Axis Capital Holdings 545,507(c) 18,203,569 Endurance Specialty Holdings 591,237(c) 21,627,449 Everest Re Group 86,113(c) 8,448,546 Hartford Financial Services Group 84,169 7,853,809 Lincoln Natl 493,872 32,793,101 Loews 1,239,787 51,413,967 Marsh & McLennan Companies 1,374,407 42,139,319 Montpelier Re Holdings 896,923(c) 16,691,737 PartnerRe 160,780(c) 11,420,203 RenaissanceRe Holdings 335,564(c) 20,133,840 Safeco 297,702 18,621,260 St. Paul Travelers Companies 1,554,964 83,486,018 Torchmark 244,662 15,599,649 UnumProvident 357,201 7,422,637 XL Capital Cl A 972,164(c) 70,015,251 --------------- Total 602,134,812 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 176 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) IT SERVICES (1.2%) Computer Sciences 278,479(b) $ 14,862,424 Electronic Data Systems 953,061 26,256,831 --------------- Total 41,119,255 - ------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.5%) Eastman Kodak 648,421(d) 16,729,262 - ------------------------------------------------------------------------------------------------- MACHINERY (5.5%) Caterpillar 1,073,892 65,861,796 Deere & Co 430,774 40,953,684 Eaton 245,422 18,441,009 Illinois Tool Works 674,163 31,139,589 Ingersoll-Rand Cl A 455,171(c) 17,810,841 Parker Hannifin 178,145 13,695,788 --------------- Total 187,902,707 - ------------------------------------------------------------------------------------------------- MEDIA (1.3%) CBS Cl B 443,074 13,815,048 Comcast Cl A 167,073(b) 7,072,200 Gannett 135,417 8,187,312 Idearc 125,103(b) 3,584,201 Time Warner 545,344 11,877,592 --------------- Total 44,536,353 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.4%) Alcoa 455,426 13,667,334 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.4%) Federated Department Stores 331,860 12,653,822 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (1.4%) Dominion Resources 193,326 16,208,452 Duke Energy 530,375 17,613,753 NiSource 563,037 13,569,192 --------------- Total 47,391,397 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (9.8%) Anadarko Petroleum 148,215 6,450,317 Apache 173,224 11,521,128 BP ADR 274,536(c) 18,421,366 Chevron 806,239 59,282,739 ConocoPhillips 660,005 47,487,360 Devon Energy 77,265 5,182,936 EnCana 175,100(c) 8,045,845 Exxon Mobil 925,435 70,916,084 Marathon Oil 505,191 46,730,168 Petroleo Brasileiro ADR 248,945(c) 25,638,846 Pioneer Natural Resources 239,444 9,503,532 Repsol YPF ADR 394,034(c) 13,594,173 Total ADR 270,398(c) 19,447,024 --------------- Total 342,221,518 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) PAPER & FOREST PRODUCTS (1.1%) Intl Paper 802,600 $ 27,368,660 Weyerhaeuser 171,207 12,095,775 --------------- Total 39,464,435 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (6.4%) Abbott Laboratories 363,552 17,708,618 Bristol-Myers Squibb 542,410 14,276,231 Eli Lilly & Co 284,207 14,807,185 Merck & Co 1,013,450 44,186,420 Pfizer 3,624,401 93,871,986 Wyeth 693,819 35,329,263 --------------- Total 220,179,703 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.2%) Realogy 217,973(b) 6,608,941 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (1.1%) Burlington Northern Santa Fe 284,118 20,970,750 Union Pacific 189,271 17,416,717 --------------- Total 38,387,467 - ------------------------------------------------------------------------------------------------- SOFTWARE (1.2%) Microsoft 1,394,664 41,644,667 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.8%) Home Depot 686,246 27,559,639 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.7%) Fannie Mae 972,236 57,741,096 - ------------------------------------------------------------------------------------------------- TOBACCO (3.8%) Altria Group 857,766 73,613,479 Loews-Carolina Group 863,752(f) 55,902,029 --------------- Total 129,515,508 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.8%) Sprint Nextel 1,404,626 26,533,385 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,852,659,151) $ 3,390,504,701 - -------------------------------------------------------------------------------------------------
PREFERRED STOCKS (0.2%)
ISSUER SHARES VALUE(a) Schering-Plough 6.00% Cv 90,800 $ 5,176,054 - ------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost: $4,618,602) $ 5,176,054 - -------------------------------------------------------------------------------------------------
BONDS (0.5%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT Qwest Communications Intl Sr Unsecured 11-15-25 3.50% $ 11,672,000 $ 18,329,475 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $11,672,000) $ 18,329,475 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (2.0%)(e)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 68,382,998(g) $ 68,382,998 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $68,382,998) $ 68,382,998 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,937,332,751)(h) $ 3,482,393,228 =================================================================================================
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 177 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 Dec. 31, 2006, the value of foreign securities represented 13.1% of net assets. (d) At Dec. 31, 2006, 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 an affiliated money market fund and represents 0.6% of net assets. See Note 6 to the financial statements. 1.4% of net assets is the Fund's cash equivalent position. (f) 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. (g) Affiliated Money Market Fund -- See Note 10 to the financial statements. (h) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $2,941,817,811 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 564,126,344 Unrealized depreciation (23,550,927) ------------------------------------------------------------------------ Net unrealized appreciation $ 540,575,417 ------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 178 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Emerging Markets Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (92.2%)(c)
ISSUER SHARES VALUE(a) ARGENTINA (1.0%) DIVERSIFIED TELECOMMUNICATION SERVICES (--%) Telecom Argentina ADR 14(b) $ 280 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (1.0%) IRSA Inversiones y Representaciones GDR 319,823(b) 5,408,207 - ------------------------------------------------------------------------------------------------- BERMUDA (1.2%) MEDIA (0.5%) Central European Media Enterprises Series A 40,226(b) 2,815,820 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.7%) Hongkong Land Holdings 943,000 3,753,140 - ------------------------------------------------------------------------------------------------- BRAZIL (14.1%) BEVERAGES (0.9%) AmBev ADR 104,789 5,113,703 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.4%) Cia Energetica de Minas Gerais ADR 106,865 5,150,893 Terna Participacoes Unit 231,172(b) 2,610,461 --------------- Total 7,761,354 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.4%) Cyrela Brazil Realty 465,000 4,442,578 Gafisa 206,500(b) 3,090,437 --------------- Total 7,533,015 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (1.0%) Submarino 167,300 5,486,518 - ------------------------------------------------------------------------------------------------- METALS & MINING (3.6%) Companhia Vale do Rio Doce ADR 650,916 19,358,242 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.1%) Petroleo Brasileiro ADR 163,085 16,796,124 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (1.5%) Aracruz Celulose ADR 131,509 8,053,611 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.2%) Tim Participacoes 230,074,000 1,355,089 Tim Participacoes ADR 155,477 5,382,613 --------------- Total 6,737,702 - ------------------------------------------------------------------------------------------------- CANADA (0.8%) METALS & MINING Aur Resources 137,800 2,867,091 Corriente Resources 407,000(b) 1,431,132 --------------- Total 4,298,223 - ------------------------------------------------------------------------------------------------- CHILE (2.7%) COMMERCIAL BANKS (2.0%) Banco Santander Chile ADR 225,515 10,860,802 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.7%) Antofagasta 397,400 3,960,779 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CHINA (4.0%) COMMERCIAL BANKS (3.1%) China Merchants Bank Series H 1,866,662(b) $ 3,955,179 Industrial & Commercial Bank of China Series H 20,988,971(b) 13,034,113 --------------- Total 16,989,292 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.9%) China Coal Energy Series H 562,000(b) 364,898 China Shenhua Energy Series H 1,803,000 4,339,551 --------------- Total 4,704,449 - ------------------------------------------------------------------------------------------------- COLOMBIA (1.0%) COMMERCIAL BANKS BanColombia ADR 171,759 5,350,293 - ------------------------------------------------------------------------------------------------- HONG KONG (6.3%) COMMERCIAL BANKS (1.0%) Bank of East Asia 949,400 5,376,979 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.8%) Lee & Man Paper Mfg 1,800,000 4,420,273 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (1.0%) China Overseas Land & Investment 3,976,000 5,336,913 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.6%) Prime Success Intl Group 3,683,066 3,423,663 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.9%) China Mobile 1,846,500 15,953,715 - ------------------------------------------------------------------------------------------------- HUNGARY (1.0%) OIL, GAS & CONSUMABLE FUELS MOL Magyar Olaj-es Gazipari 47,062 5,346,548 - ------------------------------------------------------------------------------------------------- INDIA (2.1%) ELECTRICAL EQUIPMENT (0.4%) Suzlon Energy 78,080 2,302,085 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.3%) Bajaj Hindusthan 361,463 1,796,493 - ------------------------------------------------------------------------------------------------- IT SERVICES (1.4%) Satyam Computer Services 662,301 7,234,353 - ------------------------------------------------------------------------------------------------- INDONESIA (2.1%) AUTOMOBILES (0.7%) PT Astra Intl 2,322,500 4,061,215 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.8%) Perusahaan Gas Negara 3,133,500 4,065,059 - ------------------------------------------------------------------------------------------------- MARINE (0.6%) Berlian Laju Tanker 18,541,000(b) 3,507,659 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) LUXEMBOURG (2.3%) ENERGY EQUIPMENT & SERVICES (1.2%) Tenaris ADR 134,085 $ 6,689,500 - ------------------------------------------------------------------------------------------------- METALS & MINING (1.1%) Ternium ADR 196,138(b) 5,799,801 - ------------------------------------------------------------------------------------------------- MALAYSIA (0.7%) WIRELESS TELECOMMUNICATION SERVICES Maxis Communications 1,403,600 4,060,329 - ------------------------------------------------------------------------------------------------- MEXICO (8.6%) COMMERCIAL BANKS (1.4%) Grupo Financiero Banorte Series O 1,976,000 7,731,649 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (1.3%) CEMEX ADR 218,068(b) 7,377,240 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.1%) Wal-Mart de Mexico Series V 1,353,700 5,960,072 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.9%) Corporacion GEO Series B 1,036,000(b) 5,191,804 - ------------------------------------------------------------------------------------------------- MEDIA (1.1%) Grupo Televisa ADR 221,353 5,978,745 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.4%) Grupo Famsa 459,800(b) 2,065,722 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.4%) America Movil ADR Series L 280,240 12,672,453 - ------------------------------------------------------------------------------------------------- NETHERLANDS (0.5%) BEVERAGES Efes Breweries Intl GDR 88,368(b,d,e) 2,969,165 - ------------------------------------------------------------------------------------------------- PERU (1.3%) METALS & MINING Hochschild Mining 914,240(b) 7,232,302 - ------------------------------------------------------------------------------------------------- PHILIPPINE ISLANDS (0.6%) REAL ESTATE MANAGEMENT & DEVELOPMENT Ayala Land 10,831,940 3,371,853 - ------------------------------------------------------------------------------------------------- POLAND (0.7%) DIVERSIFIED TELECOMMUNICATION SERVICES Telekomunikacja Polska 471,548 3,990,247 - ------------------------------------------------------------------------------------------------- RUSSIA (13.8%) COMMERCIAL BANKS (2.5%) Sberbank 3,925 13,541,250 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.3%) Sayano-Shushenskaya Hydro-Power Station 1,323,634 1,633,923 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 179 RiverSource VP - Emerging Markets Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) RUSSIA (CONT.) ENERGY EQUIPMENT & SERVICES (1.1%) TMK OAO GDR 181,609(b,d,e) $ 5,956,775 TMK OAO Series S 3(b) 25 --------------- Total 5,956,800 - ------------------------------------------------------------------------------------------------- MEDIA (0.8%) CTC Media 186,942(b) 4,488,477 - ------------------------------------------------------------------------------------------------- METALS & MINING (1.1%) MMC Norilsk Nickel ADR 37,116 5,864,328 - ------------------------------------------------------------------------------------------------ OIL, GAS & CONSUMABLE FUELS (5.8%) Gazprom ADR 588,577 27,074,541 LUKOIL ADR 57,723 5,076,738 --------------- Total 32,151,279 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.2%) Mobile Telesystems ADR 124,509 6,249,106 Vimpel-Communications ADR 71,966(b) 5,681,716 --------------- Total 11,930,822 - ------------------------------------------------------------------------------------------------- SINGAPORE (1.3%) INDUSTRIAL CONGLOMERATES Keppel 632,000 7,256,312 - ------------------------------------------------------------------------------------------------- SOUTH AFRICA (5.7%) FOOD & STAPLES RETAILING (1.0%) Massmart Holdings 536,577 5,383,947 - ------------------------------------------------------------------------------------------------- MEDIA (2.1%) Naspers Series N 492,824 11,693,150 - ------------------------------------------------------------------------------------------------- METALS & MINING (2.6%) Anglo Platinum 30,582 3,741,851 Impala Platinum Holdings 392,916 10,333,539 --------------- Total 14,075,390 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SOUTH KOREA (10.7%) COMMERCIAL BANKS (2.8%) Kookmin Bank 125,317 $ 10,081,160 Shinhan Financial Group 100,270 5,124,072 --------------- Total 15,205,232 - ------------------------------------------------------------------------------------------------- MACHINERY (1.5%) Doosan Infracore 221,810 5,006,614 Hyundai Heavy Inds 24,461 3,303,535 --------------- Total 8,310,149 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.9%) Hyundai Department Store 55,128 4,962,833 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.8%) SK 54,048 4,239,537 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (4.7%) Hynix Semiconductor 137,023(b) 5,344,917 Samsung Electronics 31,358 20,582,183 --------------- Total 25,927,100 - ------------------------------------------------------------------------------------------------- TAIWAN (8.5%) COMMUNICATIONS EQUIPMENT (0.6%) Compal Communications 1,017,000 3,308,332 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (2.9%) Delta Electronics 1,685,000 5,429,646 Hon Hai Precision Industry 1,183,728 8,446,117 Tripod Technology 582,000 2,089,735 --------------- Total 15,965,498 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.4%) Chong Hong Construction 846,223 2,290,528 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (4.6%) MediaTek 196,900 2,036,376 Powertech Technology 775,000 3,234,617 Taiwan Semiconductor Mfg 7,942,227 16,452,365 Vanguard Intl Semiconductor 4,687,000 3,516,868 --------------- Total 25,240,226 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) THAILAND (0.5%) HEALTH CARE PROVIDERS & SERVICES Bumrungrad Hospital 2,560,300 $ 2,725,942 - ------------------------------------------------------------------------------------------------- TURKEY (0.7%) COMMERCIAL BANKS Turkiye Garanti Bankasi Unit 1,188,328 3,930,578 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $419,402,407) $ 504,979,024 - -------------------------------------------------------------------------------------------------
PREFERRED STOCKS (2.6%)(C)
ISSUER SHARES VALUE(a) BRAZIL (1.5%) Eletropaulo Metropolitana de Sao Paulo Series B 163,542,000(b) $ 8,352,581 - ------------------------------------------------------------------------------------------------- RUSSIA (1.1%) Transneft 2,564 5,884,380 - ------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS (Cost: $11,034,746) $ 14,236,961 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (4.9%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 26,987,118(f) $ 26,987,118 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $26,987,118) $ 26,987,118 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $457,424,271)(g) $ 546,203,103 =================================================================================================
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 180 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Emerging Markets 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. (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 Dec. 31, 2006, the value of these securities amounted to $8,925,940 or 1.6% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
ACQUISITION SECURITY DATES COST -------------------------------------------------------------------------------- Efes Breweries Intl GDR* 10-15-04 thru 11-09-06 $2,552,311 TMK OAO GDR* 10-31-06 3,922,754 * Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended.
(f) Affiliated Money Market Fund -- See Note 10 to the financial statements. (g) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $458,808,501 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $90,955,335 Unrealized depreciation (3,560,733) -------------------------------------------------------------------------------- Net unrealized appreciation $87,394,602 --------------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 181 INVESTMENTS IN SECURITIES RiverSource VP - Fundamental Value Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (96.3%)
ISSUER SHARES VALUE(a) AIR FREIGHT & LOGISTICS (0.5%) United Parcel Service Cl B 24,750 $ 1,855,755 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (2.0%) Harley-Davidson 112,120 7,901,096 - ------------------------------------------------------------------------------------------------- BEVERAGES (2.0%) Diageo ADR 63,730(c) 5,054,427 Heineken Holding 66,566(c) 2,706,306 --------------- Total 7,760,733 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.3%) Mellon Financial 42,500 1,791,375 Morgan Stanley 34,500 2,809,335 State Street 10,230 689,911 --------------- Total 5,290,621 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (8.3%) Commerce Bancorp 63,410 2,236,471 HSBC Holdings ADR 119,359(c) 10,939,251 Wachovia 169,028 9,626,145 Wells Fargo & Co 282,310 10,038,944 --------------- Total 32,840,811 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.2%) Nokia ADR 44,610(c) 906,475 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (1.3%) Dell 97,580(b) 2,448,282 Hewlett-Packard 62,670 2,581,378 --------------- Total 5,029,660 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (1.5%) Martin Marietta Materials 30,960 3,217,053 Vulcan Materials 31,280 2,811,134 --------------- Total 6,028,187 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (4.7%) American Express 306,590 18,600,815 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (2.2%) Sealed Air 132,080 8,574,634 - ------------------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (1.3%) Apollo Group Cl A 24,600(b) 958,662 H&R Block 179,280 4,130,611 --------------- Total 5,089,273 - ------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (7.8%) Citigroup 161,660 9,004,462 JPMorgan Chase & Co 345,900 16,706,970 Moody's 77,730 5,368,034 --------------- Total 31,079,466 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.8%) Transocean 40,720(b) 3,293,841 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (5.5%) Costco Wholesale 277,900 14,692,573 Wal-Mart Stores 157,330 7,265,499 --------------- Total 21,958,072 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) FOOD PRODUCTS (0.5%) Hershey 43,360 $ 2,159,328 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.5%) Cardinal Health 53,220 3,428,965 Caremark Rx 89,240 5,096,496 Express Scripts 20,600(b) 1,474,960 UnitedHealth Group 74,700 4,013,631 --------------- Total 14,014,052 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.2%) Hunter Douglas 10,770(c) 865,778 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.1%) Procter & Gamble 67,100 4,312,517 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (4.3%) Tyco Intl 558,440(c) 16,976,576 - ------------------------------------------------------------------------------------------------- INSURANCE (14.5%) Ambac Financial Group 2,800 249,396 American Intl Group 249,400 17,872,004 Aon 72,390 2,558,263 Berkshire Hathaway Cl B 3,765(b) 13,802,490 Chubb 19,210 1,016,401 Loews 203,370 8,433,754 Markel 720(b) 345,672 Principal Financial Group 21,590 1,267,333 Progressive 350,440 8,487,657 Sun Life Financial 13,130(c) 556,056 Transatlantic Holdings 42,040 2,610,684 --------------- Total 57,199,710 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (1.3%) Amazon.com 67,300(b) 2,655,658 Expedia 24,770(b) 519,675 IAC/InterActiveCorp 24,390(b) 906,332 Liberty Media - Interactive Cl A 57,250(b,d) 1,234,883 --------------- Total 5,316,548 - ------------------------------------------------------------------------------------------------- IT SERVICES (1.2%) Iron Mountain 118,040(b) 4,879,774 - ------------------------------------------------------------------------------------------------- MARINE (0.3%) Kuehne & Nagel Intl 16,800(c) 1,222,257 - ------------------------------------------------------------------------------------------------- MEDIA (7.2%) Comcast Special Cl A 323,998(b) 13,569,035 Gannett 15,660 946,804 Lagardere 40,850(c) 3,289,241 Liberty Media - Capital Series A 11,950(b,d) 1,170,861 News Corp Cl A 317,400 6,817,752 NTL 74,290 1,875,080 WPP Group ADR 14,690(c) 995,101 --------------- Total 28,663,874 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) METALS & MINING (0.4%) BHP Billiton 42,770(c) $ 782,625 Rio Tinto 15,190(c) 808,429 --------------- Total 1,591,054 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.2%) Sears Holdings 5,500(b) 923,615 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (11.2%) Canadian Natural Resources 27,500(c) 1,463,825 China Coal Energy 1,358,900(b,c) 882,312 ConocoPhillips 251,340 18,083,913 Devon Energy 126,890 8,511,781 EOG Resources 108,780 6,793,311 Occidental Petroleum 174,020 8,497,397 --------------- Total 44,232,539 - ------------------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.4%) Avon Products 47,700 1,576,008 - ------------------------------------------------------------------------------------------------- SOFTWARE (2.3%) Microsoft 299,470 8,942,174 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.3%) Bed Bath & Beyond 55,500(b) 2,114,550 CarMax 21,000(b) 1,126,230 Lowe's Companies 61,200 1,906,380 --------------- Total 5,147,160 - ------------------------------------------------------------------------------------------------- TOBACCO (4.5%) Altria Group 208,650 17,906,343 - ------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.9%) China Merchants Holdings Intl 631,186(c) 2,588,757 COSCO Pacific 444,760(c) 1,044,166 --------------- Total 3,632,923 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.6%) SK Telecom ADR 79,570(c) 2,107,014 Sprint Nextel 229,920 4,343,188 --------------- Total 6,450,202 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $351,747,534) $ 382,221,871 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (5.3%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 20,893,483(e) $ 20,893,483 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $20,893,483) $ 20,893,483 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $372,641,017)(f) $ 403,115,354 =================================================================================================
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 182 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Fundamental 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 Dec. 31, 2006, the value of foreign securities represented 13.4% 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) Affiliated Money Market Fund -- See Note 10 to the financial statements. (f) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $372,641,017 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $32,077,173 Unrealized depreciation (1,602,836) -------------------------------------------------------------------------- Net unrealized appreciation $30,474,337 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 183 INVESTMENTS IN SECURITIES RiverSource VP - Global Bond Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (95.6%)(C)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AUSTRALIA (1.4%) Commonwealth Bank of Australia (European Monetary Unit) Sr Unsub 11-12-09 3.38% 685,000 $ 884,840 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 8,330,000 6,690,457 Queensland Treasury (Australian Dollar) 05-14-10 5.50 3,670,000 2,831,286 Telstra 04-01-12 6.38 700,000 722,726 --------------- Total 11,129,309 - ------------------------------------------------------------------------------------------------- AUSTRIA (1.1%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 6,280,000 8,657,821 - ------------------------------------------------------------------------------------------------- BELGIUM (2.1%) Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 12,585,000 16,155,110 - ------------------------------------------------------------------------------------------------- BRAZIL (0.2%) Federative Republic of Brazil 01-15-18 8.00 1,655,000 1,840,360 - ------------------------------------------------------------------------------------------------- CANADA (2.7%) Aquila Canada Finance 06-15-11 7.75 75,000 79,143 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 395,000(d) 344,483 Cascades Sr Nts 02-15-13 7.25 25,000 24,938 EnCana Sr Nts 10-15-13 4.75 1,020,000 969,887 Norampac Sr Nts 06-01-13 6.75 40,000 38,900 OPTI Canada 12-15-14 8.25 275,000(d) 281,187 Potash - Saskatchewan 12-01-36 5.88 775,000 748,772 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 7,765,000 7,162,780 Province of Ontario (Canadian Dollar) 03-08-14 5.00 9,625,000 8,628,408 Sun Media 02-15-13 7.63 200,000 202,750
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT CANADA (CONT.) TELUS 06-01-11 8.00% $ 2,340,000 $ 2,558,877 Videotron Ltee 01-15-14 6.88 315,000 316,969 --------------- Total 21,357,094 - ------------------------------------------------------------------------------------------------- CZECHOSLOVAKIA FEDERATED REPUBLIC (0.2%) Republic of Czechoslovakia (Czech Crown) 06-16-13 3.70 38,900,000 1,887,289 - ------------------------------------------------------------------------------------------------- DENMARK (0.4%) Realkredit Danmark (Danish Krone) Series 10D 01-01-08 4.00 18,970,000 3,352,200 - ------------------------------------------------------------------------------------------------- FRANCE (6.3%) Dexia Municipal Agency (European Monetary Unit) 09-03-07 4.25 800,000 1,058,034 Govt of France (European Monetary Unit) 04-25-12 5.00 11,660,000 16,156,137 04-25-13 4.00 12,625,000 16,706,658 10-25-16 5.00 10,550,000 15,036,733 --------------- Total 48,957,562 - ------------------------------------------------------------------------------------------------- GERMANY (9.1%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) Series 501 09-02-09 5.00 2,590,000(d) 3,493,577 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 399,000,000 3,348,787 Bundesrepublik Deutschland (European Monetary Unit) 07-04-13 3.75 16,095,000 21,007,445 07-04-27 6.50 10,505,000 18,403,746 07-04-28 4.75 2,610,000 3,756,989 07-04-34 4.75 6,870,000 10,025,113 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) Series G6 01-15-10 5.50 2,390,000 3,282,821 Deutsche Bank (European Monetary Unit) Sr Unsub 07-28-09 4.25 660,000 875,713 Landesbank Berlin Girozentrale (European Monetary Unit) 04-30-07 5.00 2,520,000 3,335,643 Rheinische Hypothekenbank (European Monetary Unit) Series 803 07-05-10 5.75 2,450,000(d) 3,409,184 --------------- Total 70,939,018 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT GREECE (1.6%) Hellenic Republic (European Monetary Unit) 04-19-07 4.65% 3,415,000 $ 4,517,941 10-22-22 5.90 5,270,000 8,162,776 --------------- Total 12,680,717 - ------------------------------------------------------------------------------------------------- IRELAND (2.5%) Irish Govt (European Monetary Unit) 10-18-07 4.25 14,640,000 19,374,652 - ------------------------------------------------------------------------------------------------- ITALY (4.0%) Buoni Poliennali Del Tesoro (European Monetary Unit) 11-01-07 6.00 14,815,000 19,892,154 11-01-26 7.25 4,650,191 8,472,626 Telecom Italia Capital 10-01-15 5.25 3,245,000 3,031,184 --------------- Total 31,395,964 - ------------------------------------------------------------------------------------------------- JAPAN (10.1%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 876,000,000 7,404,689 Govt of Japan (Japanese Yen) 12-21-09 1.70 3,431,000,000 29,455,451 09-20-10 0.80 1,396,800,000 11,624,263 06-20-12 1.40 1,122,600,000 9,486,310 12-20-12 1.00 1,861,500,000 15,320,238 12-20-14 1.30 583,000,000 4,802,725 12-20-34 2.40 90,000,000 774,607 --------------- Total 78,868,283 - ------------------------------------------------------------------------------------------------- MALAYSIA (0.3%) Petronas Capital 05-22-12 7.00 1,895,000(d) 2,043,587 05-22-12 7.00 315,000 339,549 --------------- Total 2,383,136 - ------------------------------------------------------------------------------------------------- MEXICO (0.7%) Mexican Fixed Rate (Mexican Peso) 12-24-09 9.00 21,150,000 2,051,641 12-20-12 9.00 34,180,000 3,415,973 United Mexican States 09-27-34 6.75 315,000 340,200 --------------- Total 5,807,814 - ------------------------------------------------------------------------------------------------- NETHERLANDS (3.0%) Bank Nederlandse Gemeenten (British Pound) Sr Unsub 08-06-07 7.38 1,520,000 3,005,502
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 184 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT NETHERLANDS (CONT.) Govt of Netherlands (European Monetary Unit) 01-15-08 2.50% 12,190,000 $ 15,870,351 07-15-12 5.00 3,570,000 4,955,558 --------------- Total 23,831,411 - ------------------------------------------------------------------------------------------------- NEW ZEALAND (1.0%) Govt of New Zealand (New Zealand Dollar) 07-15-09 7.00 10,480,000 7,443,747 - ------------------------------------------------------------------------------------------------- NORWAY (1.2%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 53,300,000 9,090,155 - ------------------------------------------------------------------------------------------------- POLAND (1.4%) Republic of Poland (Polish Zloty) 03-24-10 5.75 30,340,000 10,749,837 - ------------------------------------------------------------------------------------------------- SOUTH AFRICA (0.3%) Republic of South Africa (South African Rand) 08-31-10 13.00 13,390,000 2,200,949 - ------------------------------------------------------------------------------------------------- SOUTH KOREA (0.1%) Korea Development Bank (Japanese Yen) Series 21RG 06-25-08 0.98 65,000,000 545,640 - ------------------------------------------------------------------------------------------------- SPAIN (3.2%) Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 3,400,000 4,382,495 Govt of Spain (European Monetary Unit) 07-30-09 5.15 15,025,000 20,424,017 --------------- Total 24,806,512 - ------------------------------------------------------------------------------------------------- SUPRA-NATIONAL (0.9%) European Investment Bank (British Pound) 12-07-11 5.50 3,410,000 6,734,880 - ------------------------------------------------------------------------------------------------- SWEDEN (0.5%) Govt of Sweden (Swedish Krona) 03-15-11 5.25 25,140,000 3,872,014 - ------------------------------------------------------------------------------------------------- UNITED KINGDOM (4.5%) BT Group 12-15-10 8.63 715,000 797,947 HBOS Treasury Services (European Monetary Unit) 02-12-09 3.50 2,700,000 3,527,329 United Kingdom Treasury (British Pound) 03-07-12 5.00 8,293,000 16,261,262 09-07-14 5.00 7,370,000 14,574,070 --------------- Total 35,160,608 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (36.9%) American Tower Sr Nts 10-15-12 7.13% $ 45,000 $ 46,238 ANR Pipeline 03-15-10 8.88 75,000 78,682 Baltimore Gas & Electric Sr Unsecured 10-01-36 6.35 695,000(d) 709,472 Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 4.89 650,000(f) 645,418 Banc of America Commercial Mtge Series 2005-4 Cl ASB 07-10-45 4.87 975,000(f) 954,212 Banc of America Commercial Mtge Series 2006-2 Cl AAB 05-10-45 5.72 1,175,000(f) 1,204,692 Banc of America Commercial Mtge Series 2006-4 Cl AAB 07-10-46 5.60 1,300,000(f) 1,320,285 Banc of America Large Loan Series 2006-LAQ Cl E 02-09-21 5.73 675,000(d,f,h) 676,613 Banc of America Large Loan Series 2006-LAQ Cl F 02-09-21 5.79 750,000(d,f,h) 751,791 Banc of America Large Loan Series 2006-LAQ Cl G 02-09-21 5.88 525,000(d,f,h) 526,100 Bank of America Sub Nts 10-15-36 6.00 2,250,000 2,325,443 Bayerische Landesbank Sub Nts 12-01-08 5.88 800,000 807,841 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 311,044(f) 300,972 Bear Stearns Commercial Mtge Securities Series 2005-PW10 Cl A4 12-11-40 5.41 600,000(f) 602,220 Bear Stearns Commercial Mtge Securities Series 2005-T20 Cl E 10-12-42 5.16 500,000(f) 485,940 Bear Stearns Commercial Mtge Securities Series 2006-PW14 Cl A4 12-11-38 5.20 1,350,000(f) 1,333,395 Cadbury Schweppes US Finance LLC 10-01-08 3.88 2,445,000(d) 2,381,137 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 1,843,262(d,f) 1,807,115 Capital Auto Receivables Asset Trust Series 2004-1 Cl CTFS 09-15-10 2.84 700,000 689,157 Cardinal Health 06-15-15 4.00 1,110,000(k) 984,158
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68% $ 2,275,000(f) $ 2,315,567 Chesapeake Energy 08-15-17 6.50 180,000 175,950 CIGNA Sr Unsecured 11-15-36 6.15 1,000,000 990,080 Citigroup Commercial Mtge Trust Series 2005-C3 Cl A1 05-15-43 4.39 810,812(f) 796,242 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 934,961(d,f) 918,036 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 3,685,000 4,823,747 Citigroup/Deutsche Bank Commercial Mtge Trust Series 2005-CD1 Cl ASB 07-15-44 5.23 1,075,000(f) 1,074,863 Clear Channel Communications Sr Nts 09-15-14 5.50 360,000 303,681 CMS Energy Sr Nts 01-15-09 7.50 150,000 154,688 Colorado Interstate Gas Sr Nts 03-15-15 5.95 35,000 34,533 11-15-15 6.80 200,000 207,956 Comcast Cable Communications Holdings 03-15-13 8.38 48,000 54,675 Commercial Mtge Pass-Through Ctfs Series 2006-CN2A Cl BFL 02-05-19 5.66 450,000(d,f,h) 452,386 Community Health Systems Sr Sub Nts 12-15-12 6.50 45,000 44,325 Cott Beverages USA 12-15-11 8.00 435,000 443,700 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-64CB Cl 1A1 12-25-35 5.50 2,139,870(f) 2,145,367 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 915,599(f) 948,908 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-22R Cl 1A2 05-25-36 6.00 2,300,000(f) 2,322,271 Credit Suisse Mtge Capital Ctfs Series 2006-C2 Cl A3 03-15-39 5.66 1,125,000(f) 1,154,886 CS First Boston Mtge Securities Series 2003-CPN1 Cl A2 03-15-35 4.60 825,000(f) 795,398
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 185 RiverSource VP - Global Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) CS First Boston Mtge Securities Series 2005-C4 Cl A1 08-15-38 4.77% $ 1,804,643(f) $ 1,785,369 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 855,000 1,129,421 Denbury Resources Sr Sub Nts 12-15-15 7.50 25,000 25,375 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 55,000 57,131 Drive Auto Receivables Trust Series 2006-2 Cl A2 (MBIA) 07-15-11 5.30 1,650,000(d,i) 1,651,289 DRS Technologies 02-01-16 6.63 305,000 307,288 Dunkin Securitization Series 2006-1 Cl A2 (AMBAC) 06-20-31 5.78 2,125,000(d,i) 2,151,426 Edison Mission Energy Sr Unsecured 06-15-13 7.50 145,000 151,525 Exelon 06-15-10 4.45 1,525,000 1,475,141 Federal Home Loan Mtge Corp 07-12-10 4.13 7,775,000 7,576,768 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 117,764(f) 120,196 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 824,688(f) 797,524 Federal Home Loan Mtge Corp #E01377 05-01-18 4.50 585,755(f) 566,153 Federal Home Loan Mtge Corp #E91326 09-01-17 6.50 176,374(f) 180,448 Federal Home Loan Mtge Corp #E99967 10-01-18 5.00 607,959(f) 598,750 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 884,148(f) 896,634 Federal Home Loan Mtge Corp (European Monetary Unit) 02-15-07 4.63 4,285,000 5,662,015 Federal Natl Mtge Assn 11-15-07 3.25 2,500,000 2,458,148 Federal Natl Mtge Assn #254632 02-01-18 5.50 1,631,303(f) 1,635,196 Federal Natl Mtge Assn #254686 04-01-18 5.50 1,824,031(f) 1,827,514 Federal Natl Mtge Assn #254722 05-01-18 5.50 951,753(f) 953,570 Federal Natl Mtge Assn #255377 08-01-34 7.00 616,077(f) 632,759 Federal Natl Mtge Assn #357705 02-01-35 5.50 7,682,919(f) 7,600,553 Federal Natl Mtge Assn #360800 01-01-09 5.74 620,275(f) 622,724 Federal Natl Mtge Assn #440730 12-01-28 6.00 718,012(f) 729,965
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) Federal Natl Mtge Assn #555417 05-01-33 6.00% $ 1,205,980(f) $ 1,217,794 Federal Natl Mtge Assn #555528 04-01-33 6.00 2,072,191(f) 2,091,101 Federal Natl Mtge Assn #555531 06-01-33 5.50 2,744,538(f) 2,716,561 Federal Natl Mtge Assn #555734 07-01-23 5.00 571,725(f) 557,005 Federal Natl Mtge Assn #555740 08-01-18 4.50 308,572(f) 298,303 Federal Natl Mtge Assn #555851 01-01-33 6.50 4,711,045(f) 4,822,965 Federal Natl Mtge Assn #575487 04-01-17 6.50 382,789(f) 393,206 Federal Natl Mtge Assn #621581 12-01-31 6.50 346,662(f) 357,493 Federal Natl Mtge Assn #631315 02-01-17 5.50 200,069(f) 200,753 Federal Natl Mtge Assn #639965 08-01-17 6.00 702,810(f) 713,776 Federal Natl Mtge Assn #640996 05-01-32 7.50 248,342(f) 258,137 Federal Natl Mtge Assn #646147 06-01-32 7.00 196,031(f) 202,735 Federal Natl Mtge Assn #652284 08-01-32 6.50 225,734(f) 230,908 Federal Natl Mtge Assn #653145 07-01-17 6.00 133,493(f) 135,722 Federal Natl Mtge Assn #654121 09-01-17 6.00 491,227(f) 499,378 Federal Natl Mtge Assn #655589 08-01-32 6.50 927,221(f) 955,558 Federal Natl Mtge Assn #666424 08-01-32 6.50 189,549(f) 193,894 Federal Natl Mtge Assn #670461 11-01-32 7.50 171,209(f) 177,961 Federal Natl Mtge Assn #684595 03-01-33 6.00 819,921(f) 827,403 Federal Natl Mtge Assn #687583 04-01-33 6.00 2,079,543(f) 2,100,697 Federal Natl Mtge Assn #688034 03-01-33 5.50 280,913(f) 278,516 Federal Natl Mtge Assn #688691 03-01-33 5.50 464,231(f) 459,498 Federal Natl Mtge Assn #720786 09-01-33 5.50 1,013,701(f) 1,003,368 Federal Natl Mtge Assn #725162 02-01-34 6.00 2,138,449(f) 2,156,479 Federal Natl Mtge Assn #725232 03-01-34 5.00 878,939(f) 850,223 Federal Natl Mtge Assn #725424 04-01-34 5.50 5,400,277(b,f) 5,345,228 Federal Natl Mtge Assn #735029 09-01-13 5.28 677,638(f) 677,569 Federal Natl Mtge Assn #735883 03-01-33 6.00 5,964,717(f) 6,048,657 Federal Natl Mtge Assn #739474 10-01-33 5.50 608,294(f) 602,890
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) Federal Natl Mtge Assn #741850 09-01-33 5.50% $ 1,631,773(f) $ 1,615,139 Federal Natl Mtge Assn #745257 01-01-36 6.00 2,261,828(f) 2,277,637 Federal Natl Mtge Assn #748110 10-01-33 6.50 1,724,366(f) 1,760,419 Federal Natl Mtge Assn #753507 12-01-18 5.00 1,953,143(f) 1,924,734 Federal Natl Mtge Assn #755498 11-01-18 5.50 1,322,911(f) 1,326,024 Federal Natl Mtge Assn #756236 01-01-34 6.00 7,368,365(f) 7,454,926 Federal Natl Mtge Assn #756799 11-01-33 6.50 582,030(f) 595,248 Federal Natl Mtge Assn #756844 02-01-19 5.00 468,731(f) 461,307 Federal Natl Mtge Assn #757299 09-01-19 4.50 3,050,409(f) 2,946,276 Federal Natl Mtge Assn #759336 01-01-34 6.00 4,474,070(f) 4,530,360 Federal Natl Mtge Assn #783646 06-01-34 5.50 739,710(f) 731,780 Federal Natl Mtge Assn #791393 10-01-19 5.50 2,274,636(f) 2,276,273 Federal Natl Mtge Assn #794298 09-01-19 5.50 2,060,130(f) 2,061,613 Federal Natl Mtge Assn #886292 07-01-36 7.00 5,113,827(f) 5,261,996 Fereral Natl Mtge Assn #765946 02-01-34 5.50 8,742,613(f) 8,653,494 Franklin Auto Trust Series 2004-1 Cl A3 (MBIA) 03-15-12 4.15 800,000(i) 791,245 GE Capital Commercial Mtge Series 2005-C1 Cl A5 06-10-48 4.77 500,000(f) 482,315 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 1,775,000(d,f) 1,745,861 General Electric Capital (European Monetary Unit) Sr Unsub 06-20-07 5.13 740,000 981,448 General Electric Capital (New Zealand Dollar) 02-04-10 6.63 4,365,000 3,004,639 Genworth Financial (Japanese Yen) 06-20-11 1.60 140,000,000 1,171,642 Georgia-Pacific 01-15-17 7.13 655,000(d) 653,362 Govt Natl Mtge Assn #604708 10-15-33 5.50 684,560(f) 682,061 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 20.00 477,311(e,f) 42,253
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 186 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88% $ 500,000(f) $ 493,506 Greenwich Capital Commercial Funding Series 2006-GG7 Cl AAB 07-10-38 5.91 400,000(f) 415,269 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 900,000(f) 890,460 GS Mtge Securities II Series 2006-GG6 Cl A4 04-10-38 5.55 4,000,000(f) 4,061,535 HCA Secured 11-15-14 9.13 40,000(d) 42,600 11-15-16 9.25 165,000(d) 176,138 Hertz Vehicle Financing LLC Series 2004-1A Cl A3 (MBIA) 05-25-09 2.85 600,000(d,i) 584,085 Home Depot Sr Unsecured 03-01-16 5.40 775,000 757,986 12-16-36 5.88 1,510,000 1,481,799 Idearc Sr Nts 11-15-16 8.00 205,000(d) 208,844 IPALCO Enterprises Secured 11-14-08 8.38 140,000 145,250 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 1,035,403(f) 1,015,613 JPMorgan Chase Commercial Mtge Securities Series 2003-CB6 Cl A2 07-12-37 5.26 1,075,000(f) 1,073,816 JPMorgan Chase Commercial Mtge Securities Series 2003-LN1 Cl A1 10-15-37 4.13 299,461(f) 289,509 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A1 03-12-39 3.97 388,136(f) 376,331 JPMorgan Chase Commercial Mtge Securities Series 2003-ML1A Cl A2 03-12-39 4.77 1,625,000(f) 1,580,022 JPMorgan Chase Commercial Mtge Securities Series 2005-LDP5 Cl A1 12-15-44 5.04 1,187,750(f) 1,180,978 JPMorgan Chase Commercial Mtge Securities Series 2006-CB16 Cl A4 05-12-45 5.55 3,675,000(f) 3,727,778 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl A4 04-15-43 5.48 1,100,000(f) 1,109,698 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP6 Cl ASB 04-15-43 5.49 1,375,000(f) 1,387,265 JPMorgan Chase Commercial Mtge Securities Series 2006-LDP8 Cl A4 05-15-45 5.40 1,300,000(f) 1,303,783
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) L-3 Communications 06-15-12 7.63% $ 80,000 $ 82,800 07-15-13 6.13 75,000 73,500 L-3 Communications Sr Sub Nts Series B 10-15-15 6.38 195,000 193,050 LaBranche & Co Sr Nts 05-15-12 11.00 195,000 210,113 Lamar Media 01-01-13 7.25 114,000 116,138 LB-UBS Commercial Mtge Trust Series 2004-C2 Cl A3 03-15-29 3.97 650,000(f) 613,717 LB-UBS Commercial Mtge Trust Series 2004-C6 Cl A1 08-15-29 3.88 1,038,081(f) 1,013,224 LB-UBS Commercial Mtge Trust Series 2004-C8 Cl A2 12-15-29 4.20 1,000,000(f) 973,440 LB-UBS Commercial Mtge Trust Series 2005-C5 Cl AAB 09-15-30 4.93 1,800,000(f) 1,765,836 LB-UBS Commercial Mtge Trust Series 2006-C4 Cl AAB 06-15-32 5.87 925,000(f) 958,899 LB-UBS Commercial Mtge Trust Series 2006-C7 Cl A3 11-15-38 5.35 1,250,000(f) 1,249,969 Midwest Generation LLC Series B 01-02-16 8.56 34,227 37,735 Mohegan Tribal Gaming Authority 02-15-15 6.88 375,000 375,937 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 30,000 29,775 Mohegan Tribal Gaming Authority Sr Sub Nts 04-01-12 8.00 50,000 52,063 Morgan Stanley Capital I Series 2003-T11 Cl A2 06-13-41 4.34 825,000(f) 806,427 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 690,000(f) 669,059 Morgan Stanley Capital I Series 2005-T19 Cl AAB 06-12-47 4.85 1,900,000(f) 1,860,313 Morgan Stanley Capital I Series 2006-T23 Cl AAB 08-12-41 5.80 775,000(f) 800,025 Morgan Stanley Capital I Series 2006-XLF Cl A2 07-15-19 5.48 1,500,000(d,f,h) 1,500,771 Morgan Stanley Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 2,425,000(f) 2,502,210
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) Natl Collegiate Student Loan Trust Collateralized Mtge Obligation Interest Only Series 2006-3 Cl AIO 01-25-12 0.00% $ 3,400,000(e) $ 999,328 NewMarket Sr Nts 12-15-16 7.13 55,000(d) 55,000 News America 12-15-35 6.40 580,000 576,191 Nextel Communications Series F 03-15-14 5.95 2,185,000 2,127,787 Nomura Asset Securities Series 1998-D6 Cl A3 03-15-30 6.99 3,725,000(f) 4,105,786 NRG Energy 02-01-14 7.25 180,000 181,350 Omnicare Sr Sub Nts 12-15-13 6.75 345,000 340,688 12-15-15 6.88 160,000 158,000 Pioneer Natural Resources 05-01-18 6.88 550,000 534,991 Pokagon Gaming Authority Sr Nts 06-15-14 10.38 50,000(d) 54,750 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 560,000 553,295 PQ 02-15-13 7.50 25,000 24,625 Pride Intl Sr Nts 07-15-14 7.38 255,000 263,288 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 761,172(f) 730,774 Prudential Financial 12-14-36 5.70 1,515,000 1,469,966 Qwest 03-15-12 8.88 265,000 295,144 Qwest Sr Unsecured 10-01-14 7.50 220,000 233,200 Range Resources 03-15-15 6.38 195,000 190,125 05-15-16 7.50 50,000 51,250 Regency Energy Partners LP/Finance Sr Unsecured 12-15-13 8.38 115,000(d) 115,288 Renaissance Home Equity Loan Trust Series 2005-4 Cl A3 02-25-36 5.57 855,000 851,777 RH Donnelley Sr Disc Nts Series A-1 01-15-13 6.88 170,000 162,988 Sinclair Broadcast Group 03-15-12 8.00 175,000 180,688
See accompanying notes to investments in securities. - ----------------------------------------------------------------------------- RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 187 RiverSource VP - Global Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) Southern Natural Gas 03-15-10 8.88% $ 100,000 $ 104,909 Southern Star Central Sr Nts 03-01-16 6.75 300,000 299,250 Toyota Motor Credit (Japanese Yen) Sr Unsub 06-09-08 0.75 452,000,000 3,797,328 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 85,000 87,338 Transcontinental Gas Pipe Line Sr Unsecured 04-15-16 6.40 171,000 172,710 Triad Hospitals Sr Nts 05-15-12 7.00 125,000 127,188 Triad Hospitals Sr Sub Nts 11-15-13 7.00 160,000 161,000 U.S. Treasury 11-30-07 4.25 2,975,000 2,954,547 02-15-08 3.38 1,055,000(k) 1,036,579 05-31-08 4.88 1,140,000(k) 1,139,465 11-15-09 4.63 3,195,000(k) 3,185,016 10-31-11 4.63 4,400,000 4,384,015 11-30-11 4.50 5,390,000 5,341,997 08-15-16 4.88 1,940,000 1,963,189 11-15-16 4.63 9,380,000 9,318,447 08-15-23 6.25 1,920,000 2,209,951 02-15-26 6.00 1,255,000 1,423,347 U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38 6,754,214(j) 6,735,058 United Auto Group 03-15-12 9.63 155,000 162,944 United Auto Group Sr Sub Nts 12-15-16 7.75 260,000(d) 260,325 Valor Telecommunications Enterprises LLC/Finance 02-15-15 7.75 50,000 53,813 Verizon New York Series A 04-01-12 6.88 2,580,000 2,674,729 Verizon Pennsylvania Series A 11-15-11 5.65 1,435,000 1,441,457
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (CONT.) Wachovia Bank Commercial Mtge Trust Series 2003-C4 Cl A2 04-15-35 4.57% $ 2,525,000(f) $ 2,458,673 Wachovia Bank Commercial Mtge Trust Series 2003-C7 Cl A2 10-15-35 5.08 1,064,000(d,f) 1,049,591 Wachovia Bank Commercial Mtge Trust Series 2003-C8 Cl A2 11-15-35 3.89 750,000(f) 730,619 Wachovia Bank Commercial Mtge Trust Series 2005-C18 Cl A4 04-15-42 4.94 925,000(f) 900,268 Wachovia Bank Commercial Mtge Trust Series 2005-C20 Cl A5 07-15-42 5.09 925,000(f) 917,529 Wachovia Bank Commercial Mtge Trust Series 2006-C24 Cl APB 03-15-45 5.58 1,000,000(f) 1,013,791 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl A3 07-15-45 5.77 700,000(f) 719,726 Wachovia Bank Commercial Mtge Trust Series 2006-C27 Cl APB 07-15-45 5.73 1,200,000(f) 1,227,310 Wachovia Bank Commercial Mtge Trust Series 2006-C29 Cl A4 11-15-48 5.31 1,775,000(f) 1,765,223 Washington Mutual Collateralized Mtge Obligation Series 2005-AR17 Cl A1C1 12-25-45 5.51 349,409(f,g) 349,478 Wells Fargo Bank Sub Nts 08-26-36 5.95 2,100,000 2,167,578 Williams Companies Sr Nts 07-15-19 7.63 754,000 806,779 Windstream Sr Nts 08-01-16 8.63 600,000(d) 657,000 XTO Energy 01-31-15 5.00 2,045,000 1,941,897 --------------- Total 288,370,461 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $729,427,720) $ 747,592,543 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (0.4%)(L)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT NETHERLANDS (0.1%) VNU Tranche B Term Loan 08-09-13 8.13% $ 375,000(b,c) $ 377,580 - ------------------------------------------------------------------------------------------------- UNITED STATES (0.3%) Ford Motor Tranche B Term Loan 11-29-13 8.36 190,000(b) 190,327 Georgia Pacific 2nd Lien Tranche C Term Loan 12-23-13 8.35 565,000(b) 565,848 HCA Tranche B Term Loan 11-14-13 7.87 1,365,000 1,379,509 Michaels Stores Tranche B Term Loan 10-31-13 8.38 420,000 422,344 West Corp Tranche B Term Loan 10-24-13 8.10 360,000(b) 360,169 --------------- Total 2,918,197 - ------------------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $3,283,403) $ 3,295,777 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (5.2%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 40,757,916(m) $ 40,757,916 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $40,757,916) $ 40,757,916 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $773,469,039)(n) $ 791,646,236 ================================================================================================= See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 188 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 Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $6,883,342. (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 Dec. 31, 2006, the value of these securities amounted to $28,700,998 or 3.7% 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 Dec. 31, 2006. (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 Dec. 31, 2006. (h) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (i) 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 (j) 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) 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 Euro-Bund, March 2007, 10-year $ 10,000,000 Japanese Govt Bond, March 2007, 10-year 400,000,000 U.S. Long Bond, March 2007, 20-year 5,500,000 U.S. Treasury Note, March 2007, 2-year 28,400,000 SALE CONTRACTS U.S. Treasury Note, March 2007, 5-year 1,000,000 U.S. Treasury Note, March 2007, 10-year 21,600,000 (l) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. (m) Affiliated Money Market Fund -- See Note 10 to the financial statements. (n) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $773,948,174 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 26,160,192 Unrealized depreciation (8,462,130) ------------------------------------------------------------------------ Net unrealized appreciation $ 17,698,062 ------------------------------------------------------------------------ HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 189 INVESTMENTS IN SECURITIES RiverSource VP - Global Inflation Protected Securities Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (92.7%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT CANADA (2.8%) Govt of Canada (Canadian Dollar) 12-01-26 4.25% 13,219,632(b,c) $ 16,015,029 - ------------------------------------------------------------------------------------------------- FRANCE (9.7%) Govt of France (European Monetary Unit) 07-25-12 3.00 24,429,627(b,c) 34,382,104 07-25-20 2.25 15,757,079(b,c) 21,889,619 --------------- Total 56,271,723 - ------------------------------------------------------------------------------------------------- GERMANY (2.0%) Deutsche Bundesrepublik (European Monetary Unit) 04-15-16 1.50 8,758,782(b,c) 11,354,150 - ------------------------------------------------------------------------------------------------- ITALY (6.8%) Buoni Poliennali Del Tesoro (European Monetary Unit) 09-15-10 0.95 17,819,637(b,c) 22,806,022 09-15-35 2.35 12,008,659(b,c) 16,721,044 --------------- Total 39,527,066 - ------------------------------------------------------------------------------------------------- JAPAN (3.0%) Govt of Japan (Japanese Yen) 03-20-07 0.50 2,078,000,000(c) 17,464,141 - ------------------------------------------------------------------------------------------------- SWEDEN (1.8%) Govt of Sweden (Swedish Krone) 12-01-28 3.50 48,550,000(c,d) 10,686,871 - ------------------------------------------------------------------------------------------------- UNITED KINGDOM (16.4%) United Kingdom Gilt Inflation Linked (British Pound) 07-26-16 2.50% 4,450,000(c,d) 22,563,993 04-16-20 2.50 8,150,000(c,d) 42,567,117 07-22-30 4.13 6,720,000(c,d) 31,039,829 --------------- Total 96,170,939 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT UNITED STATES (50.2%) Federal Home Loan Bank 02-08-08 4.63% $ 1,000,000 $ 993,894 Federal Home Loan Mtge Corp 10-15-08 5.13 1,100,000 1,101,409 07-15-09 4.25 1,000,000 983,064 07-12-10 4.13 1,000,000 974,504 Federal Natl Mtge Assn 05-15-07 3.88 1,000,000 994,930 08-15-08 3.25 1,000,000 971,480 10-15-08 4.50 4,000,000 3,964,312 Tennessee Valley Authority 01-15-07 3.38 6,371,900(b) 6,364,803 U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38 48,687,688(b) 48,549,602 07-15-12 3.00 28,011,988(b) 28,822,058 01-15-14 2.00 28,902,444(b) 28,071,126 07-15-14 2.00 23,709,684(b) 23,008,205 01-15-15 1.63 24,299,282(b) 22,867,589 01-15-16 2.00 38,946,565(b) 37,598,085 07-15-16 2.50 11,062,566(b) 11,144,391 01-15-25 2.38 21,235,351(b) 21,137,868 04-15-28 3.63 33,730,147(b) 40,718,029 04-15-29 3.88 10,709,817(b) 13,484,534 --------------- Total 291,749,883 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $531,101,473) $ 539,239,802 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (6.1%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 35,514,748(e) $ 35,514,748 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $35,514,748) $ 35,514,748 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $566,616,221)(f) $ 574,754,550 ================================================================================================= See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 190 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) 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. (d) These inflation-indexed bonds are securities in which the principal amount disclosed represents the original face. (e) Affiliated Money Market Fund -- See Note 10 to the financial statements. (f) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $592,170,281 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ -- Unrealized depreciation (17,415,731) --------------------------------------------------------------------- Net unrealized depreciation $ (17,415,731) --------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 191 INVESTMENTS IN SECURITIES RiverSource VP - Growth Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (95.4%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.1%) Boeing 92,833 $ 8,247,283 Honeywell Intl 77,641 3,512,479 Lockheed Martin 16,066 1,479,197 --------------- Total 13,238,959 - ------------------------------------------------------------------------------------------------- BEVERAGES (2.3%) Anheuser-Busch Companies 46,534 2,289,473 Coca-Cola 62,245 3,003,321 PepsiCo 146,967 9,192,786 --------------- Total 14,485,580 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (4.9%) Amgen 153,294(b) 10,471,513 Biogen Idec 93,043(b) 4,576,785 Genentech 200,868(b) 16,296,421 --------------- Total 31,344,719 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.0%) KKR Private Equity Investors LP Unit 146,215 3,341,013 KKR Private Equity Investors LP Unit 132,331(f) 3,023,763 --------------- Total 6,364,776 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (--%) Industrial & Commercial Bank of China Series H 333,000(b,c) 206,792 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (7.9%) ADC Telecommunications 19,366(b) 281,388 ADTRAN 43,412 985,452 Alcatel-Lucent ADR 370,235(c) 5,264,742 Cisco Systems 989,160(b) 27,033,743 JDS Uniphase 36,941(b) 615,437 Motorola 189,172 3,889,376 QUALCOMM 180,767 6,831,185 Redback Networks 116,424(b) 2,903,615 Tellabs 248,704(b) 2,551,703 --------------- Total 50,356,641 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (2.0%) Apple Computer 78,463(b) 6,656,801 Dell 33,525(b) 841,142 EMC 19,898(b) 262,654 Hewlett-Packard 126,152 5,196,201 --------------- Total 12,956,798 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.7%) AT&T 104,743 3,744,562 BellSouth 198,623 9,357,129 Chunghwa Telecom ADR 13,120(c) 258,858 Embarq 170,007 8,935,568 France Telecom 100,623(c) 2,782,628 Qwest Communications Intl 617,077(b) 5,164,934 Verizon Communications 67,537 2,515,078 Windstream 269,517 3,832,532 --------------- Total 36,591,289 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (1.0%) Rite Aid 48,142(b) $ 261,892 Safeway 143,256 4,950,928 Wal-Mart Stores 30,493 1,408,167 --------------- Total 6,620,987 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.8%) General Mills 24,174 1,392,422 Kellogg 76,390 3,824,084 --------------- Total 5,216,506 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (3.4%) Boston Scientific 711,713(b) 12,227,230 Medtronic 110,106 5,891,772 St. Jude Medical 18,684(b) 683,087 Stryker 24,176 1,332,339 Zimmer Holdings 17,458(b) 1,368,358 --------------- Total 21,502,786 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.1%) Cardinal Health 136,033 8,764,607 Caremark Rx 78,467 4,481,250 HealthSouth 51,554(b) 1,167,698 Humana 29,219(b) 1,616,103 McKesson 45,716 2,317,801 UnitedHealth Group 147,629 7,932,106 --------------- Total 26,279,565 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.5%) Harrah's Entertainment 39,030 3,228,562 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (4.2%) Colgate-Palmolive 127,268 8,302,964 Procter & Gamble 214,637 13,794,721 Spectrum Brands 424,156(b) 4,623,300 --------------- Total 26,720,985 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.0%) General Electric 337,801 12,569,575 - ------------------------------------------------------------------------------------------------- INSURANCE (3.2%) ACE 64,557(c) 3,910,217 AFLAC 13,922 640,412 American Intl Group 170,499 12,217,959 Hartford Financial Services Group 7,204 672,205 Prudential Financial 32,347 2,777,313 --------------- Total 20,218,106 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (4.2%) Baidu.com ADR 7,339(b,c) 827,252 eBay 22,402(b) 673,628 Google Cl A 53,189(b) 24,492,471 Yahoo! 44,773(b) 1,143,502 --------------- Total 27,136,853 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) IT SERVICES (1.9%) BearingPoint 45,985(b) $ 361,902 Electronic Data Systems 154,185 4,247,797 First Data 285,500 7,285,960 --------------- Total 11,895,659 - ------------------------------------------------------------------------------------------------- MACHINERY (0.3%) Flowserve 34,266(b) 1,729,405 - ------------------------------------------------------------------------------------------------- MEDIA (13.2%) Cablevision Systems Cl A 11,080 315,558 Charter Communications Cl A 487,229(b) 1,490,921 Comcast Cl A 146,679(b) 6,208,922 Grupo Televisa ADR 22,377(c) 604,403 Idearc 3,376(b) 96,722 Liberty Global Cl A 276,330(b) 8,055,020 Liberty Global Series C 120,838(b) 3,383,464 News Corp Cl A 235,152 5,051,065 NTL 2,018,448(e) 50,945,627 Viacom Cl B 22,197(b) 910,743 Vivendi 113,316(c) 4,428,977 WorldSpace Cl A 75,678(b) 264,873 XM Satellite Radio Holdings Cl A 217,829(b) 3,147,629 --------------- Total 84,903,924 - ------------------------------------------------------------------------------------------------- METALS & MINING (1.0%) Coeur d'Alene Mines 749,542(b) 3,710,233 Newmont Mining 56,564 2,553,865 --------------- Total 6,264,098 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.1%) Federated Department Stores 16,378 624,493 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.5%) Chevron 26,000 1,911,780 Exxon Mobil 222,860 17,077,763 Total 47,974(c) 3,460,747 --------------- Total 22,450,290 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (8.5%) AstraZeneca 208,265(c) 11,190,136 Bristol-Myers Squibb 191,747 5,046,781 Eli Lilly & Co 46,062 2,399,830 Johnson & Johnson 124,979 8,251,114 Merck & Co 302,043 13,169,074 Pfizer 415,724 10,767,252 Schering-Plough 117,031 2,766,613 Teva Pharmaceutical Inds ADR 42,922(c) 1,334,016 --------------- Total 54,924,816 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 192 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Growth Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.7%) Advanced Micro Devices 90,015(b) $ 1,831,804 Atmel 120,373(b) 728,257 Intel 30,182 611,186 Spansion Cl A 91,965(b) 1,366,600 --------------- Total 4,537,847 - ------------------------------------------------------------------------------------------------- SOFTWARE (3.6%) Adobe Systems 8,567(b) 352,275 Electronic Arts 18,408(b) 927,027 Microsoft 555,029 16,573,166 Symantec 234,974(b) 4,899,208 --------------- Total 22,751,676 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.4%) Countrywide Financial 59,700 2,534,265 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) TOBACCO (2.6%) Altria Group 165,363 $ 14,191,453 Imperial Tobacco Group ADR 32,115(c) 2,538,048 --------------- Total 16,729,501 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (10.2%) ALLTEL 354,472 21,438,466 Hutchison Telecommunications Intl 1,945,478(b,c) 4,902,591 Orascom Telecom Holding GDR 80,303(c) 5,299,998 Sprint Nextel 487,286 9,204,833 Vodafone Group 8,228,402(c) 22,798,534 Vodafone Group ADR 79,605(c) 2,211,427 --------------- Total 65,855,849 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $553,441,233) $ 610,241,302 - -------------------------------------------------------------------------------------------------
OPTIONS PURCHASED (0.3%)
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a) PRICE DATE PUTS S&P 500 Index 314 $ 1,350 March 2007 $ 328,130 - ------------------------------------------------------------------------------------------------- CALLS NTL 5,985 27.50 June 2007 957,600 NTL 1,995 27.50 Jan. 2008 473,813 - ------------------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $2,495,495) $ 1,759,543 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (3.8%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 24,044,598(d) $ 24,044,598 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $24,044,598) $ 24,044,598 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $579,981,326)(g) $ 636,045,443 ================================================================================================= 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 Dec. 31, 2006, the value of foreign securities represented 11.3% of net assets. (d) Affiliated Money Market Fund -- See Note 10 to the financial statements. (e) At Dec. 31, 2006, securities valued at $20,141,520 were held to cover open call options written as follows (see Note 8 to the financial statements):
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a) PRICE DATE ------------------------------------------------------------------------ NTL 5,985 $30 June 2007 $493,763 NTL 1,995 30 Jan. 2008 294,262 ------------------------------------------------------------------------ Total Value $788,025 (f) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
ACQUISITION COST SECURITY DATES ---------------------------------------------------------------------------------- KKR Private Equity Investors LP Unit 05-01-06 thru 10-12-06 $3,058,416 (g) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $594,114,446 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 51,020,713 Unrealized depreciation (9,089,716) --------------------------------------------------------------------- Net unrealized appreciation $ 41,930,997 ---------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 193 INVESTMENTS IN SECURITIES RiverSource VP - High Yield Bond Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (90.6%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AEROSPACE & DEFENSE (2.6%) Communications & Power Inds Sr Sub Nts 02-01-12 8.00% $ 6,955,000 $ 7,059,324 CPI Intl Sr Nts 02-01-15 11.30 4,200,000(m) 4,315,500 DRS Technologies 02-01-16 6.63 3,185,000 3,208,888 02-01-18 7.63 2,410,000 2,482,300 DRS Technologies Sr Sub Nts 11-01-13 6.88 2,745,000 2,765,588 L-3 Communications 06-15-12 7.63 4,425,000 4,579,875 07-15-13 6.13 1,010,000 989,800 L-3 Communications Sr Sub Nts Series B 10-15-15 6.38 6,450,000 6,385,500 --------------- Total 31,786,775 - ------------------------------------------------------------------------------------------------- AUTOMOTIVE (2.8%) Ford Motor Credit 06-16-08 6.63 4,053,000 4,050,236 Ford Motor Credit Sr Nts 08-10-11 9.88 4,217,000 4,518,305 GMAC 04-15-16 7.70 9,130,000 8,605,025 Goodyear Tire & Rubber Sr Nts 12-01-09 9.14 3,465,000(d,m) 3,482,325 Insurance Auto Auctions 04-01-13 11.00 10,385,000 11,735,050 UCI Holdco Sr Nts Pay-in-kind 12-15-13 12.37 1,880,000(d,h) 1,823,600 --------------- Total 34,214,541 - ------------------------------------------------------------------------------------------------- BROKERAGE (1.0%) LaBranche & Co Sr Nts 05-15-09 9.50 830,000 871,500 05-15-12 11.00 10,120,000 10,904,300 --------------- Total 11,775,800 - ------------------------------------------------------------------------------------------------- BUILDING MATERIALS (1.1%) Ainsworth Lumber 10-01-12 7.25 590,000(c) 464,625 Gibraltar Inds Series B 12-01-15 8.00 3,408,000 3,339,840 Interline Brands Sr Sub Nts 06-15-14 8.13 1,931,000 1,984,103
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT BUILDING MATERIALS (CONT.) Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00% $ 3,310,000 $ 3,425,850 Norcraft Holdings LP/Capital Sr Disc Nts (Zero coupon through 09-01-08, thereafter 9.75%) 09-01-12 8.31 4,350,000(n) 3,675,750 --------------- Total 12,890,168 - ------------------------------------------------------------------------------------------------- CHEMICALS (5.0%) Chemtura 06-01-16 6.88 2,550,000 2,454,375 Crystal US Holdings 3 LLC/Sub3 Sr Disc Nts Series B (Zero coupon through 10-01-09, thereafter 10.50%) 10-01-14 7.30 3,675,000(n) 3,160,500 Georgia Gulf Sr Nts 12-15-13 7.13 5,063,000 4,480,755 Georgia Gulf Sr Sub Nts 10-15-16 10.75 5,531,000(d) 5,309,760 Hexion US Finance/Nova Scotia Sr Nts 11-15-14 9.75 6,680,000(d) 6,771,850 INEOS Group Holdings Sr Sub Nts 02-15-16 8.50 5,985,000(c,d) 5,715,675 INVISTA 05-01-12 9.25 13,955,000(d) 14,931,850 Lyondell Chemical 09-15-16 8.25 1,570,000 1,648,500 NALCO Sr Nts 11-15-11 7.75 2,490,000 2,546,025 NALCO Sr Sub Nts 11-15-13 8.88 3,845,000 4,070,894 NewMarket Sr Nts 12-15-16 7.13 3,785,000(d) 3,785,000 PQ 02-15-13 7.50 6,312,000 6,217,320 --------------- Total 61,092,504 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (0.8%) Case New Holland 03-01-14 7.13 6,475,000 6,572,125 United Rentals North America Sr Sub Nts 02-15-14 7.00 3,595,000 3,527,594 --------------- Total 10,099,719 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT CONSUMER PRODUCTS (2.2%) AAC Group Holding Sr Disc Nts (Zero coupon through 10-01-08, thereafter 10.25%) 10-01-12 10.28% $ 4,225,000(n) $ 3,696,875 Sealy Mattress Sr Sub Nts 06-15-14 8.25 7,980,000 8,339,100 Spectrum Brands Sr Sub Nts 10-01-13 8.50 4,557,000 4,260,795 Visant Holding Sr Disc Nts (Zero coupon through 12-01-08, thereafter 10.25%) 12-01-13 10.14 3,350,000(n) 2,964,750 Visant Holding Sr Nts 12-01-13 8.75 7,655,000 7,884,650 --------------- Total 27,146,170 - ------------------------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING (1.0%) ALH Finance LLC Sr Sub Nts 01-15-13 8.50 1,182,000 1,161,315 Covalence Specialty Materials Sr Sub Nts 03-01-16 10.25 3,786,000(d) 3,464,190 RBS Global & Rexnord 08-01-14 9.50 3,200,000(d) 3,324,000 TriMas 06-15-12 9.88 4,775,000 4,619,813 --------------- Total 12,569,318 - ------------------------------------------------------------------------------------------------- ELECTRIC (3.7%) Dynegy Holdings 05-15-18 7.13 4,885,000 4,762,875 Dynegy Holdings Sr Unsecured 05-01-16 8.38 7,510,000 7,885,500 Edison Mission Energy 06-15-16 7.75 8,425,000 8,930,499 Midwest Generation LLC Series B 01-02-16 8.56 3,993,082 4,402,373 Mirant Americas Generation LLC Sr Nts 05-01-11 8.30 4,315,000 4,422,875 Mirant North America LLC 12-31-13 7.38 5,390,000 5,470,850 NRG Energy 02-01-14 7.25 3,589,000 3,615,918 02-01-16 7.38 907,000 911,535 01-15-17 7.38 2,955,000 2,962,388
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 194 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - High Yield Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ELECTRIC (CONT.) Reliant Energy Secured 12-15-14 6.75% $ 1,705,000 $ 1,670,900 --------------- Total 45,035,713 - ------------------------------------------------------------------------------------------------- ENTERTAINMENT (1.1%) AMC Entertainment 02-01-16 11.00 7,570,000 8,497,324 Six Flags Sr Nts 06-01-14 9.63 1,895,000 1,757,613 United Artists Theatre Circuit Series AU4 07-01-15 9.30 2,044,150(j) 2,125,916 United Artists Theatre Circuit Series AV2 07-01-15 9.30 665,335(j) 691,949 --------------- Total 13,072,802 - ------------------------------------------------------------------------------------------------- ENVIRONMENTAL (1.1%) Allied Waste North America Series B 05-15-16 7.13 3,220,000 3,187,800 Allied Waste North America Sr Nts 04-15-13 7.88 1,920,000 1,980,000 Clean Harbors 07-15-12 11.25 3,872,000 4,309,997 WCA Waste 06-15-14 9.25 3,410,000 3,563,450 --------------- Total 13,041,247 - ------------------------------------------------------------------------------------------------- FOOD AND BEVERAGE (2.7%) ASG Consolidated LLC/Finance Sr Disc Nts (Zero coupon through 11-01-08, thereafter 11.50%) 11-01-11 12.16 11,075,000(n) 9,856,750 Constellation Brands 09-01-16 7.25 3,860,000 3,966,150 Cott Beverages USA 12-15-11 8.00 10,946,000 11,164,920 Pinnacle Foods Group Sr Sub Nts 12-01-13 8.25 7,860,000 8,046,675 --------------- Total 33,034,495 - ------------------------------------------------------------------------------------------------- GAMING (5.6%) Boyd Gaming Sr Sub Nts 04-15-14 6.75 6,170,000 6,154,575 02-01-16 7.13 814,000 809,930 Buffalo Thunder Development Authority Secured 12-15-14 9.38 3,540,000(d) 3,584,250 Circus & Eldorado Jt Venture/Silver Legacy Capital 1st Mtge 03-01-12 10.13 3,970,000 4,168,500
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT GAMING (CONT.) Harrah's Operating 06-01-16 6.50% $ 6,560,000 $ 5,873,496 10-01-17 5.75 2,330,000 1,952,088 Majestic Star Casino LLC/Capital 10-15-10 9.50 6,405,000 6,725,249 MGM MIRAGE Sr Nts 02-27-14 5.88 12,045,000 11,171,737 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 4,680,000 4,644,900 Pokagon Gaming Authority Sr Nts 06-15-14 10.38 6,300,000(d) 6,898,499 Station Casinos Sr Sub Nts 03-01-16 6.88 3,627,000 3,255,233 Tunica-Biloxi Gaming Authority Sr Unsecured 11-15-15 9.00 6,275,000(d) 6,494,625 Wheeling Island Gaming 12-15-09 10.13 560,000 570,500 Wynn Las Vegas LLC/Capital 1st Mtge 12-01-14 6.63 6,390,000 6,350,063 --------------- Total 68,653,645 - ------------------------------------------------------------------------------------------------- GAS PIPELINES (3.1%) Colorado Interstate Gas Sr Nts 03-15-15 5.95 2,605,000 2,570,260 11-15-15 6.80 2,100,000 2,183,542 Regency Energy Partners LP/Finance Sr Unsecured 12-15-13 8.38 7,570,000(d) 7,588,925 Southern Star Central Sr Nts 03-01-16 6.75 4,260,000 4,249,350 Williams Companies Sr Nts 07-15-19 7.63 16,825,000 18,002,750 Williams Partners LP/Finance 02-01-17 7.25 3,515,000(d) 3,585,300 --------------- Total 38,180,127 - ------------------------------------------------------------------------------------------------- HEALTH CARE (8.5%) Community Health Systems Sr Sub Nts 12-15-12 6.50 7,165,000 7,057,525 DaVita 03-15-15 7.25 9,475,000 9,664,499 HCA Secured 11-15-14 9.13 2,080,000(d) 2,215,200 11-15-16 9.25 5,790,000(d) 6,180,825 HCA Sr Unsecured 02-15-16 6.50 4,260,000 3,589,050
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT HEALTH CARE (CONT.) HealthSouth Sr Nts 06-15-16 10.75% $ 3,353,000(d) $ 3,604,475 IASIS Healthcare LLC/Capital Sr Sub Nts 06-15-14 8.75 4,426,000 4,481,325 LifeCare Holdings Sr Sub Nts 08-15-13 9.25 3,042,000 2,007,720 MedCath Holdings Sr Nts 07-15-12 9.88 10,033,000 10,810,557 Omnicare Sr Sub Nts 12-15-13 6.75 3,975,000 3,925,313 12-15-15 6.88 4,920,000 4,858,500 Select Medical 02-01-15 7.63 7,817,000 6,488,110 Select Medical Sr Unsecured 09-15-15 11.18 9,743,000(m) 8,037,975 Triad Hospitals Sr Nts 05-15-12 7.00 7,970,000 8,109,475 Triad Hospitals Sr Sub Nts 11-15-13 7.00 4,880,000 4,910,500 US Oncology 08-15-14 10.75 2,215,000 2,447,575 US Oncology Holdings Sr Nts 03-15-15 10.68 6,780,000(m) 6,966,450 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(n) 3,592,050 Vanguard Health Holding II LLC Sr Sub Nts 10-01-14 9.00 4,168,000 4,220,100 --------------- Total 103,167,224 - ------------------------------------------------------------------------------------------------- HOME CONSTRUCTION (1.4%) K Hovnanian Enterprises 05-15-16 7.50 1,980,000 1,989,900 Meritage Homes 03-15-15 6.25 4,585,000 4,355,750 Standard-Pacific Sr Nts 08-15-15 7.00 2,895,000(k) 2,786,438 Stanley-Martin Communities LLC 08-15-15 9.75 3,931,000 3,105,490 William Lyon Homes Sr Nts 02-15-14 7.50 5,310,000 4,420,575 --------------- Total 16,658,153 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 195 RiverSource VP - High Yield Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT INDEPENDENT ENERGY (5.4%) Chaparral Energy 12-01-15 8.50% $ 4,874,000 $ 4,849,630 Chesapeake Energy Sr Nts 08-15-14 7.00 4,143,000 4,210,324 Compton Petroleum Finance 12-01-13 7.63 5,233,000(c) 5,049,845 Denbury Resources Sr Sub Nts 12-15-15 7.50 2,640,000 2,679,600 Encore Acquisition 12-01-17 7.25 2,740,000 2,650,950 Encore Acquisition Sr Sub Nts 04-15-14 6.25 1,650,000 1,546,875 07-15-15 6.00 5,500,000 5,018,750 EXCO Resources 01-15-11 7.25 10,575,000 10,733,624 Hilcorp Energy I LP/Finance Sr Nts 11-01-15 7.75 5,560,000(d) 5,462,700 06-01-16 9.00 2,060,000(d) 2,178,450 Petrohawk Energy 07-15-13 9.13 7,815,000 8,205,750 Pioneer Natural Resources 05-01-18 6.88 5,310,000 5,165,090 Pioneer Natural Resources Sr Nts 07-15-16 5.88 6,150,000 5,671,364 Range Resources 05-15-16 7.50 1,970,000 2,019,250 --------------- Total 65,442,202 - ------------------------------------------------------------------------------------------------- MEDIA CABLE (4.8%) CCH I LLC Secured 10-01-15 11.00 2,080,000 2,134,600 CCH II LLC/Capital 10-01-13 10.25 2,800,000 2,982,000 CCO Holdings LLC/Capital Sr Nts 12-15-10 9.49 4,020,000(m) 4,100,400 11-15-13 8.75 3,560,000 3,697,950 Charter Communications Operating LLC/Capital Sr Nts 04-30-12 8.00 4,765,000(d) 4,949,644 CSC Holdings Sr Nts 04-15-12 7.25 8,000,000(d) 7,800,000 DIRECTV Holdings LLC/Finance 06-15-15 6.38 5,000,000 4,793,750 EchoStar DBS 10-01-14 6.63 4,045,000 3,943,875 02-01-16 7.13 5,465,000 5,465,000 EchoStar DBS Sr Nts 10-01-11 6.38 1,695,000 1,684,406 NTL Cable 04-15-14 8.75 295,000(c) 308,644
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA CABLE (CONT.) NTL Cable Sr Nts 08-15-16 9.13% $ 2,960,000(c) $ 3,130,200 Quebecor Media Sr Nts 03-15-16 7.75 4,630,000(c) 4,728,388 Videotron Ltee 01-15-14 6.88 9,070,000(c) 9,126,687 --------------- Total 58,845,544 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (9.4%) Clear Channel Communications 09-15-14 5.50 4,195,000 3,538,734 Clear Channel Communications Sr Unsub 12-15-16 5.50 8,855,000 7,167,848 Entercom Radio LLC/Capital 03-01-14 7.63 2,090,000 2,090,000 Idearc Sr Nts 11-15-16 8.00 10,280,000(d) 10,472,749 Intelsat Bermuda 06-15-16 9.25 2,250,000(c,d) 2,418,750 Intelsat Bermuda Sr Nts 06-15-13 11.35 3,460,000(c,d,m) 3,633,000 06-15-16 11.25 2,580,000(c,d) 2,831,550 Lamar Media 01-01-13 7.25 3,627,000 3,695,006 08-15-15 6.63 5,468,000 5,420,155 Lamar Media Series B 08-15-15 6.63 3,650,000 3,618,063 Liberty Media Sr Nts 05-15-13 5.70 8,824,000 8,313,417 LIN TV Series B 05-15-13 6.50 5,210,000 4,962,525 Nielsen Finance LLC Sr Disc Nts (Zero coupon through 08-01-11, thereafter 12.50%) 08-01-16 10.96 2,265,000(d,n) 1,560,019 Nielsen Finance LLC Sr Nts 08-01-14 10.00 6,880,000(d) 7,456,200 Radio One 02-15-13 6.38 6,833,000 6,388,855 Rainbow Natl Services LLC Sr Nts 09-01-12 8.75 9,115,000(d) 9,582,143 Rainbow Natl Services LLC Sr Sub Deb 09-01-14 10.38 3,775,000(d) 4,194,969 RH Donnelley Sr Disc Nts Series A-1 01-15-13 6.88 1,370,000 1,313,488
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA NON CABLE (CONT.) RH Donnelley Sr Disc Nts Series A-2 01-15-13 6.88% $ 8,371,000 $ 8,025,696 RH Donnelley Sr Nts 01-15-13 6.88 9,845,000 9,438,894 Sinclair Broadcast Group 03-15-12 8.00 3,584,000 3,700,480 Sun Media 02-15-13 7.63 5,020,000(c) 5,089,025 --------------- Total 114,911,566 - ------------------------------------------------------------------------------------------------- METALS (0.3%) Aleris Intl Sr Nts 12-15-14 9.00 3,340,000(d) 3,365,050 - ------------------------------------------------------------------------------------------------- OIL FIELD SERVICES (1.4%) Chart Inds Sr Sub Nts 10-15-15 9.13 5,890,000(d) 6,155,050 OPTI Canada 12-15-14 8.25 4,530,000(c,d) 4,631,925 Quicksilver Resources 04-01-16 7.13 5,965,000 5,830,788 --------------- Total 16,617,763 - ------------------------------------------------------------------------------------------------- OTHER FINANCIAL INSTITUTIONS (1.3%) Cardtronics 08-15-13 9.50 8,355,000 8,730,975 Triad Acquisition Sr Unsecured Series B 05-01-13 11.13 7,665,000 7,281,750 --------------- Total 16,012,725 - ------------------------------------------------------------------------------------------------- OTHER INDUSTRY (0.3%) Rental Service 12-01-14 9.50 2,970,000(d) 3,066,525 - ------------------------------------------------------------------------------------------------- PACKAGING (1.6%) Crown Americas LLC/Capital Sr Nts 11-15-15 7.75 9,445,000 9,799,188 Owens-Brockway Glass Container 05-15-13 8.25 6,060,000 6,264,525 Plastipak Holdings Sr Nts 12-15-15 8.50 3,180,000(d) 3,307,200 --------------- Total 19,370,913 - ------------------------------------------------------------------------------------------------- PAPER (4.4%) Boise Cascade LLC 10-15-14 7.13 6,090,000 5,892,075 Cascades Sr Nts 02-15-13 7.25 5,838,000(c) 5,823,405 Georgia-Pacific 06-15-15 7.70 5,713,000 5,820,119 01-15-17 7.13 10,905,000(d) 10,877,738
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 196 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - High Yield Bond Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT PAPER (CONT.) Jefferson Smurfit US 10-01-12 8.25% $ 1,620,000 $ 1,579,500 06-01-13 7.50 3,555,000 3,341,700 NewPage Secured 05-01-12 10.00 10,770,000 11,362,349 Norampac Sr Nts 06-01-13 6.75 4,270,000(c) 4,152,575 Smurfit Kappa Funding Sr Nts 10-01-12 9.63 3,865,000(c) 4,096,900 --------------- Total 52,946,361 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (0.7%) CDRV Investors Sr Disc Nts (Zero coupon through 01-01-10, thereafter 9.63%) 01-01-15 9.85 4,015,000(n) 3,111,625 Warner Chilcott 02-01-15 8.75 5,714,000 5,856,850 --------------- Total 8,968,475 - ------------------------------------------------------------------------------------------------- RAILROADS (0.2%) Kansas City Southern de Mexico Sr Nts 12-01-13 7.63 2,340,000(c,d) 2,340,000 - ------------------------------------------------------------------------------------------------- RETAILERS (3.8%) AutoNation 04-15-14 7.00 2,845,000 2,866,338 GNC Pay-in-kind 12-01-11 12.14 6,420,000(d,h) 6,420,000 Michaels Stores Sr Nts 11-01-14 10.00 1,610,000(d) 1,674,400 Michaels Stores Sr Sub Nts 11-01-16 11.38 5,645,000(d) 5,884,913 Neiman Marcus Group 10-15-15 9.00 4,203,000 4,586,524 Sally Holdings LLC Sr Nts 11-15-14 9.25 2,490,000(d) 2,536,688 Sally Holdings LLC Sr Sub Nts 11-15-16 10.50 5,270,000(d) 5,375,400 Toys "R" Us 04-15-13 7.88 10,995,000 9,675,599 10-15-18 7.38 3,170,000 2,567,700 United Auto Group Sr Sub Nts 12-15-16 7.75 4,785,000(d) 4,790,981 --------------- Total 46,378,543 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT TECHNOLOGY (2.6%) Freescale Semiconductor Sr Nts 12-15-14 8.88% $ 2,655,000(d) $ 2,648,363 12-15-14 9.24 1,425,000(d,m) 1,414,313 NXP Funding LLC Secured 10-15-13 8.12 5,215,000(c,d,m) 5,293,225 NXP Funding LLC Sr Nts 10-15-15 9.50 2,275,000(c,d) 2,331,875 SS&C Technologies 12-01-13 11.75 3,765,000 4,085,025 SunGard Data Systems 08-15-13 9.13 5,570,000 5,848,500 West Sr Nts 10-15-14 9.50 3,755,000(d) 3,755,000 10-15-16 11.00 6,045,000(d) 6,120,562 --------------- Total 31,496,863 - ------------------------------------------------------------------------------------------------- TRANSPORTATION SERVICES (1.1%) Avis Budget Car Rental LLC/Finance Sr Nts 05-15-14 7.63 4,050,000(d) 3,948,750 05-15-16 7.75 2,975,000(d) 2,870,875 Hertz Sr Sub Nts 01-01-16 10.50 3,611,000(d) 3,972,100 Quality Distribution LLC/Capital 01-15-12 9.87 2,651,000(m) 2,690,765 --------------- Total 13,482,490 - ------------------------------------------------------------------------------------------------- WIRELESS (4.2%) American Tower Sr Nts 10-15-12 7.13 8,815,000 9,057,412 Centennial Communications Sr Nts 01-01-13 10.00 4,700,000 4,999,625 01-01-13 11.12 2,455,000(m) 2,596,163 Centennial Communications/Cellular Operating LLC Sr Nts 02-01-14 8.13 2,590,000 2,657,988 Cricket Communications 11-01-14 9.38 4,775,000(d) 5,037,625 Dobson Cellular Systems Secured 11-01-11 8.38 1,122,000(d) 1,182,308 11-01-11 8.38 1,993,000 2,100,124 11-01-12 9.88 1,870,000 2,038,300 MetroPCS Wireless 11-01-14 9.25 6,815,000(d) 7,121,675 Nextel Communications Sr Nts Series D 08-01-15 7.38 7,530,000 7,721,449 Rogers Wireless Sr Sub Nts 12-15-12 8.00 5,900,000(c) 6,298,250 --------------- Total 50,810,919 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT WIRELINES (5.4%) Cincinnati Bell Sr Sub Nts 01-15-14 8.38% $ 2,055,000 $ 2,111,513 Citizens Communications Sr Nts 01-15-13 6.25 7,157,000 7,022,806 Embarq 06-01-16 7.08 2,839,000 2,890,159 GCI Sr Nts 02-15-14 7.25 7,570,000 7,513,225 Level 3 Communications 03-01-10 11.50 760,000 805,600 Level 3 Financing 03-15-13 12.25 3,135,000 3,550,388 Level 3 Financing Sr Nts 11-01-14 9.25 5,090,000(d) 5,185,438 Qwest Communications Intl 02-15-14 7.50 1,640,000 1,689,200 Qwest Sr Nts 06-15-15 7.63 10,730,000 11,481,099 Qwest Sr Unsecured 10-01-14 7.50 1,630,000 1,727,800 Valor Telecommunications Enterprises LLC/Finance 02-15-15 7.75 3,752,000 4,038,090 Windstream Sr Nts 08-01-16 8.63 15,890,000(d) 17,399,548 --------------- Total 65,414,866 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $1,080,920,952) $ 1,101,889,206 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (5.5%)(i)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AUTOMOTIVE (0.5% ) Ford Motor Tranche B Term Loan 11-29-13 8.36% $ 6,275,000(f) $ 6,285,793 - ------------------------------------------------------------------------------------------------- ELECTRIC (0.6%) NRG Energy Tranche B Term Loan 02-01-13 7.36 7,157,641 7,197,581 - ------------------------------------------------------------------------------------------------- ENVIRONMENTAL (0.3%) Allied Waste Inds North America Tranche AW Term Loan 01-15-12 7.12-7.21 3,811,760 3,818,316 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.6%) HCA Tranche B Term Loan 11-14-13 7.86 7,580,000 7,660,575 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 197 RiverSource VP - High Yield Bond Fund SENIOR LOANS (CONTINUED)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA CABLE (0.3%) Charter Communications Operating 2nd Lien Term Loan 04-28-13 8.01% $ 4,000,000 $ 4,020,840 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (1.0%) VNU Tranche B Term Loan 08-09-13 8.13 10,350,000(c) 10,421,208 - ------------------------------------------------------------------------------------------------- OTHER FINANCIAL INSTITUTIONS (0.4%) ACE Cash Express Tranche B Term Loan 10-05-13 8.30-8.36 4,845,000 4,845,000 - ------------------------------------------------------------------------------------------------- PAPER (0.4%) Georgia Pacific 2nd Lien Tranche C Term Loan 12-23-13 8.35 5,150,000 5,157,725 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT RETAILERS (0.7%) Sally Holdings LLC Tranche A Term Loan 11-16-12 7.87% $ 1,550,000 $ 1,555,162 Toys "R" Us Tranche B Term Loan 07-19-12 9.63 6,600,000 6,786,978 --------------- Total 8,342,140 - ------------------------------------------------------------------------------------------------- WIRELINES (0.7%) Qwest Tranche B Term Loan 06-30-10 6.95 8,955,000 9,105,354 - ------------------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $66,333,297) $ 66,854,532 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (--%)
ISSUER SHARES VALUE(a) Link Energy LLC Unit 494,265(b) $ 14,581 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $3,913,363) $ 14,581 - -------------------------------------------------------------------------------------------------
OTHER (0.1%)
ISSUER SHARES VALUE(a) Varde Fund V LP 5,000,000(b,e,j) $ 1,420,150 - ------------------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $ 1,420,150 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (3.5%)(l)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 42,251,95(g) $ 42,251,953 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $42,251,953) $ 42,251,953 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,193,419,565)(o) $ 1,212,430,422 ================================================================================================= 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. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Dec. 31, 2006, the value of foreign securities represented 7.2% 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 Dec. 31, 2006, the value of these securities amounted to $280,008,050 or 23.0% of net assets. (e) The share amount for Limited Liability Companies (LLC) or Limited Partnerships (LP) represents capital contributions. (f) At Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $6,304,144. (g) Affiliated Money Market Fund -- See Note 10 to the financial statements. (h) 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. (i) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. (j) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
SECURITY ACQUISITION COST DATES ------------------------------------------------------------------------ United Artists Theatre Circuit 9.30% Series AU4 08-15-96 thru 04-09-02 $ 1,727,801 United Artists Theatre Circuit 9.30% Series AV2 12-11-01 thru 08-28-02 528,403 Varde Fund V LP 04-27-00 thru 06-19-00 --* * The original cost for this position in fiscal year 2004 was $25,000,000. From Sept. 29, 2004 through March 7, 2005, $25,000,000 was returned to the fund in the form of return of capital. - ------------------------------------------------------------------------------ 198 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - High Yield Bond Fund NOTES TO INVESTMENTS IN SECURITIES (CONTINUED) (k) At Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (l) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.1% of net assets. See Note 6 to the financial statements. 3.4% of net assets is the Fund's cash equivalent position. (m) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (n) 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. (o) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $1,191,984,967 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 32,593,817 Unrealized depreciation (12,148,362) ------------------------------------------------------------------------- Net unrealized appreciation $ 20,445,455 ------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com.
- ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 199 INVESTMENTS IN SECURITIES RiverSource VP - Income Opportunities Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (88.8%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ASSET-BACKED (--%) Metris Master Trust Series 2005-1A Cl D 03-21-11 7.25% $ 75,000(d,f) $ 74,886 - ------------------------------------------------------------------------------------------------- AEROSPACE & DEFENSE (3.4%) Communications & Power Inds Sr Sub Nts 02-01-12 8.00 3,685,000 3,740,274 CPI Intl Sr Nts 02-01-15 11.30 200,000(f) 205,500 DRS Technologies 02-01-16 6.63 1,585,000 1,596,888 02-01-18 7.63 830,000 854,900 DRS Technologies Sr Sub Nts 11-01-13 6.88 2,575,000 2,594,313 L-3 Communications 06-15-12 7.63 1,650,000 1,707,750 07-15-13 6.13 80,000 78,400 L-3 Communications Sr Sub Nts 01-15-15 5.88 225,000 217,125 L-3 Communications Sr Sub Nts Series B 10-15-15 6.38 1,785,000 1,767,150 TransDigm 07-15-14 7.75 1,260,000 1,297,800 --------------- Total 14,060,100 - ------------------------------------------------------------------------------------------------- AUTOMOTIVE (2.5%) Ford Motor Credit Sr Nts 08-10-11 9.88 3,690,000 3,953,650 Ford Motor Credit Sr Unsecured 01-13-12 8.11 1,995,000(f) 1,977,575 GMAC 04-15-16 7.70 3,685,000 3,473,113 Goodyear Tire & Rubber Sr Nts 12-01-09 9.14 1,015,000(d,f) 1,020,075 --------------- Total 10,424,413 - ------------------------------------------------------------------------------------------------- BROKERAGE (0.8%) LaBranche & Co Sr Nts 05-15-12 11.00 3,130,000 3,372,575 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT BUILDING MATERIALS (0.7%) Ainsworth Lumber 10-01-12 7.25% $ 175,000(c) $ 137,813 Interline Brands Sr Sub Nts 06-15-14 8.13 375,000 385,313 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 2,120,000 2,194,199 --------------- Total 2,717,325 - ------------------------------------------------------------------------------------------------- CHEMICALS (5.0 %) BCP Crystal US Holdings Sr Sub Nts 06-15-14 9.63 1,476,000 1,630,980 Chemtura 06-01-16 6.88 2,226,000 2,142,525 Hexion US Finance/Nova Scotia Sr Nts 11-15-14 9.75 1,939,000(d) 1,965,661 INEOS Group Holdings Sr Sub Nts 02-15-16 8.50 2,046,000(c,d) 1,953,930 INVISTA 05-01-12 9.25 2,530,000(d) 2,707,100 Lyondell Chemical 09-15-16 8.25 955,000 1,002,750 NALCO Sr Nts 11-15-11 7.75 3,175,000 3,246,438 NewMarket Sr Nts 12-15-16 7.13 2,125,000(d) 2,125,000 PQ 02-15-13 7.50 3,332,000 3,282,019 --------------- Total 20,056,403 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MACHINERY (0.4%) Case New Holland 03-01-14 7.13 265,000 268,975 United Rentals North America 02-15-12 6.50 1,570,000 1,550,375 --------------- Total 1,819,350 - ------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS (2.3%) Chattem Sr Sub Nts 03-01-14 7.00 2,600,000 2,561,000 Sealy Mattress Sr Sub Nts 06-15-14 8.25 3,245,000 3,391,025
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT CONSUMER PRODUCTS (CONT.) Visant 10-01-12 7.63% $ 2,315,000 $ 2,343,938 Visant Holding Sr Nts 12-01-13 8.75 1,000,000 1,030,000 --------------- Total 9,325,963 - ------------------------------------------------------------------------------------------------- DIVERSIFIED MANUFACTURING (0.2%) ALH Finance LLC Sr Sub Nts 01-15-13 8.50 29,000 28,493 Covalence Specialty Materials Sr Sub Nts 03-01-16 10.25 518,000(d) 473,970 RBS Global & Rexnord 08-01-14 9.50 403,000(d) 418,616 --------------- Total 921,079 - ------------------------------------------------------------------------------------------------- ELECTRIC (4.7%) Aquila Canada Finance 06-15-11 7.75 1,806,000(c) 1,905,760 Dynegy Holdings 05-15-18 7.13 1,325,000 1,291,875 Dynegy Holdings Sr Unsecured 05-01-16 8.38 2,300,000 2,415,000 Edison Mission Energy Sr Unsecured 06-15-13 7.50 1,510,000 1,577,950 IPALCO Enterprises Secured 11-14-08 8.38 65,000 67,438 11-14-11 8.63 1,540,000 1,674,750 Midwest Generation LLC Series B 01-02-16 8.56 337,074 371,624 Mirant Americas Generation LLC Sr Nts 05-01-11 8.30 1,325,000 1,358,125 Mirant North America LLC 12-31-13 7.38 2,765,000 2,806,474 Nevada Power 04-15-12 6.50 550,000 564,617 NRG Energy 02-01-14 7.25 1,050,000 1,057,875 02-01-16 7.38 245,000 246,225 01-15-17 7.38 1,555,000 1,558,888 Reliant Energy Secured 07-15-13 9.50 185,000 198,413 12-15-14 6.75 2,375,000 2,327,500 --------------- Total 19,422,514 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 200 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Income Opportunities Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT ENTERTAINMENT (0.5%) AMC Entertainment 02-01-16 11.00% $ 925,000 $ 1,038,313 AMC Entertainment Sr Sub Nts 03-01-14 8.00 1,000,000 992,500 --------------- Total 2,030,813 - ------------------------------------------------------------------------------------------------- ENVIRONMENTAL (1.5%) Allied Waste North America Secured 04-15-11 6.38 1,975,000 1,950,313 Allied Waste North America Secured Series B 02-15-11 5.75 260,000 251,550 Allied Waste North America Series B 09-01-12 9.25 235,000 249,688 05-15-16 7.13 950,000 940,500 Clean Harbors 07-15-12 11.25 120,000 133,574 WCA Waste 06-15-14 9.25 2,395,000 2,502,774 --------------- Total 6,028,399 - ------------------------------------------------------------------------------------------------- FOOD AND BEVERAGE (2.7%) ASG Consolidated LLC/Finance Sr Disc Nts (Zero coupon through 11-01-08, thereafter 11.50%) 11-01-11 9.99 1,480,000(e) 1,317,200 Constellation Brands 09-01-16 7.25 2,415,000 2,481,413 Cott Beverages USA 12-15-11 8.00 5,280,000 5,385,599 Pinnacle Foods Group Sr Sub Nts 12-01-13 8.25 1,990,000 2,037,263 --------------- Total 11,221,475 - ------------------------------------------------------------------------------------------------- GAMING (6.7%) Boyd Gaming Sr Sub Nts 04-15-14 6.75 20,000 19,950 02-01-16 7.13 660,000 656,700 Buffalo Thunder Development Authority Secured 12-15-14 9.38 1,170,000(d) 1,184,625 Circus & Eldorado Jt Venture/Silver Legacy Capital 1st Mtge 03-01-12 10.13 2,930,000 3,076,499 Harrah's Operating 06-01-16 6.50 3,195,000 2,860,643 10-01-17 5.75 585,000 490,117 Majestic Star Casino LLC/Capital 10-15-10 9.50 4,300,000 4,514,999 Mandalay Resort Group Sr Nts 12-15-11 6.38 100,000 99,500
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT GAMING (CONT.) MGM MIRAGE 02-01-11 8.38% $ 245,000 $ 254,188 04-01-13 6.75 1,845,000 1,803,488 07-15-15 6.63 1,000,000 952,500 MGM MIRAGE Sr Nts 02-27-14 5.88 1,000,000 927,500 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 260,000 258,050 Pokagon Gaming Authority Sr Nts 06-15-14 10.38 1,865,000(d) 2,042,175 Station Casinos Sr Nts 04-01-12 6.00 1,675,000 1,589,156 Station Casinos Sr Sub Nts 03-01-16 6.88 750,000 673,125 Tunica-Biloxi Gaming Authority Sr Unsecured 11-15-15 9.00 2,335,000(d) 2,416,725 Wheeling Island Gaming 12-15-09 10.13 2,065,000 2,103,719 Wynn Las Vegas LLC/Capital 1st Mtge 12-01-14 6.63 980,000 973,875 --------------- Total 26,897,534 - ------------------------------------------------------------------------------------------------- GAS PIPELINES (4.5%) ANR Pipeline 03-15-10 8.88 625,000 655,681 Colorado Interstate Gas Sr Nts 03-15-15 5.95 185,000 182,533 11-15-15 6.80 135,000 140,371 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 760,000 794,200 Regency Energy Partners LP/Finance Sr Unsecured 12-15-13 8.38 2,500,000(d) 2,506,250 Southern Star Central Sr Nts 03-01-16 6.75 4,460,000 4,448,850 Tennessee Gas Pipeline 12-15-11 6.00 1,071,000 1,052,258 Williams Companies 09-01-21 7.88 2,625,000 2,815,313 Williams Companies Sr Nts 07-15-19 7.63 4,440,000 4,750,799 Williams Partners LP/Finance 02-01-17 7.25 1,160,000(d) 1,183,200 --------------- Total 18,529,455 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT HEALTH CARE (6.8%) Community Health Systems Sr Sub Nts 12-15-12 6.50% $ 575,000 $ 566,375 DaVita 03-15-13 6.63 940,000 942,350 03-15-15 7.25 1,350,000 1,377,000 HCA Secured 11-15-16 9.25 3,440,000(d) 3,672,200 11-15-16 9.63 4,082,000(d) 4,367,739 HCA Sr Unsecured 02-15-16 6.50 1,015,000 855,138 HealthSouth Sr Nts 06-15-16 10.75 340,000(d) 365,500 IASIS Healthcare LLC/Capital Sr Sub Nts 06-15-14 8.75 1,296,000 1,312,200 MedCath Holdings Sr Nts 07-15-12 9.88 610,000 657,275 Omnicare Sr Sub Nts 12-15-13 6.75 2,800,000 2,765,000 12-15-15 6.88 570,000 562,875 Select Medical 02-01-15 7.63 1,028,000 853,240 Select Medical Sr Unsecured 09-15-15 11.18 957,000(f) 789,525 Triad Hospitals Sr Nts 05-15-12 7.00 680,000 691,900 Triad Hospitals Sr Sub Nts 11-15-13 7.00 3,037,000 3,055,981 US Oncology 08-15-12 9.00 2,315,000 2,442,325 VWR Intl Sr Nts 04-15-12 6.88 2,140,000 2,153,375 --------------- Total 27,429,998 - ------------------------------------------------------------------------------------------------- HOME CONSTRUCTION (0.9%) K Hovnanian Enterprises 05-15-16 7.50 1,000,000 1,005,000 Meritage Homes 03-15-15 6.25 765,000 726,750 Meritage Homes Sr Nts 05-01-14 7.00 1,400,000 1,379,000 Stanley-Martin Communities LLC 08-15-15 9.75 465,000 367,350 William Lyon Homes Sr Nts 02-15-14 7.50 370,000 308,025 --------------- Total 3,786,125 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 201 RiverSource VP - Income Opportunities Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT INDEPENDENT ENERGY (6.1%) Chaparral Energy 12-01-15 8.50% $ 2,248,000 $ 2,236,760 Chesapeake Energy 07-15-13 7.63 1,405,000 1,478,763 Chesapeake Energy Sr Nts 06-15-14 7.50 225,000 233,719 08-15-14 7.00 1,230,000 1,249,988 Compton Petroleum Finance 12-01-13 7.63 832,000(c) 802,880 Denbury Resources Sr Sub Nts 12-15-15 7.50 855,000 867,825 Encore Acquisition Sr Sub Nts 04-15-14 6.25 210,000 196,875 07-15-15 6.00 1,220,000 1,113,250 EXCO Resources 01-15-11 7.25 3,420,000 3,471,299 Hilcorp Energy I LP/Finance Sr Nts 06-01-16 9.00 1,250,000(d) 1,321,875 Petrohawk Energy 07-15-13 9.13 3,050,000 3,202,500 Pioneer Natural Resources 05-01-18 6.88 1,450,000 1,410,430 Pioneer Natural Resources Sr Nts 07-15-16 5.88 4,835,000 4,458,705 Range Resources 03-15-15 6.38 1,660,000 1,618,500 05-15-16 7.50 1,005,000 1,030,125 --------------- Total 24,693,494 - ------------------------------------------------------------------------------------------------- MEDIA CABLE (2.5%) Charter Communications Operating LLC/Capital Sr Nts 04-30-12 8.00 950,000(d) 986,813 04-30-14 8.38 1,880,000(d) 1,962,249 CSC Holdings Sr Nts Series B 07-15-09 8.13 485,000 502,581 04-01-11 7.63 370,000 376,938 DIRECTV Holdings LLC/Finance 06-15-15 6.38 85,000 81,494 EchoStar DBS 10-01-14 6.63 1,210,000 1,179,750 02-01-16 7.13 2,675,000 2,674,999 EchoStar DBS Sr Nts 10-01-11 6.38 185,000 183,844 Mediacom LLC/Capital Sr Nts 02-15-11 7.88 300,000 298,125 NTL Cable 04-15-14 8.75 60,000(c) 62,775
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA CABLE (CONT.) NTL Cable Sr Nts 08-15-16 9.13% $ 825,000(c) $ 872,438 Quebecor Media Sr Nts 03-15-16 7.75 210,000(c) 214,463 Videotron Ltee 12-15-15 6.38 1,000,000(c) 977,500 --------------- Total 10,373,969 - ------------------------------------------------------------------------------------------------- MEDIA NON CABLE (9.0%) Clear Channel Communications Sr Nts 09-15-14 5.50 1,315,000 1,109,281 Clear Channel Communications Sr Unsub 12-15-16 5.50 2,630,000 2,128,903 Dex Media 11-15-13 8.00 1,410,000 1,452,300 Dex Media (Zero coupon through 11-15-08, thereafter 9.00%) 11-15-13 8.68 5,475,000(e) 4,886,437 Entercom Radio LLC/Capital 03-01-14 7.63 1,597,000 1,597,000 Idearc Sr Nts 11-15-16 8.00 3,840,000(d) 3,912,000 Intelsat Bermuda 06-15-16 9.25 2,080,000(c,d) 2,236,000 Lamar Media 01-01-13 7.25 651,000 663,206 08-15-15 6.63 1,219,000 1,208,334 Lamar Media Series B 08-15-15 6.63 740,000 733,525 Liberty Media Sr Nts 05-15-13 5.70 2,490,000 2,345,921 LIN TV Series B 05-15-13 6.50 160,000 152,400 LIN TV Sr Sub Nts 05-15-13 6.50 380,000 361,950 Nielsen Finance LLC Sr Nts 08-01-14 10.00 775,000(d) 839,906 Radio One 02-15-13 6.38 285,000 266,475 Radio One Series B 07-01-11 8.88 1,160,000 1,197,700 Rainbow Natl Services LLC Sr Nts 09-01-12 8.75 1,130,000(d) 1,187,913
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA NON CABLE (CONT.) Rainbow Natl Services LLC Sr Sub Deb 09-01-14 10.38% $ 1,025,000(d) $ 1,139,031 RH Donnelley 12-15-12 10.88 250,000 272,500 RH Donnelley Sr Disc Nts Series A-2 01-15-13 6.88 170,000 162,988 Salem Communications 12-15-10 7.75 4,274,000 4,338,110 Sinclair Broadcast Group 03-15-12 8.00 1,265,000 1,306,113 Sun Media 02-15-13 7.63 2,900,000(c) 2,939,875 --------------- Total 36,437,868 - ------------------------------------------------------------------------------------------------- METALS (0.8%) Aleris Intl Sr Nts 12-15-14 9.00 1,105,000(d) 1,113,288 Peabody Energy Series B 03-15-13 6.88 1,918,000 1,965,950 --------------- Total 3,079,238 - ------------------------------------------------------------------------------------------------- OIL FIELD SERVICES (2.6%) Chart Inds Sr Sub Nts 10-15-15 9.13 2,750,000(d) 2,873,750 OPTI Canada 12-15-14 8.25 2,300,000(c,d) 2,351,750 Pride Intl Sr Nts 07-15-14 7.38 4,095,000 4,228,088 Quicksilver Resources 04-01-16 7.13 1,310,000 1,280,525 --------------- Total 10,734,113 - ------------------------------------------------------------------------------------------------- OTHER FINANCIAL INSTITUTIONS (4.2%) Cardtronics 08-15-13 9.25 2,765,000 2,889,425 Dow Jones CDX HY Series 7-T1 12-29-11 8.38 12,000,000(d) 12,324,000 Residential Capital 02-22-11 6.00 435,000 434,177 Triad Acquisition Sr Unsecured Series B 05-01-13 11.13 1,845,000 1,752,750 --------------- Total 17,400,352 - ------------------------------------------------------------------------------------------------- OTHER INDUSTRY (0.1%) Rental Service 12-01-14 9.50 580,000(d) 598,850 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 202 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Income Opportunities Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT PACKAGING (1.5%) Ball 12-15-12 6.88% $ 1,475,000 $ 1,502,656 Crown Americas LLC/Capital 11-15-13 7.63 1,225,000 1,261,750 Crown Americas LLC/Capital Sr Nts 11-15-15 7.75 250,000 259,375 Owens-Brockway Glass Container 05-15-11 7.75 1,120,000 1,150,800 Plastipak Holdings Sr Nts 12-15-15 8.50 1,400,000(d) 1,456,000 Silgan Holdings Sr Sub Nts 11-15-13 6.75 650,000 637,000 --------------- Total 6,267,581 - ------------------------------------------------------------------------------------------------- PAPER (4.7%) Boise Cascade LLC 10-15-12 8.25 625,000(f) 626,563 10-15-14 7.13 1,885,000 1,823,738 Cascades Sr Nts 02-15-13 7.25 950,000(c) 947,625 Georgia-Pacific 01-15-17 7.13 6,262,000(d) 6,246,344 Jefferson Smurfit US 06-01-13 7.50 1,995,000 1,875,300 NewPage Secured 05-01-12 10.00 4,215,000 4,446,825 Norampac Sr Nts 06-01-13 6.75 1,380,000(c) 1,342,050 Smurfit Kappa Funding Sr Nts 10-01-12 9.63 640,000(c) 678,400 Stone Container Finance 07-15-14 7.38 1,385,000(c) 1,288,050 --------------- Total 19,274,895 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (0.4%) Elan Finance 11-15-11 7.75 1,600,000(c) 1,562,000 - ------------------------------------------------------------------------------------------------- RAILROADS (0.2%) Kansas City Southern de Mexico Sr Nts 12-01-13 7.63 685,000(c,d) 685,000 - ------------------------------------------------------------------------------------------------- RETAILERS (2.4%) AutoNation 04-15-14 7.00 1,430,000 1,440,725 Michaels Stores Sr Nts 11-01-14 10.00 2,140,000(d) 2,225,600 Neiman Marcus Group 10-15-15 9.00 1,440,000 1,571,400
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT RETAILERS (CONT.) Sally Holdings LLC Sr Nts 11-15-14 9.25% $ 1,515,000(d) $ 1,543,406 United Auto Group 03-15-12 9.63 1,560,000 1,639,950 United Auto Group Sr Sub Nts 12-15-16 7.75 1,500,000(d) 1,501,875 --------------- Total 9,922,956 - ------------------------------------------------------------------------------------------------- TECHNOLOGY (2.5%) Freescale Semiconductor Sr Nts 12-15-14 8.88 930,000(d) 927,675 12-15-14 9.24 445,000(d,f) 441,663 NXP Funding LLC Secured 10-15-13 8.12 2,195,000(c,d,f) 2,227,925 NXP Funding LLC Sr Nts 10-15-15 9.50 1,071,000(c,d) 1,097,775 Seagate Technology HDD Holdings 10-01-16 6.80 3,000,000(c) 3,015,000 West Sr Nts 10-15-16 11.00 2,650,000(d) 2,683,125 --------------- Total 10,393,163 - ------------------------------------------------------------------------------------------------- TRANSPORTATION SERVICES (0.5%) Avis Budget Car Rental LLC/Finance Sr Nts 05-15-14 7.63 325,000(d) 316,875 05-15-16 7.75 240,000(d) 231,600 Hertz Sr Nts 01-01-14 8.88 1,475,000(d) 1,545,063 --------------- Total 2,093,538 - ------------------------------------------------------------------------------------------------- WIRELESS (3.3%) American Tower Sr Nts 10-15-12 7.13 415,000 426,413 Centennial Cellular Operating/Communications 06-15-13 10.13 1,000,000 1,077,500 Centennial Communications/Cellular Operating LLC Sr Nts 02-01-14 8.13 900,000 923,625 Dobson Cellular Systems Secured 11-01-11 8.38 1,350,000 1,422,563 Nextel Communications Series D 08-01-15 7.38 950,000 974,154 Nextel Communications Series E 10-31-13 6.88 140,000 141,446
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT WIRELESS (CONT.) Nextel Communications Series F 03-15-14 5.95% $ 4,300,000 $ 4,187,408 Rogers Wireless Secured 12-15-12 7.25 1,150,000(c) 1,219,000 03-01-14 6.38 1,160,000(c) 1,174,500 Rogers Wireless Sr Sub Nts 12-15-12 8.00 210,000(c) 224,175 Rural Cellular Secured 03-15-12 8.25 1,550,000 1,613,937 --------------- Total 13,384,721 - ------------------------------------------------------------------------------------------------- WIRELINES (4.5%) Cincinnati Bell 07-15-13 7.25 110,000 113,850 Citizens Communications 05-15-11 9.25 100,000 110,625 Citizens Communications Sr Nts 01-15-13 6.25 1,285,000 1,260,906 Embarq 06-01-16 7.08 1,095,000 1,114,732 GCI Sr Nts 02-15-14 7.25 1,175,000 1,166,188 Level 3 Financing 03-15-13 12.25 530,000 600,225 Level 3 Financing Sr Nts 11-01-14 9.25 1,685,000(d) 1,716,594 Qwest 03-15-12 8.88 3,385,000 3,770,044 Qwest Communications Intl 02-15-14 7.50 250,000 257,500 Qwest Sr Nts 06-15-15 7.63 1,025,000 1,096,750 Qwest Sr Unsecured 10-01-14 7.50 600,000 636,000 Windstream Sr Nts 08-01-16 8.63 6,170,000(d) 6,756,149 --------------- Total 18,599,563 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $357,881,800) $ 363,619,708 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 203 RiverSource VP - Income Opportunities Fund SENIOR LOANS (5.1%)(g)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT AUTOMOTIVE (0.5%) Ford Motor Tranche B Term Loan 11-29-13 8.36% $ 2,075,000(b) $ 2,078,569 - ------------------------------------------------------------------------------------------------- ELECTRIC (0.2%) NRG Energy Tranche B Term Loan 02-01-13 7.37 997,494 1,003,060 - ------------------------------------------------------------------------------------------------- HEALTH CARE (0.7%) HCA Tranche B Term Loan 11-14-13 7.86 2,650,000 2,678,170 - ------------------------------------------------------------------------------------------------- MEDIA CABLE (0.7%) Charter Communications Operating Term Loan 04-28-13 8.01 2,750,000 2,764,328 - -------------------------------------------------------------------------------------------------
SENIOR LOANS (CONTINUED)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MEDIA NON CABLE (0.6%) VNU Tranche B Term Loan 08-09-13 8.13% $ 2,500,000(c) $ 2,517,200 - ------------------------------------------------------------------------------------------------- OTHER FINANCIAL INSTITUTIONS (0.3%) ACE Cash Express Term Loan 10-05-13 8.30-8.39 1,255,000 1,255,000 - ------------------------------------------------------------------------------------------------- OTHER INDUSTRY (0.2%) Rental Services 2nd Lien Term Loan 11-27-13 8.85-8.87 860,000 866,665 - ------------------------------------------------------------------------------------------------- PAPER (1.1%) Georgia Pacific 2nd Lien Tranche C Term Loan 12-23-13 8.35 4,450,000 4,456,674 - ------------------------------------------------------------------------------------------------- RETAILERS (0.4%) Sally Holdings LLC Tranche B Term Loan 11-16-12 7.87 450,000 451,499
SENIOR LOANS (CONTINUED)
BORROWER COUPON PRINCIPAL VALUE(a) RATE AMOUNT RETAILERS (CONT.) Toys "R" Us Tranche B Term Loan 07-19-12 9.63% $ 1,000,000 $ 1,028,330 --------------- Total 1,479,829 - ------------------------------------------------------------------------------------------------- TECHNOLOGY (0.4%) West Corp Tranche B Term Loan 10-24-13 8.11 1,820,000(b) 1,820,855 - ------------------------------------------------------------------------------------------------- TOTAL SENIOR LOANS (Cost: $20,877,397) $ 20,920,350 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (6.5%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 26,802,813(h) $ 26,802,813 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $26,802,813) $ 26,802,813 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $405,562,010)(i) $ 411,342,871 ================================================================================================= NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $3,905,775. (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 Dec. 31, 2006, the value of foreign securities represented 7.9% 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 Dec. 31, 2006, the value of these securities amounted to $92,927,746 or 22.7% of net assets. (e) 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. (f) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (g) Senior loans have rates of interest that float periodically based primarily on the London Interbank Offered Rate ("LIBOR") and other short-term rates. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty. (h) Affiliated Money Market Fund -- See Note 10 to the financial statements. (i) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $405,667,157 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 6,314,239 Unrealized depreciation (638,525) --------------------------------------------------------------------- Net unrealized appreciation $ 5,675,714 --------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com.
- ------------------------------------------------------------------------------ 204 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - International Opportunity Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (99.0%)(C)
ISSUER SHARES VALUE(a) AUSTRALIA (2.4%) CAPITAL MARKETS (0.6%) Macquarie Bank 116,841 $ 7,279,132 - ------------------------------------------------------------------------------------------------- INSURANCE (0.4%) QBE Insurance Group 208,979 4,758,726 - ------------------------------------------------------------------------------------------------- METALS & MINING (1.4%) BHP Billiton 400,393 7,995,566 Newcrest Mining 229,418 4,771,450 Rio Tinto 119,508(e) 7,008,548 --------------- Total 19,775,564 - ------------------------------------------------------------------------------------------------- AUSTRIA (0.7%) COMMERCIAL BANKS Erste Bank der Oesterreichischen Sparkassen 122,604 9,387,112 - ------------------------------------------------------------------------------------------------- BELGIUM (1.6%) BEVERAGES (0.9%) InBev 183,904 12,123,095 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.7%) Colruyt 40,717 8,696,171 - ------------------------------------------------------------------------------------------------- BRAZIL (0.7%) AIRLINES (0.3%) GOL Linhas Aereas Inteligentes ADR 142,261 4,078,623 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.4%) Companhia Vale do Rio Doce ADR 164,003 4,877,449 - ------------------------------------------------------------------------------------------------- CANADA (1.1%) OIL, GAS & CONSUMABLE FUELS (0.7%) Canadian Natural Resources 70,000 3,731,132 Petro-Canada 110,000 4,504,717 --------------- Total 8,235,849 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (0.4%) Canadian Pacific Railway 110,000 5,792,453 - ------------------------------------------------------------------------------------------------- CHILE (0.6%) COMMERCIAL BANKS Banco Santander Chile ADR 155,495 7,488,639 - ------------------------------------------------------------------------------------------------- CHINA (0.6%) COMMERCIAL BANKS China Merchants Bank Series H 3,678,500(b) 7,794,194 - ------------------------------------------------------------------------------------------------- FINLAND (0.5%) OIL, GAS & CONSUMABLE FUELS Neste Oil 200,855 6,105,910 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) FRANCE (10.6%) COMMERCIAL BANKS (1.5%) BNP Paribas 84,759 $ 9,247,034 Societe Generale 64,420 10,935,421 --------------- Total 20,182,455 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.7%) VINCI 68,188 8,712,787 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.4%) Imerys 62,740 5,581,851 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.1%) ALSTOM 48,994(b) 6,641,820 Schneider Electric 70,202 7,793,262 --------------- Total 14,435,082 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.3%) Carrefour 62,345 3,780,649 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.8%) Essilor Intl 102,634 11,034,588 - ------------------------------------------------------------------------------------------------- INSURANCE (2.8%) Assurances Generales de France 81,413 12,691,631 AXA 459,311 18,594,924 Euler Hermes 28,994 4,194,619 --------------- Total 35,481,174 - ------------------------------------------------------------------------------------------------- MACHINERY (0.4%) Vallourec 18,555 5,395,718 - ------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.6%) Neopost 61,275 7,696,015 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.5%) Total 272,114 19,629,753 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.5%) LVMH Moet Hennessy Louis Vuitton 67,879 7,163,540 - ------------------------------------------------------------------------------------------------- GERMANY (6.1%) AEROSPACE & DEFENSE (0.5%) MTU Aero Engines Holding 130,109 6,090,036 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.6%) Deutsche Postbank 97,042 8,194,263 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.7%) Wincor Nixdorf 57,693 8,975,597 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.3%) E.ON 27,740 3,765,304 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.6%) Fresenius Medical Care & Co 62,554 8,337,219 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) GERMANY (CONT.) INSURANCE (1.8%) Allianz 119,307 $ 24,372,408 - ------------------------------------------------------------------------------------------------- MACHINERY (0.7%) MAN 95,658 8,644,343 - ------------------------------------------------------------------------------------------------- SOFTWARE (0.3%) SAP 68,836 3,658,164 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.6%) Hypo Real Estate Holding 116,597 7,347,567 - ------------------------------------------------------------------------------------------------- GREECE (0.9%) COMMERCIAL BANKS EFG Eurobank Ergasias 332,519 12,044,100 - ------------------------------------------------------------------------------------------------- HONG KONG (2.3%) COMMERCIAL BANKS (0.2%) Bank of East Asia 430,000 2,435,329 - ------------------------------------------------------------------------------------------------- DISTRIBUTORS (0.6%) Li & Fung 2,404,000 7,479,853 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.9%) Cheung Kong Holdings 386,000 4,751,922 China Overseas Land & Investment 5,804,000 7,790,604 --------------- Total 12,542,526 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.6%) Esprit Holdings 741,500 8,279,883 - ------------------------------------------------------------------------------------------------- HUNGARY (0.2%) PHARMACEUTICALS Richter Gedeon ADR 13,808(d,g) 3,146,252 - ------------------------------------------------------------------------------------------------- INDONESIA (0.4%) DIVERSIFIED TELECOMMUNICATION SERVICES Telekomunikasi Indonesia 4,667,000 5,264,513 - ------------------------------------------------------------------------------------------------- IRELAND (1.4%) COMMERCIAL BANKS (0.7%) Bank of Ireland 398,789 9,212,023 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.7%) CRH 219,244 9,127,739 - ------------------------------------------------------------------------------------------------- ITALY (4.1%) COMMERCIAL BANKS (1.1%) UniCredito Italiano 1,587,411 13,913,335 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.1%) Saipem 558,167 14,544,041 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.6%) Parmalat 1,976,367(b) 8,504,700 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (1.3%) Eni 489,612 16,467,409 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 205 RiverSource VP - International Opportunity Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) JAPAN (21.9%) AUTO COMPONENTS (0.3%) Keihin 166,000 $ 4,177,899 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (2.3%) Honda Motor 245,100 9,680,420 Toyota Motor 297,500 19,900,000 --------------- Total 29,580,420 - ------------------------------------------------------------------------------------------------- BEVERAGES (0.2%) Asahi Breweries 203,600 3,259,311 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.8%) Asahi Glass 837,000 10,058,067 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.3%) Nikko Cordial 639,000 7,329,706 Nomura Holdings 380,800 7,184,000 Tokai Tokyo Securities 467,000 2,201,571 --------------- Total 16,715,277 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.7%) Showa Denko 2,195,000 8,411,092 Sumitomo Chemical 1,200,000 9,307,563 UBE Inds 1,515,000 4,354,034 --------------- Total 22,072,689 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (3.0%) Bank of Yokohama 583,000 4,566,017 Mitsubishi UFJ Financial Group 1,397 17,257,059 Mitsui Trust Holdings 647,000 7,426,908 Mizuho Financial Group 1,602 11,442,857 --------------- Total 40,692,841 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.2%) Okumura 630,000 3,118,235 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.1%) Japan Cash Machine 97,500(e) 1,039,727 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.9%) Arisawa Mfg 218,800 2,476,669 Murata Mfg 59,100 3,997,941 Yokogawa Electric 316,100 5,012,443 --------------- Total 11,487,053 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.9%) Daito Trust Construction 87,700 4,023,882 Haseko 1,191,000(b) 4,263,580 Misawa Homes Holdings 151,400(b) 3,734,109 Sekisui Chemical 854,000 6,810,472 Sharp 380,000 6,546,218 --------------- Total 25,378,261 - ------------------------------------------------------------------------------------------------- INSURANCE (0.5%) Millea Holdings 64,900 2,290,588 T&D Holdings 62,200 4,113,563 --------------- Total 6,404,151 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.2%) eAccess 5,573(e) 3,147,106 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) JAPAN (CONT.) MACHINERY (1.2%) AMADA 643,000 $ 6,813,639 SMC 59,700 8,468,369 --------------- Total 15,282,008 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.9%) Mitsui Mining & Smelting 1,721,000 8,619,462 Pacific Metals 340,000 3,334,286 --------------- Total 11,953,748 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.5%) Mitsukoshi 611,000 2,859,891 Ryohin Keikaku 51,600 3,950,218 --------------- Total 6,810,109 - ------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS (1.6%) Canon 234,950 13,228,277 Ricoh 385,000 7,861,765 --------------- Total 21,090,042 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (0.5%) Nippon Mining Holdings 954,500 6,865,983 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.3%) Shionogi & Co 257,000 5,053,613 Takeda Pharmaceutical 178,900 12,282,463 --------------- Total 17,336,076 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (1.0%) Mitsui Fudosan 178,000 4,345,294 Sumitomo Real Estate Sales 51,170 3,891,500 TOC 846,250 4,266,807 --------------- Total 12,503,601 - ------------------------------------------------------------------------------------------------- SOFTWARE (0.7%) Nintendo 34,600 8,984,370 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.3%) Komeri 113,800 3,327,933 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.2%) ONWARD Kashiyama 234,000 2,986,941 - ------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.3%) Mitsubishi Logistics 228,000 3,538,790 - ------------------------------------------------------------------------------------------------- MEXICO (0.5%) MEDIA Grupo Televisa ADR 241,290 6,517,242 - ------------------------------------------------------------------------------------------------- NETHERLANDS (0.9%) DIVERSIFIED FINANCIAL SERVICES (0.2%) ING Groep 73,706 3,268,035 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.7%) Royal Numico 159,863 8,599,028 - ------------------------------------------------------------------------------------------------- RUSSIA (0.6%) OIL, GAS & CONSUMABLE FUELS Gazprom ADR 161,379 7,423,434 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SINGAPORE (1.4%) COMMERCIAL BANKS (0.5%) DBS Group Holdings 422,000 $ 6,221,671 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.5%) Keppel 611,000 7,015,200 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.4%) City Developments 659,200 5,461,439 - ------------------------------------------------------------------------------------------------- SOUTH AFRICA (0.8%) MEDIA (0.4%) Naspers Series N 217,771 5,167,015 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.4%) Impala Platinum Holdings 207,864 5,466,743 - ------------------------------------------------------------------------------------------------- SOUTH KOREA (1.0%) COMMERCIAL BANKS (0.6%) Shinhan Financial Group 154,140 7,876,977 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.4%) Samsung Electronics 6,989 4,587,310 - ------------------------------------------------------------------------------------------------- SPAIN (2.5%) COMMERCIAL BANKS (1.6%) Banco Bilbao Vizcaya Argentaria 847,838 20,413,220 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.9%) Inditex 222,228 11,971,241 - ------------------------------------------------------------------------------------------------- SWEDEN (2.3%) BUILDING PRODUCTS (0.9%) ASSA ABLOY Cl B 526,200 11,451,494 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (0.6%) Skandinaviska Enskilda Banken 257,400 8,176,978 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.8%) Telefonaktiebolaget LM Ericsson Series B 2,444,000 9,870,096 - ------------------------------------------------------------------------------------------------- SWITZERLAND (8.9%) CAPITAL MARKETS (2.9%) Credit Suisse Group 209,222 14,637,813 UBS 375,076 22,793,910 --------------- Total 37,431,723 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.2%) Lonza Group 73,789 6,376,678 Syngenta 52,118(b) 9,696,471 --------------- Total 16,073,149 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.0%) Nestle 36,266 12,887,302 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.6%) Nobel Biocare Holding 27,326 8,078,943 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.5%) Xstrata 139,937 6,987,273 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 206 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - International Opportunity Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SWITZERLAND (CONT.) PHARMACEUTICALS (2.7%) Novartis 270,433 $ 15,591,234 Roche Holding 106,943 19,176,894 --------------- Total 34,768,128 - ------------------------------------------------------------------------------------------------- TAIWAN (0.5%) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Taiwan Semiconductor Mfg 2,877,877 5,961,538 - ------------------------------------------------------------------------------------------------- UNITED KINGDOM (23.6%) AEROSPACE & DEFENSE (1.3%) BAE Systems 516,124 4,302,726 Rolls-Royce Group 1,382,776(b) 12,123,344 Rolls-Royce Group Series B 50,747,879 99,369 --------------- Total 16,525,439 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.2%) Barclays 503,501 7,197,111 Standard Chartered 766,384 22,389,802 --------------- Total 29,586,913 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (1.0%) Hanson 839,567 12,666,685 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (3.2%) Tesco 3,337,265 26,432,864 Wm Morrison Supermarkets 3,315,840 16,524,044 --------------- Total 42,956,908 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.6%) Drax Group 465,274 7,434,195 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) INSURANCE (1.8%) Admiral Group 471,321 $ 10,142,604 Hiscox 1,147,922 6,299,310 Resolution 650,388 8,169,664 --------------- Total 24,611,578 - ------------------------------------------------------------------------------------------------- MEDIA (0.5%) Yell Group 580,001 6,473,492 - ------------------------------------------------------------------------------------------------- METALS & MINING (2.1%) Anglo American 421,383 20,553,498 Corus Group 743,976 7,728,217 --------------- Total 28,281,715 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.8%) Marks & Spencer Group 773,252 10,856,134 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.3%) BG Group 1,636,210 22,202,776 BP 2,026,268 22,516,338 --------------- Total 44,719,114 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.8%) AstraZeneca 113,746 6,111,604 GlaxoSmithKline 235,668 6,202,044 Shire 516,275 10,705,626 --------------- Total 23,019,274 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.5%) British Land 186,349 6,254,216 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.4%) Carphone Warehouse Group 1,668,092 10,256,157 Signet Group 3,374,494 7,830,004 --------------- Total 18,086,161 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) UNITED KINGDOM (CONT.) TOBACCO (0.6%) British American Tobacco 259,567 $ 7,263,011 - ------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.0%) SIG 304,052 6,132,253 Wolseley 285,249 6,886,875 --------------- Total 13,019,128 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.5%) Vodafone Group 6,861,353 19,010,835 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,008,434,926) $ 1,298,083,748 - -------------------------------------------------------------------------------------------------
OTHER (--%)(c)
ISSUER SHARES VALUE(a) HONG KONG China Overseas Land & Investment Warrants 797,250(b,g) $ 615,020 - ------------------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $ 615,020 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (1.9%)(f)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 24,975,398(h) $ 24,975,398 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $24,975,398) $ 24,975,398 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,033,410,324)(i) $ 1,323,674,166 ================================================================================================= See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 207 RiverSource VP - International Opportunity 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. (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 Dec. 31, 2006, the value of these securities amounted to $3,146,252 or 0.2% of net assets. (e) At Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.7% of net assets. See Note 6 to the financial statements. 1.2% of net assets is the Fund's cash equivalent position. (g) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
SECURITY ACQUISITION COST DATES ------------------------------------------------------------------------- China Overseas Land & Investment Warrants 06-29-06 $ -- Richter Gedeon ADR* 04-20-06 2,948,050 * Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. (h) Affiliated Money Market Fund -- See Note 10 to the financial statements. (i) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $1,036,940,931 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 299,467,742 Unrealized depreciation (12,734,507) -------------------------------------------------------------------------- Net unrealized appreciation $ 286,733,235 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 208 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Large Cap Equity Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (94.8%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (3.3%) Boeing 438,728 $ 38,976,596 DRS Technologies 27,816 1,465,347 General Dynamics 49,994 3,717,054 Goodrich 190,804 8,691,122 Honeywell Intl 697,576 31,558,338 L-3 Communications Holdings 67,309 5,504,530 Lockheed Martin 132,323 12,182,979 Northrop Grumman 126,362 8,554,707 United Technologies 183,565 11,476,484 --------------- Total 122,127,157 - ------------------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.1%) United Parcel Service Cl B 30,115 2,258,023 - ------------------------------------------------------------------------------------------------- AIRLINES (--%) UAL 28,051(b) 1,234,244 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (0.1%) Goodyear Tire & Rubber 16,615(b) 348,749 Johnson Controls 18,326 1,574,570 --------------- Total 1,923,319 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (0.1%) Ford Motor 176,262 1,323,728 General Motors 53,001 1,628,190 --------------- Total 2,951,918 - ------------------------------------------------------------------------------------------------- BEVERAGES (1.7%) Anheuser-Busch Companies 161,057 7,924,004 Brown-Forman Cl B 7,359 487,460 Coca-Cola 386,801(g) 18,663,149 Coca-Cola Enterprises 25,826 527,367 Constellation Brands Cl A 19,761(b) 573,464 Molson Coors Brewing Cl B 4,278 327,010 Pepsi Bottling Group 12,729 393,453 PepsiCo 550,366 34,425,394 --------------- Total 63,321,301 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.2%) Amgen 482,577(b) 32,964,835 Biogen Idec 261,593(b) 12,867,760 Genentech 413,446(b) 33,542,874 Gilead Sciences 18,088(b) 1,174,454 MedImmune 28,658(b) 927,659 --------------- Total 81,477,582 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.1%) American Standard Companies 30,239 1,386,458 Masco 118,312 3,533,980 --------------- Total 4,920,438 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CAPITAL MARKETS (3.0%) Bank of New York 142,195 $ 5,598,217 Bear Stearns Companies 11,280 1,836,158 Charles Schwab 75,388 1,458,004 Franklin Resources 92,974 10,242,946 Goldman Sachs Group 40,453 8,064,306 KKR Private Equity Investors LP Unit 278,740 6,369,209 KKR Private Equity Investors LP Unit 340,799(i) 7,787,257 Legg Mason 12,395 1,178,145 Lehman Brothers Holdings 230,856 18,034,471 Merrill Lynch & Co 222,773 20,740,165 Morgan Stanley 265,185(g) 21,594,014 Nuveen Investments Cl A 5,520 286,378 State Street 132,233 8,917,794 --------------- Total 112,107,064 - ------------------------------------------------------------------------------------------------- CHEMICALS (0.9%) Air Products & Chemicals 20,647 1,451,071 Ashland 34,318 2,374,119 Dow Chemical 281,915 11,259,686 Eastman Chemical 56,285 3,338,263 Ecolab 16,741 756,693 EI du Pont de Nemours & Co 145,750 7,099,484 Hercules 10,620(b) 205,072 Intl Flavors & Fragrances 7,392 363,391 Monsanto 50,864 2,671,886 PPG Inds 15,478 993,842 Praxair 30,207 1,792,181 Rohm & Haas 13,452 687,666 RPM Intl 72,909 1,523,069 Sigma-Aldrich 6,220 483,418 --------------- Total 34,999,841 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.4%) BB&T 50,324 2,210,733 Comerica 15,200 891,936 Commerce Bancorp 54,042(e) 1,906,061 Compass Bancshares 12,125 723,256 Fifth Third Bancorp 52,278 2,139,739 First Horizon Natl 11,615 485,275 Huntington Bancshares 22,258 528,628 Industrial & Commercial Bank of China Series H 1,327,000(b,c) 824,065 M&T Bank 7,281 889,447 Natl City 56,679 2,072,184 PNC Financial Services Group 106,074 7,853,719 Regions Financial 68,192 2,550,381 SunTrust Banks 34,185 2,886,923 US Bancorp 432,591 15,655,468 Wachovia 372,454 21,211,255 Wells Fargo & Co 775,997 27,594,454 Zions Bancorporation 9,996 824,070 --------------- Total 91,247,594 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMERCIAL SERVICES & SUPPLIES (0.2%) Allied Waste Inds 23,767(b) $ 292,096 Avery Dennison 32,809 2,228,716 Cintas 12,797 508,169 Equifax 3,132 127,159 Robert Half Intl 16,053 595,887 Waste Management 50,648 1,862,327 --------------- Total 5,614,354 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (3.8%) ADC Telecommunications 61,775(b) 897,591 ADTRAN 107,338 2,436,573 Alcatel-Lucent 22,653(c) 325,931 Alcatel-Lucent ADR 1,015,745(c) 14,443,894 Cisco Systems 2,635,949(b) 72,040,486 Corning 113,045(b) 2,115,072 JDS Uniphase 93,685(b) 1,560,792 Juniper Networks 47,410(b) 897,945 Motorola 607,286 12,485,800 QUALCOMM 535,962 20,254,004 Redback Networks 277,486(b) 6,920,501 Tellabs 617,516(b) 6,335,714 --------------- Total 140,714,303 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (2.7%) Apple Computer 244,072(b) 20,707,068 Dell 187,670(b) 4,708,640 EMC 399,197(b) 5,269,400 Hewlett-Packard 913,792 37,639,093 Intl Business Machines 308,992 30,018,573 SanDisk 16,850(b) 725,056 --------------- Total 99,067,830 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (--%) Vulcan Materials 9,042 812,605 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (0.8%) American Express 198,539 12,045,361 Capital One Financial 190,454 14,630,676 SLM 38,423 1,873,890 --------------- Total 28,549,927 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.1%) Ball 9,765 425,754 Bemis 9,824 333,820 Pactiv 12,930(b) 461,472 Sealed Air 7,597 493,197 Temple-Inland 66,822 3,075,816 --------------- Total 4,790,059 - ------------------------------------------------------------------------------------------------- DISTRIBUTORS (--%) Genuine Parts 16,053 761,394 - ------------------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (--%) Apollo Group Cl A 13,114(b) 511,053 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 209 RiverSource VP - Large Cap Equity Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) DIVERSIFIED FINANCIAL SERVICES (5.0%) Bank of America 1,278,335 $ 68,250,306 Chicago Mercantile Exchange Holdings 3,333 1,698,997 CIT Group 18,632 1,039,107 Citigroup 1,265,380 70,481,665 Consumer Discretionary Select Sector SPDR Fund 28,623 1,099,696 Financial Select Sector SPDR Fund 93,318(e) 3,428,503 iShares Dow Jones US Healthcare Sector Index Fund 1 66 JPMorgan Chase & Co 783,020 37,819,866 Materials Select Sector SPDR Trust 25,919 904,055 Moody's 22,189 1,532,372 --------------- Total 186,254,633 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (4.2%) AT&T 521,090 18,628,968 BellSouth 1,181,305 55,651,278 Chunghwa Telecom ADR 169,813(c) 3,350,410 Citizens Communications 103,327 1,484,809 Embarq 379,892 19,967,124 France Telecom 195,042(c) 5,393,690 Qwest Communications Intl 1,273,316(b) 10,657,655 Verizon Communications 822,865 30,643,492 Windstream 717,441 10,202,011 --------------- Total 155,979,437 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.4%) Allegheny Energy 15,423(b) 708,070 American Electric Power 36,918 1,571,968 Edison Intl 30,531 1,388,550 Entergy 114,179 10,541,005 Exelon 239,409 14,817,024 FirstEnergy 30,908 1,863,752 FPL Group 75,358 4,100,982 Pinnacle West Capital 9,322 472,532 PPL 124,185 4,450,790 Progress Energy 23,740 1,165,159 Southern 291,816 10,756,339 --------------- Total 51,836,171 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.1%) Cooper Inds Cl A 8,330 753,282 Emerson Electric 72,138 3,180,564 Rockwell Automation 15,637 955,108 --------------- Total 4,888,954 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Flextronics Intl 169,264(b,c) 1,943,151 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (0.6%) Baker Hughes 65,104 4,860,665 BJ Services 125,309 3,674,060 Cameron Intl 48,185(b) 2,556,214 Halliburton 76,930 2,388,677 Natl Oilwell Varco 38,360(b) 2,346,865
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) ENERGY EQUIPMENT & SERVICES (CONT.) Pride Intl 27,379(b) $ 821,370 Transocean 16,832(b) 1,361,540 Weatherford Intl 117,762(b) 4,921,274 --------------- Total 22,930,665 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.2%) Costco Wholesale 60,710 3,209,738 CVS 309,969 9,581,142 Rite Aid 93,112(b) 506,529 Safeway 412,564 14,258,212 SYSCO 57,960 2,130,610 Wal-Mart Stores 317,897 14,680,483 Whole Foods Market 13,230 620,884 --------------- Total 44,987,598 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.0%) Archer-Daniels-Midland 61,445 1,963,782 Cadbury Schweppes 132,832(c) 1,421,438 Campbell Soup 84,791 3,297,522 ConAgra Foods 47,869 1,292,463 Dean Foods 12,508(b) 528,838 General Mills 123,768 7,129,037 Hershey 40,933 2,038,463 HJ Heinz 31,062 1,398,101 Kellogg 270,458 13,539,128 Kraft Foods Cl A 40,376 1,441,423 McCormick & Co 12,354 476,370 Sara Lee 71,229 1,213,030 Tyson Foods Cl A 23,610 388,385 WM Wrigley Jr 20,545 1,062,587 --------------- Total 37,190,567 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.1%) Nicor 4,173 195,296 ONEOK 84,034 3,623,546 Peoples Energy 3,605 160,675 Questar 8,031 666,975 --------------- Total 4,646,492 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.8%) Bausch & Lomb 26,151 1,361,421 Baxter Intl 39,751 1,844,049 Biomet 29,680 1,224,894 Boston Scientific 1,956,222(b) 33,607,893 Medtronic 322,307 17,246,648 St. Jude Medical 85,910(b) 3,140,870 Stryker 74,572 4,109,663 Zimmer Holdings 77,888(b) 6,104,861 --------------- Total 68,640,299 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.4%) Aetna 168,995 7,297,204 Cardinal Health 387,333 24,955,864 Caremark Rx 190,039 10,853,127 CIGNA 30,176 3,970,256 Coventry Health Care 14,890(b) 745,245 Express Scripts 12,908(b) 924,213 Health Management Associates Cl A 22,516 475,313 HealthSouth 99,704(b) 2,258,296 Humana 71,320(b) 3,944,709
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (CONT.) Laboratory Corp of America Holdings 11,732(b) $ 861,950 Manor Care 6,903 323,889 McKesson 141,927 7,195,699 Patterson Companies 13,021(b) 462,376 Quest Diagnostics 15,148 802,844 Tenet Healthcare 44,165(b) 307,830 UnitedHealth Group 450,386 24,199,240 --------------- Total 89,578,055 - ------------------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (--%) IMS Health 18,882 518,877 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (0.9%) Applebee's Intl 163,032 4,021,999 Carnival Unit 53,011 2,600,190 Chipotle Mexican Grill Cl A 2,324(b) 132,468 Chipotle Mexican Grill Cl B 9,158(b) 476,216 Harrah's Entertainment 98,446 8,143,452 Intl Game Technology 14,993 692,677 Marriott Intl Cl A 184,094 8,784,965 McDonald's 136,592 6,055,123 Orient-Express Hotels Series A 18,280(c) 865,010 Pinnacle Entertainment 25,783(b) 854,449 Starbucks 31,914(b) 1,130,394 Yum! Brands 7,912 465,226 --------------- Total 34,222,169 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.3%) Centex 11,107 624,991 DR Horton 138,813 3,677,156 Fortune Brands 14,134 1,206,902 Harman Intl Inds 6,107 610,150 Hovnanian Enterprises Cl A 60,143(b) 2,038,848 KB HOME 7,359 377,370 Leggett & Platt 16,929 404,603 Lennar Cl A 12,970 680,406 Newell Rubbermaid 25,947 751,166 Pulte Homes 19,835 656,935 Snap-On 5,440 259,162 Standard-Pacific 23,875 639,611 Stanley Works 7,583 381,349 Whirlpool 7,330 608,537 --------------- Total 12,917,186 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (2.5%) Clorox 14,164 908,621 Colgate-Palmolive 368,433 24,036,569 Kimberly-Clark 42,937 2,917,569 Procter & Gamble 784,570 50,424,314 Spectrum Brands 1,233,870(b,e) 13,449,183 --------------- Total 91,736,256 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.1%) AES 61,980(b) 1,366,039 Constellation Energy Group 16,835 1,159,426 Dynegy Cl A 36,007(b) 260,691 TXU 43,234 2,343,715 --------------- Total 5,129,871 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 210 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Large Cap Equity Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) INDUSTRIAL CONGLOMERATES (2.8%) 3M 109,340 $ 8,520,866 General Electric 2,424,688 90,222,640 Tyco Intl 219,649(c) 6,677,330 --------------- Total 105,420,836 - ------------------------------------------------------------------------------------------------- INSURANCE (4.9%) ACE 405,449(c) 24,558,045 AFLAC 244,999 11,269,954 Allied World Assurance Holdings 48,866(c) 2,132,024 American Intl Group 1,088,219 77,981,773 Aon 158,017 5,584,321 Arch Capital Group 47,450(b,c) 3,208,095 Aspen Insurance Holdings 147,000(c) 3,874,920 Chubb 68,433 3,620,790 Endurance Specialty Holdings 59,165(c) 2,164,256 Hartford Financial Services Group 201,476 18,799,726 Max Re Capital 212,076(c) 5,263,726 Prudential Financial 236,506 20,306,405 XL Capital Cl A 37,998(c) 2,736,616 --------------- Total 181,500,651 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.1%) Amazon.com 29,641(b) 1,169,634 IAC/InterActiveCorp 20,898(b) 776,570 Liberty Media - Interactive Cl A 159,434(b,d) 3,438,991 --------------- Total 5,385,195 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.9%) Baidu.com ADR 14,208(b,c) 1,601,526 eBay 155,635(b) 4,679,944 Google Cl A 122,573(b) 56,442,415 VeriSign 82,590(b) 1,986,290 Yahoo! 198,444(b) 5,068,260 --------------- Total 69,778,435 - ------------------------------------------------------------------------------------------------- IT SERVICES (1.5%) Accenture Cl A 886(c) 32,720 Affiliated Computer Services Cl A 100,068(b) 4,887,321 Automatic Data Processing 169,327 8,339,355 BearingPoint 122,907(b) 967,278 Cognizant Technology Solutions Cl A 13,203(b) 1,018,743 Electronic Data Systems 547,384 15,080,429 Fidelity Natl Information Services 15,246 611,212 First Data 777,481 19,841,315 Ness Technologies 52,965(b,c) 755,281 Paychex 32,992 1,304,504 Satyam Computer Services ADR 32,007(c) 768,488 Unisys 32,678(b) 256,196 Western Union 36,630 821,245 --------------- Total 54,684,087 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) LEISURE EQUIPMENT & PRODUCTS (0.1%) Eastman Kodak 26,917 $ 694,459 Mattel 67,513 1,529,844 --------------- Total 2,224,303 - ------------------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.1%) PerkinElmer 119,872 2,664,754 Thermo Fisher Scientific 47,009(b) 2,129,038 --------------- Total 4,793,792 - ------------------------------------------------------------------------------------------------- MACHINERY (0.9%) Caterpillar 161,776 9,921,722 Danaher 22,141 1,603,894 Deere & Co 75,282 7,157,060 Dover 19,253 943,782 Flowserve 89,215(b) 4,502,681 Illinois Tool Works 29,009 1,339,926 Ingersoll-Rand Cl A 33,512(c) 1,311,325 ITT 34,582 1,964,949 Navistar Intl 5,968(b) 199,510 Parker Hannifin 66,292 5,096,529 --------------- Total 34,041,378 - ------------------------------------------------------------------------------------------------- MEDIA (8.1%) Cablevision Systems Cl A 45,383 1,292,508 CBS Cl B 369 11,505 Charter Communications Cl A 1,226,470(b) 3,752,998 Clear Channel Communications 41,865 1,487,882 Comcast Cl A 477,850(b) 20,227,391 Comcast Special Cl A 290,870(b) 12,181,636 EchoStar Communications Cl A 78,927(b) 3,001,594 Grupo Televisa ADR 42,788(c) 1,155,704 Idearc 37,834(b) 1,083,944 Liberty Global Cl A 582,687(b) 16,985,326 Liberty Global Series C 272,643(b) 7,634,004 Liberty Media - Capital Series A 31,885(b,d) 3,124,092 News Corp Cl A 1,842,763 39,582,549 NTL 4,550,305(h) 114,849,697 Time Warner 887,333 19,326,113 Viacom Cl B 393,735(b) 16,154,947 Vivendi 609,178(c) 23,809,836 Walt Disney 240,841 8,253,621 WorldSpace Cl A 147,719(b,e) 517,017 XM Satellite Radio Holdings Cl A 612,133(b) 8,845,322 --------------- Total 303,277,686 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.7%) Alcan 20,256(c) 987,277 Alcoa 184,671 5,541,977 Allegheny Technologies 9,426 854,750 Coeur d'Alene Mines 1,450,259(b) 7,178,782 Freeport-McMoRan Copper & Gold Cl B 18,410 1,025,989 Newmont Mining 151,659 6,847,404
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) METALS & MINING (CONT.) Nucor 28,891 $ 1,579,182 Phelps Dodge 19,114 2,288,328 --------------- Total 26,303,689 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.9%) Dollar General 29,186 468,727 Family Dollar Stores 70,028 2,053,921 Federated Department Stores 96,700 3,687,171 JC Penney 106,898 8,269,629 Target 339,953 19,394,319 --------------- Total 33,873,767 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (0.8%) Ameren 19,291 1,036,505 CenterPoint Energy 29,215 484,385 CMS Energy 20,764(b) 346,759 Consolidated Edison 23,095 1,110,177 Dominion Resources 148,877 12,481,849 DTE Energy 16,657 806,365 Duke Energy 117,415 3,899,352 KeySpan 16,401 675,393 NiSource 25,563 616,068 PG&E 32,616 1,543,715 Public Service Enterprise Group 23,588 1,565,771 Sempra Energy 24,477 1,371,691 TECO Energy 19,575 337,277 Xcel Energy 168,663 3,889,369 --------------- Total 30,164,676 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (7.4%) Anadarko Petroleum 76,122 3,312,829 BP ADR 53,921(c) 3,618,099 Chesapeake Energy 105,678 3,069,946 Chevron 650,983 47,866,779 ConocoPhillips 553,128 39,797,560 CONSOL Energy 17,743 570,083 Devon Energy 54,281 3,641,169 El Paso 61,292 936,542 Exxon Mobil 1,790,980 137,242,796 Kinder Morgan 9,964 1,053,693 Newfield Exploration 20,848(b) 957,966 Occidental Petroleum 120,968 5,906,867 Peabody Energy 24,770 1,000,956 Royal Dutch Shell ADR 28,389(c) 2,009,657 Ship Finance Intl 25,926(c) 616,002 Sunoco 18,682 1,165,010 Total 213,033(c) 15,367,770 Valero Energy 81,944 4,192,255 Williams Companies 54,575 1,425,499 XTO Energy 59,560 2,802,298 --------------- Total 276,553,776 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.4%) Bowater 131,398 2,956,455 Intl Paper 160,558 5,475,028 MeadWestvaco 16,977 510,329 Weyerhaeuser 104,989 7,417,472 --------------- Total 16,359,284 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 211 RiverSource VP - Large Cap Equity Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) PERSONAL PRODUCTS (0.1%) Avon Products 41,950 $ 1,386,028 Estee Lauder Companies Cl A 12,106 494,167 --------------- Total 1,880,195 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (6.3%) AstraZeneca 422,618(c) 22,707,383 Bristol-Myers Squibb 1,014,068 26,690,270 Eli Lilly & Co 264,378 13,774,094 GlaxoSmithKline ADR 41,788(c) 2,204,735 Johnson & Johnson 365,252 24,113,937 Merck & Co 1,069,847 46,645,329 Novartis ADR 52,673(c) 3,025,537 Pfizer 2,682,052 69,465,148 Roche Holding 2,576(c) 461,925 Schering-Plough 631,084 14,918,826 Teva Pharmaceutical Inds ADR 152,480(c) 4,739,078 Watson Pharmaceuticals 126,567(b) 3,294,539 Wyeth 68,696 3,498,000 --------------- Total 235,538,801 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%) Apartment Investment & Management Cl A 53,411 2,992,084 Archstone-Smith Trust 20,076 1,168,624 Boston Properties 10,710 1,198,235 Equity Office Properties Trust 118,237 5,695,476 Equity Residential 27,264 1,383,648 HomeBanc 341,596 1,444,951 Kimco Realty 20,295 912,260 Plum Creek Timber 16,793 669,201 ProLogis 22,969 1,395,826 Public Storage 11,363 1,107,893 Vornado Realty Trust 12,074 1,466,991 --------------- Total 19,435,189 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (--%) CB Richard Ellis Group Cl A 17,185(b) 570,542 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (0.1%) Avis Budget Group 2,657 57,630 CSX 49,911 1,718,436 Norfolk Southern 38,424 1,932,343 --------------- Total 3,708,409 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.4%) Advanced Micro Devices 419,970(b) 8,546,390 Agere Systems 77,123(b) 1,478,448 ASML Holding 23,794(b,c) 586,046 Atmel 532,943(b) 3,224,305 Broadcom Cl A 52,240(b) 1,687,874 Credence Systems 85,442(b) 444,298 Cypress Semiconductor 200,751(b) 3,386,669 Infineon Technologies 247,320(b,c) 3,486,617 Infineon Technologies ADR 188,386(b,c) 2,643,056 Intel 754,477 15,278,160 LSI Logic 138,733(b) 1,248,597
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT.) Maxim Integrated Products 49,530 $ 1,516,609 NVIDIA 30,199(b) 1,117,665 Spansion Cl A 327,121(b) 4,861,018 Texas Instruments 106,901 3,078,749 Verigy 3,980(b,c) 70,645 --------------- Total 52,655,146 - ------------------------------------------------------------------------------------------------- SOFTWARE (3.1%) Adobe Systems 101,642(b) 4,179,519 Business Objects ADR 36,359(b,c) 1,434,363 Cadence Design Systems 313,069(b) 5,607,066 Citrix Systems 55,086(b) 1,490,076 Compuware 319,042(b) 2,657,620 Electronic Arts 48,765(b) 2,455,805 McAfee 106,090(b) 3,010,834 Microsoft 2,377,455 70,990,806 Oracle 287,035(b) 4,919,780 Symantec 713,816(b) 14,883,064 TIBCO Software 536,529(b) 5,064,834 --------------- Total 116,693,767 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.9%) AutoNation 14,370(b) 306,368 AutoZone 4,943(b) 571,213 Bed Bath & Beyond 49,615(b) 1,890,332 Best Buy 21,481 1,056,650 Circuit City Stores 93,290 1,770,644 Home Depot 263,764 10,592,763 Limited Brands 84,967 2,458,945 Lowe's Companies 185,098 5,765,803 Office Depot 26,545(b) 1,013,223 OfficeMax 6,953 345,216 RadioShack 12,717 213,391 Sherwin-Williams 10,559 671,341 Staples 68,077 1,817,656 Tiffany & Co 32,427 1,272,435 TJX Companies 155,117 4,423,937 --------------- Total 34,169,917 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.1%) Jones Apparel Group 10,572 353,422 Liz Claiborne 9,668 420,171 Nike Cl B 17,949 1,777,490 VF 8,315 682,495 --------------- Total 3,233,578 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.8%) Countrywide Financial 850,339 36,096,890 Fannie Mae 251,839 14,956,718 Freddie Mac 208,682 14,169,508 Washington Mutual 46,628 2,121,108 --------------- Total 67,344,224 - ------------------------------------------------------------------------------------------------- TOBACCO (2.0%) Altria Group 787,934 67,620,495 Imperial Tobacco Group ADR 61,587(c) 4,867,221 Reynolds American 16,063 1,051,645 UST 15,070 877,074 --------------- Total 74,416,435 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) WIRELESS TELECOMMUNICATION SERVICES (4.7%) ALLTEL 1,021,165 $ 61,760,059 Hutchison Telecommunications Intl 3,720,931(b,c) 9,376,719 Orascom Telecom Holding GDR 153,800(c) 10,150,800 Sprint Nextel 1,691,136 31,945,559 Vodafone Group 19,385,389(c) 53,711,336 Vodafone Group ADR 345,570(c,e) 9,599,935 --------------- Total 176,544,408 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $3,089,628,042) $ 3,543,342,553 - -------------------------------------------------------------------------------------------------
OPTIONS PURCHASED (0.1%)
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a) PRICE DATE CALLS NTL 11,450 $ 27.50 June 2007 $ 1,832,000 NTL 3,818 27.50 Jan. 2008 906,775 - ------------------------------------------------------------------------------------------------- PUTS S&P 500 Index 619 1,350.00 March 2007 646,855 - ------------------------------------------------------------------------------------------------- TOTAL OPTIONS PURCHASED (Cost: $4,829,096) $ 3,385,630 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (5.1%)(f,g)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 189,743,159(j) $ 189,743,159 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $189,743,159) $ 189,743,159 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $3,284,200,297)(k) $ 3,736,471,342 ================================================================================================= See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 212 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 Dec. 31, 2006, the value of foreign securities represented 7.0% 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 Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.3% of net assets. See Note 6 to the financial statements. 4.8% of net assets is the Fund's cash equivalent position. (g) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 7 to the financial statements):
TYPE OF SECURITY CONTRACTS ------------------------------------------------------------------------ PURCHASE CONTRACTS S&P 500 Index, March 2007 256 (h) At Dec. 31, 2006, securities valued at $38,536,432 were held to cover open call options written as follows (see Note 8 to the financial statements):
ISSUER CONTRACTS EXERCISE EXPIRATION VALUE(a) PRICE DATE ------------------------------------------------------------------------- NTL 11,450 $ 30 June 2007 $ 944,625 NTL 3,818 30 Jan. 2008 563,155 ------------------------------------------------------------------------- Total value $ 1,507,780 ------------------------------------------------------------------------- (i) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows:
SECURITY ACQUISITION COST DATES ------------------------------------------------------------------------- KKR Private Equity Investors LP Unit 05-01-06 thru 10-12-06 $ 8,008,611
(j) Affiliated Money Market Fund -- See Note 10 to the financial statements. (k) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $3,351,518,444 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $421,417,796 Unrealized depreciation (36,464,898) -------------------------------------------------------------------------- Net unrealized appreciation $384,952,898 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 213 INVESTMENTS IN SECURITIES RiverSource VP - Large Cap Value Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (93.3%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (3.9%) Boeing 1,416 $ 125,797 DRS Technologies 557 29,343 General Dynamics 1,012 75,242 Goodrich 2,274 103,581 Honeywell Intl 5,407 244,614 L-3 Communications Holdings 454 37,128 Lockheed Martin 1,414 130,187 Northrop Grumman 2,559 173,244 United Technologies 1,320 82,526 --------------- Total 1,001,662 - ------------------------------------------------------------------------------------------------- BEVERAGES (0.9%) Coca-Cola 1,570 75,753 PepsiCo 2,254 140,987 --------------- Total 216,740 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.2%) Amgen 314(b) 21,449 Biogen Idec 468(b) 23,021 --------------- Total 44,470 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.4%) American Standard Companies 554 25,401 Masco 2,396 71,568 --------------- Total 96,969 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (4.4%) Bank of New York 2,880 113,386 Franklin Resources 556 61,255 KKR Private Equity Investors LP Unit 1,135 25,935 Legg Mason 249 23,667 Lehman Brothers Holdings 3,650 285,137 Merrill Lynch & Co 2,865 266,732 Morgan Stanley 3,379 275,152 State Street 852 57,459 --------------- Total 1,108,723 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.4%) Ashland 586 40,539 Dow Chemical 3,928 156,885 Eastman Chemical 984 58,361 EI du Pont de Nemours & Co 1,218 59,329 RPM Intl 1,461 30,520 --------------- Total 345,634 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (3.5%) Commerce Bancorp 736 25,959 Industrial & Commercial Bank of China Series H 12,000(b,c) 7,452 PNC Financial Services Group 1,589 117,650 US Bancorp 5,457 197,489 Wachovia 3,960 225,522 Wells Fargo & Co 8,978 319,257 --------------- Total 893,329 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMERCIAL SERVICES & SUPPLIES (0.2%) Avery Dennison 664 $ 45,106 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.1%) Alcatel-Lucent 342(c) 4,921 Alcatel-Lucent ADR 3,955(c) 56,240 Cisco Systems 5,075(b) 138,699 Corning 515(b) 9,636 Motorola 2,916 59,953 --------------- Total 269,449 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (2.1%) Hewlett-Packard 6,311 259,950 Intl Business Machines 2,839 275,809 --------------- Total 535,759 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (1.4%) American Express 1,737 105,384 Capital One Financial 3,119 239,601 --------------- Total 344,985 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.2%) Temple-Inland 1,147 52,796 - ------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (8.5%) Bank of America 16,584 885,419 Citigroup 15,640 871,148 JPMorgan Chase & Co 8,925 431,078 --------------- Total 2,187,645 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (5.0%) AT&T 4,555 162,841 BellSouth 8,914 419,939 Chunghwa Telecom ADR 2,920(c) 57,612 Citizens Communications 2,092 30,062 Embarq 1,027 53,979 Verizon Communications 13,099 487,807 Windstream 3,961 56,325 --------------- Total 1,268,565 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (2.6%) Entergy 1,917 176,977 Exelon 3,590 222,186 FPL Group 759 41,305 PPL 1,792 64,225 Southern 4,529 166,939 --------------- Total 671,632 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.1%) Flextronics Intl 2,159(b,c) 24,785 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.1%) Baker Hughes 324 24,190 BJ Services 1,160 34,011 Cameron Intl 976(b) 51,777 Halliburton 1,561 48,469 Natl Oilwell Varco 385(b) 23,554
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) ENERGY EQUIPMENT & SERVICES (CONT.) Transocean 322(b) $ 26,047 Weatherford Intl 1,646(b) 68,786 --------------- Total 276,834 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.1%) CVS 2,528 78,140 Safeway 1,152 39,813 Wal-Mart Stores 3,292 152,025 --------------- Total 269,978 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.1%) Cadbury Schweppes 2,530(c) 27,074 Campbell Soup 1,232 47,912 General Mills 853 49,133 Hershey 449 22,360 Kellogg 1,996 99,920 Kraft Foods Cl A 809 28,881 --------------- Total 275,280 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.3%) ONEOK 1,702 73,390 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.7%) Bausch & Lomb 479 24,937 Baxter Intl 761 35,303 Boston Scientific 6,144(b) 105,553 --------------- Total 165,793 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (1.3%) Aetna 2,398 103,546 Cardinal Health 1,740 112,107 CIGNA 422 55,523 McKesson 494 25,046 UnitedHealth Group 853 45,832 --------------- Total 342,054 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.0%) Applebee's Intl 2,162 53,337 Carnival Unit 284 13,930 Chipotle Mexican Grill Cl B 96(b) 4,992 Marriott Intl Cl A 2,030 96,871 McDonald's 1,630 72,258 --------------- Total 241,388 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.5%) DR Horton 2,561 67,841 Hovnanian Enterprises Cl A 1,218(b) 41,290 Standard-Pacific 491 13,154 --------------- Total 122,285 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.1%) Colgate-Palmolive 1,506 98,251 Procter & Gamble 1,496 96,148 Spectrum Brands 8,610(b) 93,849 --------------- Total 288,248 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 214 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Large Cap Value Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) INDUSTRIAL CONGLOMERATES (2.8%) 3M 1,364 $ 106,297 General Electric 12,887 479,525 Tyco Intl 3,690(c) 112,176 --------------- Total 697,998 - ------------------------------------------------------------------------------------------------- INSURANCE (6.7%) ACE 3,714(c) 224,957 AFLAC 2,197 101,062 Allied World Assurance Holdings 753(c) 32,853 American Intl Group 8,729 625,521 Aon 2,192 77,465 Arch Capital Group 423(b,c) 28,599 Aspen Insurance Holdings 1,624(c) 42,809 Chubb 1,386 73,333 Endurance Specialty Holdings 1,198(c) 43,823 Hartford Financial Services Group 2,547 237,661 Max Re Capital 1,545(c) 38,347 Prudential Financial 1,468 126,042 XL Capital Cl A 769(c) 55,383 --------------- Total 1,707,855 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.3%) Liberty Media - Interactive Cl A 3,229(b,d) 69,650 - ------------------------------------------------------------------------------------------------- IT SERVICES (1.3%) Affiliated Computer Services Cl A 1,615(b) 78,877 Automatic Data Processing 1,925 94,806 Electronic Data Systems 3,657 100,750 First Data 2,548 65,025 --------------- Total 339,458 - ------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.1%) Mattel 1,367 30,976 - ------------------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (--%) PerkinElmer 497 11,048 - ------------------------------------------------------------------------------------------------- MACHINERY (1.4%) Caterpillar 1,582 97,025 Deere & Co 1,011 96,116 Flowserve 177(b) 8,933 Illinois Tool Works 581 26,836 Ingersoll-Rand Cl A 611(c) 23,908 ITT 700 39,774 Parker Hannifin 651 50,049 --------------- Total 342,641 - ------------------------------------------------------------------------------------------------- MEDIA (6.8%) Cablevision Systems Cl A 439 12,503 Clear Channel Communications 359 12,759 Comcast Cl A 4,047(b) 171,310 Comcast Special Cl A 5,890(b) 246,674 EchoStar Communications Cl A 1,598(b) 60,772 Idearc 602(b) 17,247 Liberty Global Cl A 902(b) 26,293 Liberty Global Series C 743(b) 20,804 Liberty Media - Capital Series A 646(b,d) 63,295
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) MEDIA (CONT.) News Corp Cl A 10,176 $ 218,580 NTL 9,576 241,698 Time Warner 10,478 228,211 Viacom Cl B 4,732(b) 194,154 Vivendi 2,818(c) 110,142 Walt Disney 3,709 127,107 --------------- Total 1,751,549 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.3%) Alcan 371(c) 18,083 Alcoa 2,059 61,790 --------------- Total 79,873 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (1.2%) Federated Department Stores 890 33,936 JC Penney 1,100 85,096 Target 3,400 193,970 --------------- Total 313,002 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (1.0%) Dominion Resources 2,345 196,605 Xcel Energy 2,645 60,994 --------------- Total 257,599 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (9.7%) Anadarko Petroleum 1,542 67,108 BP ADR 381(c) 25,565 Chesapeake Energy 1,173 34,076 Chevron 7,048 518,239 ConocoPhillips 7,224 519,767 Devon Energy 1,099 73,721 Exxon Mobil 13,914 1,066,230 Newfield Exploration 399(b) 18,334 Royal Dutch Shell ADR 575(c) 40,704 Total 1,217(c) 87,792 XTO Energy 517 24,325 --------------- Total 2,475,861 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (1.0%) Bowater 2,661 59,873 Intl Paper 2,380 81,158 Weyerhaeuser 1,659 117,208 --------------- Total 258,239 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (4.5%) Bristol-Myers Squibb 6,413 168,790 GlaxoSmithKline ADR 846(c) 44,635 Merck & Co 5,012 218,523 Novartis ADR 1,016(c) 58,359 Pfizer 18,146 469,981 Schering-Plough 4,143 97,941 Watson Pharmaceuticals 1,378(b) 35,869 Wyeth 841 42,824 --------------- Total 1,136,922 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.7%) Apartment Investment & Management Cl A 892 49,970 Equity Office Properties Trust 2,394 115,319 HomeBanc 1,390 5,880 --------------- Total 171,169 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.3%) Advanced Micro Devices 2,900(b) $ 59,015 Agere Systems 1,545(b) 29,618 Atmel 2,360(b) 14,278 Credence Systems 1,509(b) 7,847 Cypress Semiconductor 4,065(b) 68,577 Infineon Technologies 1,848(b,c) 26,052 Infineon Technologies ADR 3,589(b,c) 50,354 Intel 3,613 73,162 Spansion Cl A 873(b) 12,973 --------------- Total 341,876 - ------------------------------------------------------------------------------------------------- SOFTWARE (2.3%) Cadence Design Systems 6,340(b) 113,549 Compuware 6,461(b) 53,820 McAfee 469(b) 13,310 Microsoft 8,769 261,843 Oracle 1,451(b) 24,870 Symantec 2,903(b) 60,528 TIBCO Software 4,551(b) 42,961 --------------- Total 570,881 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (0.5%) Circuit City Stores 1,096 20,802 Home Depot 1,443 57,951 Lowe's Companies 841 26,197 TJX Companies 856 24,413 --------------- Total 129,363 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (3.3%) Countrywide Financial 9,138 387,907 Fannie Mae 3,305 196,284 Freddie Mac 2,943 199,830 Washington Mutual 944 42,943 --------------- Total 826,964 - ------------------------------------------------------------------------------------------------- TOBACCO (1.9%) Altria Group 5,501 472,096 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (2.0%) ALLTEL 3,279 198,314 Sprint Nextel 10,692 201,972 Vodafone Group ADR 3,882(c) 107,842 --------------- Total 508,128 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $20,540,210) $ 23,656,647 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (6.8%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 1,714,470(e) $ 1,714,470 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $1,714,470) $ 1,714,470 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $22,254,680)(f) $ 25,371,117 ================================================================================================= See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 215 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 Dec. 31, 2006, the value of foreign securities represented 5.3% of net assets. (d) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (e) Affiliated Money Market Fund -- See Note 10 to the financial statements. (f) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $22,389,607 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 3,127,019 Unrealized depreciation (145,509) -------------------------------------------------------------------------- Net unrealized appreciation $ 2,981,510 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 216 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Mid Cap Growth Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (94.5%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.3%) Precision Castparts 50,670 $ 3,966,448 Rockwell Collins 83,712 5,298,132 --------------- Total 9,264,580 - ------------------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.9%) CH Robinson Worldwide 99,287 4,059,846 UTI Worldwide 62,239(c) 1,860,946 --------------- Total 5,920,792 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (0.5%) Harley-Davidson 50,414 3,552,675 - ------------------------------------------------------------------------------------------------- BEVERAGES (0.5%) Pepsi Bottling Group 105,114 3,249,074 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (3.8%) Amylin Pharmaceuticals 64,193(b) 2,315,442 Biogen Idec 108,360(b) 5,330,228 MedImmune 352,177(b) 11,399,969 OSI Pharmaceuticals 196,704(b,d) 6,880,706 --------------- Total 25,926,345 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (6.0%) Investors Financial Services 240,536 10,263,671 Legg Mason 38,589 3,667,884 Northern Trust 91,671 5,563,513 T Rowe Price Group 307,447 13,456,956 TD Ameritrade Holding 523,285 8,466,751 --------------- Total 41,418,775 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.3%) Sigma-Aldrich 116,396 9,046,297 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (3.3%) Cintas 167,922 6,668,183 Monster Worldwide 96,455(b) 4,498,661 Robert Half Intl 310,651 11,531,365 --------------- Total 22,698,209 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (2.1%) F5 Networks 101,081(b) 7,501,221 Juniper Networks 363,400(b) 6,882,796 --------------- Total 14,384,017 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (2.3%) Network Appliance 317,718(b) 12,479,963 SanDisk 81,054(b) 3,487,754 --------------- Total 15,967,717 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.8%) Fluor 43,117 3,520,503 Foster Wheeler 36,184(b) 1,995,186 --------------- Total 5,515,689 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (1.5%) Martin Marietta Materials 100,144 10,405,963 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) DIVERSIFIED CONSUMER SERVICES (0.4%) Strayer Education 26,048 $ 2,762,390 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%) Level 3 Communications 427,249(b) 2,392,594 Time Warner Telecom Cl A 97,946(b) 1,952,064 --------------- Total 4,344,658 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.4%) Allegheny Energy 60,672(b) 2,785,452 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.6%) Rockwell Automation 63,301 3,866,425 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (1.4%) Amphenol Cl A 61,891 3,842,193 Anixter Intl 47,881(b) 2,599,938 Molex 96,393 3,048,911 --------------- Total 9,491,042 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (3.4%) BJ Services 235,796 6,913,539 ENSCO Intl 193,341 9,678,651 Natl Oilwell Varco 56,786(b) 3,474,167 Smith Intl 90,762 3,727,595 --------------- Total 23,793,952 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (0.6%) Whole Foods Market 94,478 4,433,853 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.8%) Hershey 100,929 5,026,264 HJ Heinz 68,571 3,086,381 WM Wrigley Jr 77,652 4,016,161 --------------- Total 12,128,806 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.3%) Questar 28,406 2,359,118 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (3.6%) Biomet 127,121 5,246,284 Kinetic Concepts 104,382(b) 4,128,308 ResMed 89,353(b) 4,397,955 St. Jude Medical 295,039(b) 10,786,625 --------------- Total 24,559,172 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (5.1%) Express Scripts 134,565(b) 9,634,855 Health Management Associates Cl A 309,279 6,528,880 Humana 128,053(b) 7,082,611 Lincare Holdings 134,781(b) 5,369,675 Omnicare 164,423 6,351,660 --------------- Total 34,967,681 - ------------------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (1.6%) Cerner 78,786(b) 3,584,763 Dendrite Intl 688,149(b) 7,370,076 --------------- Total 10,954,839 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HOTELS, RESTAURANTS & LEISURE (4.8%) Brinker Intl 170,583 $ 5,144,783 Hilton Hotels 129,418 4,516,688 Intl Game Technology 179,300 8,283,660 Panera Bread Cl A 68,678(b) 3,839,787 Royal Caribbean Cruises 88,004 3,641,606 Starwood Hotels & Resorts Worldwide 60,759 3,797,438 Station Casinos 51,208 4,182,157 --------------- Total 33,406,119 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.4%) Energizer Holdings 37,018(b) 2,627,908 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.3%) AES 397,004(b) 8,749,968 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.4%) VistaPrint 76,399(b) 2,529,571 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.3%) Akamai Technologies 50,497(b) 2,682,401 VeriSign 263,111(b) 6,327,819 --------------- Total 9,010,220 - ------------------------------------------------------------------------------------------------- IT SERVICES (6.6%) Acxiom 503,421 12,912,749 Alliance Data Systems 30,766(b) 1,921,952 Fiserv 243,265(b) 12,751,951 Paychex 179,119 7,082,365 VeriFone Holdings 300,198(b) 10,627,009 --------------- Total 45,296,026 - ------------------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (2.5%) Invitrogen 109,293(b) 6,184,891 Techne 202,653(b) 11,237,109 --------------- Total 17,422,000 - ------------------------------------------------------------------------------------------------- MACHINERY (1.2%) ITT 68,985 3,919,728 Joy Global 89,886 4,345,089 --------------- Total 8,264,817 - ------------------------------------------------------------------------------------------------- MEDIA (3.3%) Catalina Marketing 307,401 8,453,527 Lamar Advertising Cl A 66,781(b) 4,366,810 Sirius Satellite Radio 1,447,352(b) 5,123,626 XM Satellite Radio Holdings Cl A 316,735(b) 4,576,821 --------------- Total 22,520,784 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.6%) Allegheny Technologies 28,732 2,605,417 Freeport-McMoRan Copper & Gold Cl B 29,790 1,660,197 --------------- Total 4,265,614 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (0.3%) Nordstrom 39,744 1,960,969 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securrities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 217 RiverSource VP - Mid Cap Growth Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (3.8%) Denbury Resources 232,290(b) $ 6,455,339 El Paso 248,256 3,793,352 Murphy Oil 72,049 3,663,692 Newfield Exploration 161,841(b) 7,436,593 Williams Companies 174,324 4,553,343 --------------- Total 25,902,319 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (2.2%) Allergan 48,400 5,795,416 Endo Pharmaceuticals Holdings 215,800(b) 5,951,764 Forest Laboratories 73,599(b) 3,724,109 --------------- Total 15,471,289 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.5%) St. Joe 65,802(d) 3,525,013 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (6.7%) Hittite Microwave 20,485(b) 662,075 Integrated Device Technology 159,923(b) 2,475,608 KLA-Tencor 153,168 7,620,108 Kulicke & Soffa Inds 482,800(b) 4,055,520 Maxim Integrated Products 341,331 10,451,555 MEMC Electronic Materials 87,565(b) 3,427,294 Microchip Technology 388,203 12,694,238 NVIDIA 136,369(b) 5,047,017 --------------- Total 46,433,415 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SOFTWARE (7.4%) Advent Software 417,907(b) $ 14,747,939 BEA Systems 229,180(b) 2,883,084 BMC Software 316,211(b) 10,181,994 Business Objects ADR 95,437(b,c) 3,764,990 Citrix Systems 114,841(b) 3,106,449 Electronic Arts 49,284(b) 2,481,942 Fair Isaac 142,723 5,801,690 Lawson Software 464,413(b) 3,432,012 NAVTEQ 148,775(b) 5,202,662 --------------- Total 51,602,762 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (3.0%) Abercrombie & Fitch Cl A 61,884 4,308,983 Chico's FAS 130,135(b) 2,692,493 Limited Brands 63,942 1,850,481 TJX Companies 157,615 4,495,181 Urban Outfitters 161,775(b) 3,725,678 Williams-Sonoma 109,512 3,443,057 --------------- Total 20,515,873 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.5%) Coach 82,826(b) 3,558,205 - ------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.1%) Fastenal 219,858 7,888,505 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) WIRELESS TELECOMMUNICATION SERVICES (2.5%) American Tower Cl A 200,133(b) $ 7,460,959 Crown Castle Intl 55,468(b) 1,791,616 NII Holdings 83,567(b) 5,385,057 SBA Communications Cl A 101,939(b) 2,803,323 --------------- Total 17,440,955 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $638,880,414) $ 652,189,853 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (6.1%)(e)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 41,780,759(f) $ 41,780,759 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $41,780,759) $ 41,780,759 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $680,661,173)(g) $ 693,970,612 ================================================================================================= 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 Dec. 31, 2006, the value of foreign securities represented 0.8% of net assets. (d) At Dec. 31, 2006, 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 an affiliated money market fund and represents 0.7% of net assets. See Note 6 to the financial statements. 5.4% of net assets is the Fund's cash equivalent position. (f) Affiliated Money Market Fund -- See Note 10 to the financial statements. (g) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $683,561,769 and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 46,590,416 Unrealized depreciation (36,181,573) ------------------------------------------------------------------------ Net unrealized appreciation $ 10,408,843 ------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 218 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Mid Cap Value Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (97.8%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.5%) Goodrich 40,118 $ 1,827,375 - ------------------------------------------------------------------------------------------------- AIRLINES (1.5%) AMR 52,568(b) 1,589,131 Continental Airlines Cl B 45,674(b) 1,884,052 UAL 6,587(b) 289,828 US Airways Group 31,322(b) 1,686,690 --------------- Total 5,449,701 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (0.5%) Ballard Power Systems 52,781(b,c) 300,324 Johnson Controls 16,374 1,406,854 --------------- Total 1,707,178 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (0.8%) Ford Motor 371,165 2,787,449 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (2.1%) American Standard Companies 129,708 5,947,111 USG 35,582(b) 1,949,894 --------------- Total 7,897,005 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (0.2%) AMVESCAP 66,740(c) 778,874 - ------------------------------------------------------------------------------------------------- CHEMICALS (3.2%) Cabot 25,854 1,126,459 Eastman Chemical 57,894 3,433,693 Imperial Chemical Inds ADR 37,936(c) 1,344,072 Lubrizol 20,095 1,007,362 Monsanto 8,171 429,223 Mosaic 65,991(b) 1,409,568 PPG Inds 49,510 3,179,037 --------------- Total 11,929,414 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (1.8%) Comerica 42,731 2,507,455 Huntington Bancshares 50,821 1,206,999 Regions Financial 79,182 2,961,407 --------------- Total 6,675,861 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.9%) Dun & Bradstreet 12,827(b) 1,061,947 Pitney Bowes 22,667 1,046,989 Ritchie Bros Auctioneers 24,326(c) 1,302,414 --------------- Total 3,411,350 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.8%) Tellabs 293,614(b) 3,012,480 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.3%) Diebold 21,213 988,526 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CONSTRUCTION & ENGINEERING (1.2%) Chicago Bridge & Iron 59,696(c) $ 1,632,089 Fluor 29,646 2,420,596 Insituform Technologies Cl A 16,942(b) 438,120 --------------- Total 4,490,805 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.3%) Temple-Inland 20,806 957,700 - ------------------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Genuine Parts 19,225 911,842 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (3.3%) CenturyTel 90,598 3,955,508 Citizens Communications 129,024 1,854,075 Embarq 14,190 745,826 Qwest Communications Intl 305,775(b) 2,559,337 Windstream 215,016 3,057,528 --------------- Total 12,172,274 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (5.3%) American Electric Power 57,739 2,458,527 DPL 76,528 2,125,948 Edison Intl 94,623 4,303,454 Pinnacle West Capital 114,642 5,811,202 PPL 96,728 3,466,732 Reliant Energy 91,475(b) 1,299,860 --------------- Total 19,465,723 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.5%) Cooper Inds Cl A 25,429 2,299,544 Energy Conversion Devices 10,093(b) 342,960 FuelCell Energy 27,077(b) 174,917 Plug Power 36,735(b) 142,899 Rockwell Automation 41,977 2,563,956 --------------- Total 5,524,276 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.4%) Solectron 476,357(b) 1,533,870 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (4.4%) BJ Services 71,571 2,098,462 Cameron Intl 54,174(b) 2,873,931 ENSCO Intl 28,497 1,426,560 GlobalSantaFe 68,796 4,043,828 Nabors Inds 45,163(b,c) 1,344,954 Natl Oilwell Varco 17,492(b) 1,070,161 Smith Intl 39,886 1,638,118 Weatherford Intl 42,644(b) 1,782,093 --------------- Total 16,278,107 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.8%) Archer-Daniels-Midland 34,722 1,109,715 Del Monte Foods 139,719 1,541,101 Reddy Ice Holdings 46,670 1,205,019 Tyson Foods Cl A 176,964 2,911,058 --------------- Total 6,766,893 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) GAS UTILITIES (0.4%) Questar 19,352 $ 1,607,184 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.2%) Hospira 21,280(b) 714,582 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.3%) AmerisourceBergen 43,871 1,972,440 Health Management Associates Cl A 79,819 1,684,979 Health Net 68,065(b) 3,312,043 Humana 57,561(b) 3,183,699 McKesson 16,384 830,669 Omnicare 30,378 1,173,502 --------------- Total 12,157,332 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (2.0%) Hilton Hotels 101,698 3,549,260 Royal Caribbean Cruises 97,003 4,013,984 --------------- Total 7,563,244 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (2.0%) Mohawk Inds 12,898(b) 965,544 Stanley Works 63,911 3,214,084 Whirlpool 36,897 3,063,189 --------------- Total 7,242,817 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (1.0%) Constellation Energy Group 33,586 2,313,068 Mirant 48,979(b) 1,546,267 --------------- Total 3,859,335 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.1%) McDermott Intl 117,752(b) 5,988,867 Textron 19,659 1,843,424 --------------- Total 7,832,291 - ------------------------------------------------------------------------------------------------- INSURANCE (16.5%) ACE 126,374(c) 7,654,473 Ambac Financial Group 6,474 576,639 Aon 211,901 7,488,581 Axis Capital Holdings 87,186(c) 2,909,397 Conseco 34,764(b) 694,585 Everest Re Group 97,136(c) 9,530,013 Lincoln Natl 62,584 4,155,578 Loews 134,352 5,571,577 MBIA 8,172 597,046 PartnerRe 91,746(c) 6,516,718 Torchmark 39,079 2,491,677 Willis Group Holdings 61,297(c) 2,434,104 XL Capital Cl A 150,056(c) 10,807,033 --------------- Total 61,427,421 - ------------------------------------------------------------------------------------------------- IT SERVICES (2.1%) Computer Sciences 59,596(b) 3,180,639 Electronic Data Systems 169,434 4,667,906 --------------- Total 7,848,545 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 219 RiverSource VP - Mid Cap Value Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) LEISURE EQUIPMENT & PRODUCTS (1.1%) Eastman Kodak 102,191 $ 2,636,527 Hasbro 50,758 1,383,156 --------------- Total 4,019,683 - ------------------------------------------------------------------------------------------------- MACHINERY (4.4%) AGCO 168,425(b) 5,211,069 Dover 36,268 1,777,857 Eaton 51,768 3,889,848 Ingersoll-Rand Cl A 53,501(c) 2,093,494 Manitowoc 24,818 1,474,934 Terex 29,255(b) 1,889,288 --------------- Total 16,336,490 - ------------------------------------------------------------------------------------------------- MEDIA (2.7%) Interpublic Group of Companies 212,548(b) 2,601,588 Regal Entertainment Group Cl A 157,800 3,364,296 RH Donnelley 64,442 4,042,446 --------------- Total 10,008,330 - ------------------------------------------------------------------------------------------------- METALS & MINING (1.5%) Freeport-McMoRan Copper & Gold Cl B 34,526 1,924,134 Nucor 21,115 1,154,146 Phelps Dodge 20,268 2,426,485 --------------- Total 5,504,765 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (1.6%) Family Dollar Stores 100,128 2,936,754 Federated Department Stores 82,192 3,133,981 --------------- Total 6,070,735 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (6.7%) CMS Energy 47,972(b) 801,132 Consolidated Edison 55,833 2,683,892 DTE Energy 59,328 2,872,068 Energy East 134,684 3,340,164 MDU Resources Group 66,889 1,715,034 NiSource 215,177 5,185,767 SCANA 42,047 1,707,949 Sempra Energy 52,142 2,922,038 TECO Energy 109,867 1,893,008 Xcel Energy 66,005 1,522,075 --------------- Total 24,643,127 - ------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS (-%) Xerox 4,219(b) 71,512 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (5.4%) El Paso 214,576 $ 3,278,722 Enbridge 85,823(c) 2,952,311 Hess 53,275 2,640,842 Newfield Exploration 55,734(b) 2,560,977 Pioneer Natural Resources 76,307 3,028,625 Southwestern Energy 65,266(b) 2,287,573 Suncor Energy 15,033(c) 1,186,254 Sunoco 34,400 2,145,184 --------------- Total 20,080,488 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.5%) Bowater 43,208 972,180 MeadWestvaco 32,150 966,429 --------------- Total 1,938,609 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.2%) King Pharmaceuticals 73,147(b) 1,164,500 Mylan Laboratories 117,527 2,345,839 Watson Pharmaceuticals 28,895(b) 752,137 --------------- Total 4,262,476 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (2.5%) Boston Properties 9,912 1,108,955 Crescent Real Estate Equities 78,715 1,554,621 Equity Residential 70,370 3,571,277 Rayonier 72,492 2,975,797 --------------- Total 9,210,650 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (1.1%) CSX 117,321 4,039,362 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.3%) Intersil Cl A 119,706 2,863,368 Microchip Technology 53,176 1,738,855 Natl Semiconductor 164,486 3,733,832 --------------- Total 8,336,055 - ------------------------------------------------------------------------------------------------- SOFTWARE (1.7%) BMC Software 127,946(b) 4,119,862 McAfee 71,943(b) 2,041,742 --------------- Total 6,161,604 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (2.2%) Liz Claiborne 95,961 4,170,465 VF 49,552 4,067,228 --------------- Total 8,237,693 - ------------------------------------------------------------------------------------------------- TOBACCO (2.4%) Loews-Carolina Group 97,105(d) 6,284,635 Reynolds American 37,731 2,470,249 --------------- Total 8,754,884 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $337,182,272) $ 362,495,917 - -------------------------------------------------------------------------------------------------
BONDS (0.3%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT Qwest Communications Intl Sr Unsecured 11-15-25 3.50% $ 794,000 $ 1,246,882 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $1,213,039) $ 1,246,882 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (2.8%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 10,451,921(e) $ 10,451,921 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $10,451,921) $ 10,451,921 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $348,847,232)(f) $ 374,194,720 =================================================================================================
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 220 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Mid 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 Dec. 31, 2006, the value of foreign securities represented 14.2% 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) Affiliated Money Market Fund - See Note 10 to the financial statements. (f) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $350,377,940 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $26,930,147 Unrealized depreciation (3,113,367) -------------------------------------------------------------------------- Net unrealized appreciation $23,816,780 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 221 INVESTMENTS IN SECURITIES RiverSource VP - S&P 500 Index Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (98.3%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.4%) Boeing 23,936 $ 2,126,475 General Dynamics 12,252 910,936 Goodrich 3,778 172,088 Honeywell Intl 24,717 1,118,197 L-3 Communications Holdings 3,785 309,537 Lockheed Martin 10,784 992,883 Northrop Grumman 10,460 708,142 Raytheon 13,463 710,846 Rockwell Collins 5,062 320,374 United Technologies 30,382 1,899,483 --------------- Total 9,268,961 - ------------------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.9%) FedEx 9,284 1,008,428 United Parcel Service Cl B 32,503 2,437,075 --------------- Total 3,445,503 - ------------------------------------------------------------------------------------------------- AIRLINES (0.1%) Southwest Airlines 23,974(d) 367,282 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (0.2%) Goodyear Tire & Rubber 5,375(b) 112,821 Johnson Controls 5,926 509,162 --------------- Total 621,983 - ------------------------------------------------------------------------------------------------- AUTOMOBILES (0.4%) Ford Motor 57,187 429,474 General Motors 17,122 525,988 Harley-Davidson 7,846 552,908 --------------- Total 1,508,370 - ------------------------------------------------------------------------------------------------- BEVERAGES (2.0%) Anheuser-Busch Companies 23,277 1,145,228 Brown-Forman Cl B 2,384 157,916 Coca-Cola 61,734 2,978,666 Coca-Cola Enterprises 8,390 171,324 Constellation Brands Cl A 6,360(b) 184,567 Molson Coors Brewing Cl B 1,385 105,869 Pepsi Bottling Group 4,144 128,091 PepsiCo 49,708 3,109,236 --------------- Total 7,980,897 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (1.3%) Amgen 35,310(b) 2,412,025 Biogen Idec 10,204(b) 501,935 Celgene 11,275(b) 648,651 Genzyme 7,962(b) 490,300 Gilead Sciences 13,920(b) 903,826 MedImmune 7,240(b) 234,359 --------------- Total 5,191,096 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.2%) American Standard Companies 5,247 240,575 Masco 11,929 356,319 --------------- Total 596,894 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CAPITAL MARKETS (3.8%) Ameriprise Financial 7,326 $ 399,267 Bank of New York 23,134 910,786 Bear Stearns Companies 3,547 577,381 Charles Schwab 30,966 598,882 E*TRADE Financial 12,930(b) 289,891 Federated Investors Cl B 2,730 92,219 Franklin Resources 5,045 555,808 Goldman Sachs Group 12,895 2,570,617 Janus Capital Group 6,003 129,605 Legg Mason 3,975 377,824 Lehman Brothers Holdings 16,048 1,253,670 Mellon Financial 12,470 525,611 Merrill Lynch & Co 26,757 2,491,077 Morgan Stanley 32,047 2,609,586 Northern Trust 5,677 344,537 State Street 10,052 677,907 T Rowe Price Group 7,980 349,285 --------------- Total 14,753,953 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.5%) Air Products & Chemicals 6,675 469,119 Ashland 1,729 119,612 Dow Chemical 28,913 1,154,784 Eastman Chemical 2,487 147,504 Ecolab 5,394 243,809 EI du Pont de Nemours & Co 27,842 1,356,183 Hercules 3,435(b) 66,330 Intl Flavors & Fragrances 2,366 116,313 Monsanto 16,452 864,224 PPG Inds 5,003 321,243 Praxair 9,778 580,129 Rohm & Haas 4,299 219,765 Sigma-Aldrich 1,998 155,285 --------------- Total 5,814,300 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (4.1%) BB&T 16,375 719,354 Comerica 4,807 282,075 Commerce Bancorp 5,680 200,334 Compass Bancshares 3,930 234,425 Fifth Third Bancorp 16,896 691,553 First Horizon Natl 3,766 157,343 Huntington Bancshares 7,192 170,810 KeyCorp 12,155 462,255 M&T Bank 2,350 287,076 Marshall & Ilsley 7,720 371,409 Natl City 19,115 698,844 PNC Financial Services Group 8,894 658,512 Regions Financial 22,076 825,642 SunTrust Banks 10,719 905,220 Synovus Financial 9,837 303,275 US Bancorp 53,219 1,925,996
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMERCIAL BANKS (CONT.) Wachovia 57,701 $ 3,286,072 Wells Fargo & Co 102,206 3,634,444 Zions Bancorporation 3,238 266,941 --------------- Total 16,081,580 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.5%) Allied Waste Inds 7,682(b) 94,412 Avery Dennison 2,854 193,872 Cintas 4,133 164,121 Equifax 3,790 153,874 Monster Worldwide 3,883(b) 181,103 Pitney Bowes 6,716 310,212 Robert Half Intl 5,077 188,458 RR Donnelley & Sons 6,568 233,427 Waste Management 16,200 595,675 --------------- Total 2,115,154 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (2.6%) ADC Telecommunications 3,551(b) 51,596 Avaya 13,749(b) 192,211 Ciena 2,555(b) 70,799 Cisco Systems 183,906(b) 5,026,152 Comverse Technology 6,118(b) 129,151 Corning 47,354(b) 885,993 JDS Uniphase 6,387(b) 106,407 Juniper Networks 17,130(b) 324,442 Motorola 73,189 1,504,766 QUALCOMM 50,032 1,890,709 Tellabs 13,373(b) 137,207 --------------- Total 10,319,433 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (3.7%) Apple Computer 25,744(b) 2,184,121 Dell 68,771(b) 1,725,464 EMC 66,676(b) 880,123 Hewlett-Packard 82,913 3,415,187 Intl Business Machines 45,598(d) 4,429,847 Lexmark Intl Cl A 2,961(b) 216,745 NCR 5,394(b) 230,647 Network Appliance 11,319(b) 444,610 QLogic 4,768(b) 104,515 SanDisk 6,810(b) 293,034 Sun Microsystems 106,551(b) 577,506 --------------- Total 14,501,799 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.1%) Fluor 2,669 217,924 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.1%) Vulcan Materials 2,857 256,759 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (1.0%) American Express 36,474 2,212,878 Capital One Financial 12,350 948,727 SLM 12,377 603,626 --------------- Total 3,765,231 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 222 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - S&P 500 Index Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CONTAINERS & PACKAGING (0.2%) Ball 3,158 $ 137,689 Bemis 3,178 107,988 Pactiv 4,028(b) 143,759 Sealed Air 2,440 158,406 Temple-Inland 3,240 149,137 --------------- Total 696,979 - ------------------------------------------------------------------------------------------------- DISTRIBUTORS (0.1%) Genuine Parts 5,156 244,549 - ------------------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.1%) Apollo Group Cl A 4,233(b) 164,960 H&R Block 9,762 224,916 --------------- Total 389,876 - ------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (5.5%) Bank of America 135,950(d) 7,258,371 Chicago Mercantile Exchange Holdings 1,055 537,786 CIT Group 6,005 334,899 Citigroup 148,751 8,285,430 JPMorgan Chase & Co 105,015 5,072,225 Moody's 7,120 491,707 --------------- Total 21,980,418 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (2.9%) AT&T 116,341 4,159,190 BellSouth 55,217 2,601,273 CenturyTel 3,475 151,719 Citizens Communications 9,748 140,079 Embarq 4,525 237,834 Qwest Communications Intl 48,682(b) 407,468 Verizon Communications 88,383 3,291,383 Windstream 14,437 205,294 --------------- Total 11,194,240 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.5%) Allegheny Energy 5,007(b) 229,871 American Electric Power 11,975 509,896 Edison Intl 9,861 448,478 Entergy 6,262 578,108 Exelon 20,314 1,257,234 FirstEnergy 9,666 582,860 FPL Group 12,234 665,774 Pinnacle West Capital 3,027 153,439 PPL 11,556(d) 414,167 Progress Energy 7,691 377,474 Southern 22,484 828,760 --------------- Total 6,046,061 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.5%) American Power Conversion 5,117 156,529 Cooper Inds Cl A 2,755 249,135 Emerson Electric 24,294 1,071,122 Rockwell Automation 5,154 314,806 --------------- Total 1,791,592 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (0.3%) Agilent Technologies 12,373(b) 431,198 Jabil Circuit 5,595 137,357 Molex 4,293 135,788
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) ELECTRONIC EQUIPMENT & INSTRUMENTS (CONT.) Sanmina-SCI 16,128(b) $ 55,642 Solectron 27,690(b) 89,162 Symbol Technologies 7,707 115,143 Tektronix 2,493 72,721 --------------- Total 1,037,011 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.7%) Baker Hughes 9,711 725,023 BJ Services 8,878 260,303 Halliburton 30,444 945,286 Nabors Inds 9,060(b,c) 269,807 Natl Oilwell Varco 5,315(b) 325,172 Noble 4,102 312,367 Rowan Companies 3,340 110,888 Schlumberger 35,672 2,253,044 Smith Intl 6,035 247,857 Transocean 8,849(b) 715,796 Weatherford Intl 10,280(b) 429,601 --------------- Total 6,595,144 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.1%) Costco Wholesale 13,869 733,254 CVS 24,932 770,648 Kroger 21,714 500,942 Safeway 13,423 463,899 SUPERVALU 6,233 222,830 SYSCO 18,717 688,037 Walgreen 30,374 1,393,863 Wal-Mart Stores 74,443 3,437,777 Whole Foods Market 4,330 203,207 --------------- Total 8,414,457 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (1.1%) Archer-Daniels-Midland 19,895 635,843 Campbell Soup 6,594 256,441 ConAgra Foods 15,422 416,394 Dean Foods 4,045(b) 171,023 General Mills 10,384 598,118 Hershey 5,260 261,948 HJ Heinz 9,977 449,065 Kellogg 7,601 380,506 McCormick & Co 3,980 153,469 Sara Lee 22,605 384,963 Tyson Foods Cl A 7,630 125,514 WM Wrigley Jr 6,649 343,886 --------------- Total 4,177,170 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.1%) Nicor 1,358 63,554 Peoples Energy 1,168 52,058 Questar 2,595 215,515 --------------- Total 331,127 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.6%) Bausch & Lomb 1,628 84,754 Baxter Intl 19,814 919,171 Becton Dickinson & Co 7,470 524,021 Biomet 7,413 305,935 Boston Scientific 35,701(b) 613,343 CR Bard 3,122 259,032
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HEALTH CARE EQUIPMENT & SUPPLIES (CONT.) Hospira 4,717(b) $ 158,397 Medtronic 34,849 1,864,769 St. Jude Medical 10,704(b) 391,338 Stryker 8,998 495,880 Zimmer Holdings 7,228(b) 566,531 --------------- Total 6,183,171 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.4%) Aetna 15,798 682,158 AmerisourceBergen 5,818 261,577 Cardinal Health 12,263 790,105 Caremark Rx 12,915 737,576 CIGNA 3,110 409,183 Coventry Health Care 4,825(b) 241,491 Express Scripts 4,100(b) 293,560 Health Management Associates Cl A 7,282 153,723 Humana 5,031(b) 278,265 Laboratory Corp of America Holdings 3,798(b) 279,039 Manor Care 2,234 104,819 McKesson 8,964 454,475 Medco Health Solutions 8,885(b) 474,814 Patterson Companies 4,205(b) 149,320 Quest Diagnostics 4,840 256,520 Tenet Healthcare 14,269(b) 99,455 UnitedHealth Group 40,778 2,191,001 WellPoint 18,772(b) 1,477,169 --------------- Total 9,334,250 - ------------------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (--%) IMS Health 6,005 165,017 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.6%) Carnival Unit 13,467 660,556 Darden Restaurants 4,443 178,475 Harrah's Entertainment 5,632 465,879 Hilton Hotels 11,702 408,400 Intl Game Technology 10,276 474,751 Marriott Intl Cl A 10,178 485,694 McDonald's 37,440 1,659,715 Starbucks 22,892(b,d) 810,835 Starwood Hotels & Resorts Worldwide 6,415 400,938 Wendy's Intl 2,892 95,696 Wyndham Worldwide 5,995(b) 191,960 Yum! Brands 8,026 471,929 --------------- Total 6,304,828 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.6%) Black & Decker 2,062 164,898 Centex 3,592 202,122 DR Horton 8,350 221,192 Fortune Brands 4,579 391,001 Harman Intl Inds 1,980 197,822 KB HOME 2,376 121,841 Leggett & Platt 5,417 129,466 Lennar Cl A 4,170 218,758 Newell Rubbermaid 8,390 242,891 Pulte Homes 6,400 211,968
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 223 RiverSource VP - S&P 500 Index Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HOUSEHOLD DURABLES (CONT.) Snap-On 1,771 $ 84,370 Stanley Works 2,461 123,764 Whirlpool 2,368 196,591 --------------- Total 2,506,684 - ------------------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (2.1%) Clorox 4,599 295,026 Colgate-Palmolive 15,570 1,015,787 Kimberly-Clark 13,874 942,738 Procter & Gamble 95,933(d) 6,165,614 --------------- Total 8,419,165 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.4%) AES 20,103(b) 443,070 Constellation Energy Group 5,446 375,066 Dynegy Cl A 11,743(b) 85,019 TXU 13,900 753,519 --------------- Total 1,656,674 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (4.0%) 3M 22,296 1,737,527 General Electric 312,061(d) 11,611,790 Textron 3,793 355,670 Tyco Intl 60,208(c) 1,830,323 --------------- Total 15,535,310 - ------------------------------------------------------------------------------------------------- INSURANCE (4.8%) ACE 9,854(c) 596,857 AFLAC 14,969 688,574 Allstate 18,916 1,231,621 Ambac Financial Group 3,210 285,915 American Intl Group 78,705 5,640,001 Aon 9,376 331,348 Chubb 12,462 659,364 Cincinnati Financial 5,240 237,424 Genworth Financial Cl A 13,420 459,098 Hartford Financial Services Group 9,593 895,123 Lincoln Natl 8,690 577,016 Loews 13,834 573,696 Marsh & McLennan Companies 16,683 511,501 MBIA 4,081 298,158 MetLife 23,013 1,357,997 Principal Financial Group 8,168 479,462 Progressive 23,062 558,562 Prudential Financial 14,442 1,239,990 Safeco 3,188 199,409 St. Paul Travelers Companies 20,893 1,121,745 Torchmark 2,965 189,048 UnumProvident 10,371 215,509 XL Capital Cl A 5,470(c) 393,949 --------------- Total 18,741,367 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) Amazon.com 9,350(b,d) 368,951 IAC/InterActiveCorp 6,755(b) 251,016 --------------- Total 619,967 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) INTERNET SOFTWARE & SERVICES (1.3%) eBay 35,028(b) $ 1,053,292 Google Cl A 6,490(b) 2,988,516 VeriSign 7,420(b) 178,451 Yahoo! 37,060(b) 946,512 --------------- Total 5,166,771 - ------------------------------------------------------------------------------------------------- IT SERVICES (1.1%) Affiliated Computer Services Cl A 3,590(b) 175,336 Automatic Data Processing 16,672 821,096 Cognizant Technology Solutions Cl A 4,295(b) 331,402 Computer Sciences 5,194(b) 277,204 Convergys 4,167(b) 99,091 Electronic Data Systems 15,660 431,433 Fidelity Natl Information Services 4,905 196,641 First Data 23,186 591,707 Fiserv 5,241(b) 274,733 Paychex 10,249 405,245 Sabre Holdings Cl A 4,006 127,751 Unisys 10,433(b) 81,795 Western Union 23,206 520,279 --------------- Total 4,333,713 - ------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.2%) Brunswick 2,777 88,586 Eastman Kodak 8,693 224,279 Hasbro 4,805 130,936 Mattel 11,549 261,701 --------------- Total 705,502 - ------------------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.3%) Applera-Applied Biosystems Group 5,542(e) 203,336 Millipore 1,620(b) 107,892 PerkinElmer 3,726 82,829 Thermo Fisher Scientific 12,359(b) 559,739 Waters 3,076(b) 150,632 --------------- Total 1,104,428 - ------------------------------------------------------------------------------------------------- MACHINERY (1.4%) Caterpillar 19,690 1,207,587 Cummins 1,593 188,261 Danaher 7,176 519,829 Deere & Co 6,996 665,110 Dover 6,185 303,189 Eaton 4,512 339,032 Illinois Tool Works 12,700 586,613 Ingersoll-Rand Cl A 9,278(c) 363,048 ITT 5,592 317,737 PACCAR 7,522 488,178 Pall 3,707 128,077 Parker Hannifin 3,570 274,462 Terex 3,090(b) 199,552 --------------- Total 5,580,675 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) MEDIA (3.7%) CBS Cl B 23,663 $ 737,812 Clear Channel Communications 14,947 531,216 Comcast Cl A 63,008(b) 2,667,130 DIRECTV Group 23,335(b) 581,975 Dow Jones & Co 1,969 74,822 EW Scripps Cl A 2,520 125,849 Gannett 7,089 428,601 Interpublic Group of Companies 13,353(b) 163,441 McGraw-Hill Companies 10,722 729,310 Meredith 1,177 66,324 New York Times Cl A 4,350 105,966 News Corp Cl A 70,860 1,522,073 Omnicom Group 5,175 540,995 Time Warner 120,863 2,632,396 Tribune 5,771 177,631 Univision Communications Cl A 7,632(b) 270,325 Viacom Cl B 21,173(b) 868,728 Walt Disney 62,619 2,145,953 --------------- Total 14,370,547 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.9%) Alcoa 26,253 787,853 Allegheny Technologies 3,046 276,211 Freeport-McMoRan Copper & Gold Cl B 5,962 332,262 Newmont Mining 13,629 615,349 Nucor 9,146 499,920 Phelps Dodge 6,180 739,870 United States Steel 3,583 262,061 --------------- Total 3,513,526 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (1.1%) Big Lots 3,312(b) 75,911 Dillard's Cl A 1,840 64,345 Dollar General 9,446 151,703 Family Dollar Stores 4,592 134,683 Federated Department Stores 15,896 606,114 JC Penney 6,808 526,667 Kohl's 9,902(b) 677,594 Nordstrom 6,928(d) 341,828 Sears Holdings 2,520(b) 423,184 Target 26,005 1,483,585 --------------- Total 4,485,614 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (1.4%) Ameren 6,240 335,275 CenterPoint Energy 9,466 156,946 CMS Energy 6,736(b) 112,491 Consolidated Edison 7,774 373,696 Dominion Resources 10,711 898,011 DTE Energy 5,385 260,688 Duke Energy 38,013 1,262,413 KeySpan 5,302 218,336 NiSource 8,263 199,138 PG&E 10,561 499,852
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 224 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - S&P 500 Index Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) MULTI-UTILITIES (CONT.) Public Service Enterprise Group 7,638 $ 507,010 Sempra Energy 7,941 445,014 TECO Energy 6,335 109,152 Xcel Energy 12,317 284,030 --------------- Total 5,662,052 - ------------------------------------------------------------------------------------------------- OFFICE ELECTRONICS (0.1%) Xerox 29,220(b) 495,279 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (7.9%) Anadarko Petroleum 13,914 605,537 Apache 9,974 663,371 Chesapeake Energy 12,590 365,740 Chevron 65,994 4,852,539 ConocoPhillips 49,823 3,584,765 CONSOL Energy 5,525 177,518 Devon Energy 13,376 897,262 El Paso 21,353 326,274 EOG Resources 7,368 460,132 Exxon Mobil 176,568 13,530,405 Hess 8,192 406,077 Kinder Morgan 3,251 343,793 Marathon Oil 10,640 984,200 Murphy Oil 5,665 288,065 Occidental Petroleum 26,082 1,273,584 Peabody Energy 7,985 322,674 Sunoco 3,726 232,353 Valero Energy 18,300 936,228 Williams Companies 18,055 471,597 XTO Energy 11,076 521,126 --------------- Total 31,243,240 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.3%) Intl Paper 13,776 469,762 MeadWestvaco 5,483 164,819 Weyerhaeuser 7,159 505,783 --------------- Total 1,140,364 - ------------------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.2%) Avon Products 13,456 444,586 Estee Lauder Companies Cl A 3,860 157,565 --------------- Total 602,151 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (6.1%) Abbott Laboratories 46,464 2,263,261 Allergan 4,650 556,791 Barr Pharmaceuticals 3,220(b) 161,386 Bristol-Myers Squibb 59,541 1,567,119 Eli Lilly & Co 29,808 1,552,997 Forest Laboratories 9,590(b) 485,254 Johnson & Johnson 87,775 5,794,907 King Pharmaceuticals 7,355(b) 117,092 Merck & Co 65,719 2,865,348 Mylan Laboratories 6,420 128,143 Pfizer 218,288(d) 5,653,659 Schering-Plough 44,885 1,061,081 Watson Pharmaceuticals 3,102(b) 80,745 Wyeth 40,773 2,076,161 --------------- Total 24,363,944 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) REAL ESTATE INVESTMENT TRUSTS (REITS) (1.1%) Apartment Investment & Management Cl A 2,920 $ 163,578 Archstone-Smith Trust 6,610 384,768 Boston Properties 3,535 395,496 Equity Office Properties Trust 10,639 512,481 Equity Residential 8,839 448,579 Kimco Realty 6,840 307,458 Plum Creek Timber 5,359 213,556 ProLogis 7,495 455,471 Public Storage 3,710 361,725 Simon Property Group 6,699 678,542 Vornado Realty Trust 3,910 475,065 --------------- Total 4,396,719 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.1%) CB Richard Ellis Group Cl A 5,590(b) 185,588 Realogy 6,491(b) 196,807 --------------- Total 382,395 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (0.7%) Burlington Northern Santa Fe 10,879 802,979 CSX 13,172 453,512 Norfolk Southern 12,016 604,285 Ryder System 1,837 93,797 Union Pacific 8,162 751,067 --------------- Total 2,705,640 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (2.4%) Advanced Micro Devices 16,610(b) 338,014 Altera 10,959(b) 215,673 Analog Devices 10,353 340,303 Applied Materials 42,046 775,749 Broadcom Cl A 14,196(b) 458,673 Intel 174,557 3,534,779 KLA-Tencor 6,023 299,644 Linear Technology 9,048 274,335 LSI Logic 12,129(b) 109,161 Maxim Integrated Products 9,705 297,167 Micron Technology 22,839(b) 318,832 Natl Semiconductor 8,738 198,353 Novellus Systems 3,740(b) 128,731 NVIDIA 10,762(b) 398,302 PMC-Sierra 6,354(b) 42,635 Teradyne 5,744(b) 85,930 Texas Instruments 44,923 1,293,782 Xilinx 10,181 242,410 --------------- Total 9,352,473 - ------------------------------------------------------------------------------------------------- SOFTWARE (3.3%) Adobe Systems 17,656(b) 726,015 Autodesk 7,012(b) 283,706 BMC Software 6,211(b) 199,994 CA 12,432 281,585 Citrix Systems 5,465(b) 147,828 Compuware 10,664(b) 88,831 Electronic Arts 9,344(b) 470,564 Intuit 10,552(b) 321,942
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SOFTWARE (CONT.) Microsoft 261,884 $ 7,819,856 Novell 10,264(b) 63,637 Oracle 121,110(b) 2,075,825 Symantec 28,399(b) 592,119 --------------- Total 13,071,902 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (2.0%) AutoNation 4,530(b) 96,580 AutoZone 1,536(b) 177,500 Bed Bath & Beyond 8,555(b) 325,946 Best Buy 12,213 600,757 Circuit City Stores 4,294 81,500 Gap 15,950(d) 311,025 Home Depot 61,787 2,481,366 Limited Brands 10,353 299,616 Lowe's Companies 46,100 1,436,015 Office Depot 8,429(b) 321,735 OfficeMax 2,251 111,762 RadioShack 4,108 68,932 Sherwin-Williams 3,387 215,345 Staples 21,872 583,982 Tiffany & Co 4,095 160,688 TJX Companies 13,778 392,949 --------------- Total 7,665,698 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.4%) Coach 11,120(b) 477,715 Jones Apparel Group 3,342 111,723 Liz Claiborne 3,102 134,813 Nike Cl B 5,691 563,580 VF 2,708 222,273 --------------- Total 1,510,104 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.5%) Countrywide Financial 18,806 798,315 Fannie Mae 29,523 1,753,370 Freddie Mac 20,984 1,424,814 MGIC Investment 2,513 157,163 Sovereign Bancorp 10,881 276,269 Washington Mutual 28,611 1,301,514 --------------- Total 5,711,445 - ------------------------------------------------------------------------------------------------- TOBACCO (1.5%) Altria Group 63,451 5,445,365 Reynolds American 5,190 339,789 UST 4,875 283,725 --------------- Total 6,068,879 - ------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (--%) WW Grainger 2,216 154,987 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.6%) ALLTEL 11,309 683,968 Sprint Nextel 87,635 1,655,425 --------------- Total 2,339,393 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $298,758,392) $ 385,299,617 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 225 RiverSource VP - S&P 500 Index Fund MONEY MARKET FUND (1.6%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 6,076,431(f) $ 6,076,431 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $6,076,431) $ 6,076,431 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $304,834,823)(g) $ 391,376,048 ================================================================================================= 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 Dec. 31, 2006, 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, March 2007 82 (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) Affiliated Money Market Fund -- See Note 10 to the financial statements. (g) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $308,180,680 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 92,730,952 Unrealized depreciation (9,535,584) ----------------------------------------------------------------------- Net unrealized appreciation $ 83,195,368 -----------------------------------------------------------------------
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 riversource.com. - ------------------------------------------------------------------------------ 226 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Select Value Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (97.5%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.3%) DRS Technologies 1,800 $ 94,824 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (0.4%) BorgWarner 1,851 109,246 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.6%) AMVESCAP ADR 12,500(c) 308,125 Bear Stearns Companies 900 146,502 --------------- Total 454,627 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.9%) Airgas 4,600 186,392 Albemarle 4,300 308,740 Celanese Series A 2,200 56,936 --------------- Total 552,068 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (4.8%) Colonial BancGroup 8,300 213,642 Comerica 4,800 281,664 Compass Bancshares 9,400 560,710 KeyCorp 8,400 319,452 --------------- Total 1,375,468 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (3.9%) Covanta Holding 12,700(b) 279,908 Knoll 11,800 259,600 RR Donnelley & Sons 16,100 572,194 --------------- Total 1,111,702 - ------------------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (1.5%) ARRIS Group 9,400(b) 117,594 Avocent 4,400(b) 148,940 Polycom 5,100(b) 157,641 --------------- Total 424,175 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (2.5%) Chicago Bridge & Iron 5,800(c) 158,572 URS 13,200(b) 565,620 --------------- Total 724,192 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (4.0%) AptarGroup 9,700 572,688 Sonoco Products 14,900 567,094 --------------- Total 1,139,782 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (7.2%) American Electric Power 9,000 383,220 Edison Intl 6,300 286,524 Idacorp 14,100 544,965 Pinnacle West Capital 11,300 572,797 PPL 6,400 229,376 --------------- Total 2,016,882 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.8%) Regal-Beloit 4,600 241,546 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) ELECTRONIC EQUIPMENT & INSTRUMENTS (2.1%) Coherent 2,900(b) $ 91,553 Flextronics Intl 35,500(b,c) 407,540 Trimble Navigation 2,000(b) 101,460 --------------- Total 600,553 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.9%) Diamond Offshore Drilling 2,500 199,850 Noble 3,600 274,140 SEACOR Holdings 800(b) 79,312 --------------- Total 553,302 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (1.9%) Ruddick 10,400 288,600 Safeway 2,800 96,768 SUPERVALU 4,200 150,150 --------------- Total 535,518 - ------------------------------------------------------------------------------------------------- FOOD PRODUCTS (3.7%) ConAgra Foods 6,700 180,900 HJ Heinz 6,700 301,567 Hormel Foods 15,000 560,100 --------------- Total 1,042,567 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (2.7%) AGL Resources 5,500 214,005 ONEOK 3,500 150,920 Questar 4,900 406,945 --------------- Total 771,870 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.5%) Beckman Coulter 7,100 424,580 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.5%) AmerisourceBergen 4,400 197,824 CIGNA 2,900 381,553 Magellan Health Services 4,000(b) 172,880 McKesson 5,000 253,500 --------------- Total 1,005,757 - ------------------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (1.5%) IMS Health 15,200 417,696 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.8%) Darden Restaurants 12,500 502,125 - ------------------------------------------------------------------------------------------------- INSURANCE (8.3%) Assurant 4,300 237,575 Lincoln Natl 9,700 644,080 Old Republic Intl 24,400 568,032 ProAssurance 2,100(b) 104,832 Safeco 8,800 550,440 Zenith Natl Insurance 4,800 225,168 --------------- Total 2,330,127 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.5%) Expedia 3,900(b) 81,822 Priceline.com 1,700(b) 74,137 --------------- Total 155,959 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) IT SERVICES (2.5%) Computer Sciences 10,600(b) $ 565,722 MPS Group 11,100(b) 157,398 --------------- Total 723,120 - ------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (0.6%) Mattel 7,100 160,886 - ------------------------------------------------------------------------------------------------- MACHINERY (2.5%) Eaton 3,800 285,532 Terex 3,200(b) 206,656 Trinity Inds 6,500 228,800 --------------- Total 720,988 - ------------------------------------------------------------------------------------------------- MARINE (0.7%) American Commercial Lines 3,000(b) 196,530 - ------------------------------------------------------------------------------------------------- MEDIA (0.5%) Grupo Televisa ADR 5,400(c) 145,854 - ------------------------------------------------------------------------------------------------- METALS & MINING (0.7%) Freeport-McMoRan Copper & Gold Cl B 3,700 206,201 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (1.0%) Family Dollar Stores 8,000 234,640 JC Penney 800 61,888 --------------- Total 296,528 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (1.2%) NSTAR 9,900 340,164 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.3%) Chesapeake Energy 8,800 255,640 CONSOL Energy 4,300 138,159 Western Refining 4,200 106,932 Williams Companies 6,000 156,720 --------------- Total 657,451 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (8.7%) Apartment Investment & Management Cl A 5,000 280,100 DiamondRock Hospitality 9,200 165,692 Douglas Emmett 3,700 98,383 Duke Realty 13,600 556,240 Health Care REIT 5,500 236,610 KKR Financial 14,900 399,171 Mid-America Apartment Communities 3,300 188,892 Realty Income 8,000 221,600 Simon Property Group 2,900 293,741 --------------- Total 2,440,429 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (1.1%) Jones Lang LaSalle 3,500 322,595 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (1.3%) Werner Enterprises 21,800 381,064 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 227 RiverSource VP - Select Value Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.7%) LSI Logic 23,900(b) $ 215,100 Microchip Technology 8,300 271,410 --------------- Total 486,510 - ------------------------------------------------------------------------------------------------- SOFTWARE (5.0%) Cadence Design Systems 41,000(b) 734,310 Hyperion Solutions 13,500(b) 485,190 Sybase 7,000(b) 172,900 --------------- Total 1,392,400 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.7%) OfficeMax 3,000 148,950 TJX Companies 12,200 347,944 --------------- Total 496,894 - ------------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (3.2%) Phillips-Van Heusen 6,900 346,173 VF 6,900 566,352 --------------- Total 912,525 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) THRIFTS & MORTGAGE FINANCE (1.1%) PMI Group 3,100 $ 146,227 Washington Federal 7,500 176,475 --------------- Total 322,702 - ------------------------------------------------------------------------------------------------- TOBACCO (0.7%) Loews-Carolina Group 3,100(d) 200,632 - ------------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS (1.0%) United Rentals 11,400(b) 289,902 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.7%) Millicom Intl Cellular 2,000(b,c) 123,280 Rogers Communications Cl B 6,100(c) 363,560 --------------- Total 486,840 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $26,380,520) $ 27,764,781 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (2.3%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 668,002(e) $ 668,002 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $668,002) $ 668,002 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $27,048,522)(f) $ 28,432,783 ================================================================================================= 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 Dec. 31, 2006, the value of foreign securities represented 5.3% of net assets. (d) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (e) Affiliated Money Market Fund -- See Note 10 to the financial statements. (f) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $27,081,570 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 1,613,294 Unrealized depreciation (262,081) ------------------------------------------------------------------------ Net unrealized appreciation $ 1,351,213 ------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ 228 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT INVESTMENTS IN SECURITIES RiverSource VP - Short Duration U.S. Government Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) BONDS (105.2%)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT FOREIGN AGENCIES (2.2%) KFW 05-19-09 5.25% $ 10,000,000(c) $ 10,044,900 - ------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (46.3%) Federal Farm Credit Bank 04-05-07 2.15 6,600,000 6,547,530 06-19-07 6.75 2,565,000 2,582,732 10-10-08 4.25 4,040,000 3,987,492 Federal Home Loan Bank 10-19-07 4.13 15,000,000 14,869,695 01-18-08 4.63 4,665,000 4,639,156 02-08-08 4.63 1,470,000 1,461,024 02-13-08 5.25 3,970,000 3,972,088 11-21-08 4.63 2,215,000 2,198,454 Federal Home Loan Mtge Corp 01-30-07 3.00 2,500,000 2,495,242 08-17-07 4.00 6,210,000 6,162,419 06-15-08 3.88 920,000 904,332 10-15-08 5.13 1,825,000 1,827,338 Federal Natl Mtge Assn 03-02-07 3.00 3,855,000 3,841,168 05-15-07 3.88 5,000,000 4,974,650 10-15-08 4.50 1,545,000 1,531,216 U.S. Treasury 09-30-07 4.00 27,745,000 27,530,420 11-30-07 4.25 7,410,000 7,359,056 02-15-08 3.38 15,130,000 14,865,815 05-31-08 4.88 27,990,000 27,976,873 10-31-08 4.88 40,235,000 40,253,871 10-31-11 4.63 2,440,000 2,431,135 11-15-16 4.63 2,810,000 2,791,561 11-15-18 9.00 2,115,000(k) 2,908,290 08-15-23 6.25 560,000 644,569 U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38 22,938,840(g) 22,873,782 --------------- Total 211,629,908 - ------------------------------------------------------------------------------------------------- ASSET-BACKED (1.5%) Capital Auto Receivables Asset Trust Series 2006-SN1A Cl A4B 03-20-10 5.43 1,525,000(d,e) 1,525,000 Franklin Auto Trust Series 2004-2 Cl A4 (MBIA) 08-15-12 3.93 5,000,000(m) 4,931,653 Small Business Administration Participation Ctfs Series 2001-20H Cl 1 08-01-21 6.34 302,708 313,578 Small Business Administration Series 2001-10B Cl 1 09-10-11 5.89 286,972 292,453 --------------- Total 7,062,684 - -------------------------------------------------------------------------------------------------
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT COMMERCIAL MORTGAGE-BACKED (2.0%)(f) Citigroup Commercial Mtge Trust Series 2005-C3 Cl A1 05-15-43 4.39% $ 4,054,060 $ 3,981,207 Federal Home Loan Mtge Corp Multifamily Structured Pass-Through Ctfs Series K001 Cl A2 04-25-16 5.65 3,605,642 3,651,795 Federal Natl Mtge Assn #360800 01-01-09 5.74 886,107 889,605 Federal Natl Mtge Assn #381990 10-01-09 7.11 464,374 485,498 --------------- Total 9,008,105 - ------------------------------------------------------------------------------------------------- MORTGAGE-BACKED (53.2%)(f) Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2005-12 Cl 2A1 03-25-36 5.71 1,352,486(j) 1,356,692 Adjustable Rate Mtge Trust Collateralized Mtge Obligation Series 2006-1 Cl 2A1 03-25-36 5.97 1,576,521(j) 1,576,804 American Home Mtge Assets Collateralized Mtge Obligation Series 2006-2 Cl 2A2 09-25-46 5.55 3,074,010(j) 3,066,652 American Home Mtge Assets Collateralized Mtge Obligation Series 2006-3 Cl 3A2 10-25-46 5.61 2,484,585(j) 2,491,589 Bank of America Alternative Loan Trust Collateralized Mtge Obligation Series 2006-9 Cl 1CB1 01-25-37 6.00 3,000,000(b) 3,011,719 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2005-6CB Cl 1A1 04-25-35 7.50 873,663 905,447 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-2CB Cl A11 03-25-36 6.00 2,625,639 2,625,469 Countrywide Alternative Loan Trust Collateralized Mtge Obligation Series 2006-OA8 Cl 1A2 07-25-46 5.58 3,089,524(e) 3,097,243 Countrywide Home Loans Collateralized Mtge Obligation Series 2005-R2 Cl 2A1 06-25-35 7.00 1,930,871(d) 1,997,580
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Countrywide Home Loans Collateralized Mtge Obligation Series 2006-OA5 Cl 2A2 04-25-46 5.65% $ 2,045,922(j) $ 2,046,905 Federal Home Loan Mtge Corp 01-01-37 6.00 5,800,000(b) 5,841,701 01-01-37 6.50 2,075,000(b) 2,113,259 Federal Home Loan Mtge Corp #1G2496 09-01-36 6.21 1,399,842(j) 1,412,006 Federal Home Loan Mtge Corp #1J1445 01-01-37 5.92 2,725,000(j) 2,736,922 Federal Home Loan Mtge Corp #A18107 01-01-34 5.50 2,113,676 2,092,530 Federal Home Loan Mtge Corp #B16408 09-01-19 5.50 1,376,856(k) 1,377,100 Federal Home Loan Mtge Corp #C73304 11-01-32 7.00 379,437 390,075 Federal Home Loan Mtge Corp #D95319 03-01-22 6.00 146,712 148,748 Federal Home Loan Mtge Corp #E00489 06-01-12 7.00 7,879 8,100 Federal Home Loan Mtge Corp #E81240 06-01-15 7.50 1,118,540 1,161,573 Federal Home Loan Mtge Corp #E92454 11-01-17 5.00 815,995 804,140 Federal Home Loan Mtge Corp #E93465 11-01-17 5.50 920,396 921,960 Federal Home Loan Mtge Corp #E95188 03-01-18 6.00 477,101 484,727 Federal Home Loan Mtge Corp #G10669 03-01-12 7.50 459,130 475,620 Federal Home Loan Mtge Corp #G11243 04-01-17 6.50 1,321,352 1,355,919 Federal Home Loan Mtge Corp #G12100 11-01-13 5.00 99,371 98,227 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2590 Cl BI 02-15-14 2.28 658,116(i) 27,268 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2639 Cl UI 03-15-22 9.93 2,749,213(i) 417,792 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2718 Cl IA 10-15-22 20.00 447,013(i) 16,597
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 229 RiverSource VP - Short Duration U.S. Government Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2783 Cl MI 03-15-25 20.00% $ 1,427,443(i) $ 74,308 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only Series 2795 Cl IY 07-15-17 15.06 1,134,670(i) 111,381 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Interest Only/Inverse Floater Series 2882 Cl XS 11-15-19 3.14 2,022,646(h,i) 152,307 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2617 Cl HD 06-15-16 7.00 1,301,649 1,341,144 Federal Home Loan Mtge Corp Collateralized Mtge Obligation Series 2843 Cl BA 01-15-18 5.00 1,191,770 1,179,015 Federal Natl Mtge Assn 01-01-22 5.50 3,800,000(b) 3,798,814 01-01-37 5.50 5,500,000(b) 5,434,687 01-01-37 6.00 6,000,000(b) 6,039,359 01-01-37 6.50 5,700,000(b) 5,806,874 Federal Natl Mtge Assn #190353 08-01-34 5.00 2,771,194 2,678,829 Federal Natl Mtge Assn #252211 01-01-29 6.00 116,095 117,417 Federal Natl Mtge Assn #252409 03-01-29 6.50 1,337,298 1,376,069 Federal Natl Mtge Assn #254384 06-01-17 7.00 363,268 373,421 Federal Natl Mtge Assn #254723 05-01-23 5.50 3,629,599 3,612,214 Federal Natl Mtge Assn #254748 04-01-13 5.50 980,227 981,836 Federal Natl Mtge Assn #254757 05-01-13 5.00 975,384 962,687 Federal Natl Mtge Assn #254774 05-01-13 5.50 800,741 803,343 Federal Natl Mtge Assn #255488 10-01-14 5.50 1,317,581 1,322,753 Federal Natl Mtge Assn #255501 09-01-14 6.00 1,068,822 1,085,965 Federal Natl Mtge Assn #313470 08-01-10 7.50 276,605 281,749 Federal Natl Mtge Assn #323133 04-01-13 5.50 45,460 45,654 Federal Natl Mtge Assn #357324 01-01-33 5.00 3,518,954 3,405,152
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #357485 02-01-34 5.50% $ 4,744,617 $ 4,696,252 Federal Natl Mtge Assn #507182 07-01-14 6.00 93,992 95,446 Federal Natl Mtge Assn #512232 05-01-29 7.00 35,196 36,350 Federal Natl Mtge Assn #535168 12-01-14 5.50 149,452 150,042 Federal Natl Mtge Assn #545818 07-01-17 6.00 1,317,944 1,339,954 Federal Natl Mtge Assn #545864 08-01-17 5.50 1,759,463 1,765,558 Federal Natl Mtge Assn #545910 08-01-17 6.00 1,574,343 1,600,681 Federal Natl Mtge Assn #555063 11-01-17 5.50 2,162,885 2,169,867 Federal Natl Mtge Assn #555343 08-01-17 6.00 601,695 610,536 Federal Natl Mtge Assn #555367 03-01-33 6.00 2,992,082 3,019,386 Federal Natl Mtge Assn #555375 04-01-33 6.00 139,340 141,182 Federal Natl Mtge Assn #555740 08-01-18 4.50 185,143 178,982 Federal Natl Mtge Assn #602630 10-01-31 7.00 251,884 259,193 Federal Natl Mtge Assn #606789 10-01-31 7.00 2,199,114 2,262,933 Federal Natl Mtge Assn #626720 01-01-17 6.00 459,047 465,879 Federal Natl Mtge Assn #630992 09-01-31 7.00 965,526 1,006,338 Federal Natl Mtge Assn #630993 09-01-31 7.50 819,617 855,850 Federal Natl Mtge Assn #633672 06-01-17 6.00 364,767 371,089 Federal Natl Mtge Assn #636720 05-01-17 5.50 115,791 116,067 Federal Natl Mtge Assn #638210 05-01-32 6.50 135,246 138,535 Federal Natl Mtge Assn #648040 06-01-32 6.50 669,500 684,845 Federal Natl Mtge Assn #648349 06-01-17 6.00 1,140,982 1,160,070 Federal Natl Mtge Assn #648679 07-01-32 6.00 2,668,776 2,693,130 Federal Natl Mtge Assn #654413 09-01-32 7.00 190,771 196,244 Federal Natl Mtge Assn #656562 02-01-33 7.00 266,903 274,901 Federal Natl Mtge Assn #665752 09-01-32 6.50 575,723 588,919 Federal Natl Mtge Assn #668412 02-01-18 5.50 606,829 608,362
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #670387 08-01-32 7.00% $ 17,958 $ 18,490 Federal Natl Mtge Assn #671054 01-01-33 7.00 27,278 28,061 Federal Natl Mtge Assn #671174 02-01-33 4.60 700,399(j) 693,319 Federal Natl Mtge Assn #675692 02-01-18 6.00 498,309 505,631 Federal Natl Mtge Assn #678940 02-01-18 5.50 887,279 889,593 Federal Natl Mtge Assn #684588 03-01-33 6.50 254,037 260,374 Federal Natl Mtge Assn #688181 03-01-33 6.00 1,507,581 1,521,338 Federal Natl Mtge Assn #695838 04-01-18 5.50 264,321 265,081 Federal Natl Mtge Assn #701937 04-01-33 6.00 180,901 182,427 Federal Natl Mtge Assn #704610 06-01-33 5.50 3,534,969 3,498,935 Federal Natl Mtge Assn #705655 05-01-33 5.00 1,544,409 1,493,952 Federal Natl Mtge Assn #720378 06-01-18 4.50 1,523,016 1,472,832 Federal Natl Mtge Assn #722325 07-01-33 4.97 741,382(j) 732,440 Federal Natl Mtge Assn #723448 07-01-13 5.00 879,104 873,758 Federal Natl Mtge Assn #725232 03-01-34 5.00 3,650,976 3,531,695 Federal Natl Mtge Assn #725425 04-01-34 5.50 3,995,705 3,955,238 Federal Natl Mtge Assn #725431 08-01-15 5.50 2,195,697 2,205,089 Federal Natl Mtge Assn #725558 06-01-34 4.58 1,607,633(j) 1,581,575 Federal Natl Mtge Assn #725737 08-01-34 4.53 903,889(j) 898,140 Federal Natl Mtge Assn #725773 09-01-34 5.50 4,700,962 4,650,564 Federal Natl Mtge Assn #735057 01-01-19 4.50 2,257,181 2,182,806 Federal Natl Mtge Assn #740843 11-01-18 5.00 130,714 128,811 Federal Natl Mtge Assn #744010 07-01-13 5.00 1,417,697 1,405,967 Federal Natl Mtge Assn #745802 07-01-36 6.00 4,465,198 4,495,431 Federal Natl Mtge Assn #747536 11-01-33 5.00 2,029,585 1,963,277 Federal Natl Mtge Assn #754297 12-01-33 4.73 277,743(j) 270,749 Federal Natl Mtge Assn #755891 03-01-13 5.00 342,773 340,572
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 230 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 #791447 10-01-34 6.00% $ 674,977 $ 680,036 Federal Natl Mtge Assn #797044 07-01-34 5.50 3,380,820 3,344,575 Federal Natl Mtge Assn #799769 11-01-34 5.05 1,174,012(j) 1,165,864 Federal Natl Mtge Assn #801344 10-01-34 5.07 1,358,239(j) 1,357,247 Federal Natl Mtge Assn #815264 05-01-35 5.22 1,930,846(j) 1,926,666 Federal Natl Mtge Assn #815463 02-01-35 5.50 784,044 775,639 Federal Natl Mtge Assn #844257 11-01-35 5.09 1,779,748(j) 1,780,139 Federal Natl Mtge Assn #845070 12-01-35 5.09 1,081,564(j) 1,075,984 Federal Natl Mtge Assn #849082 01-01-36 5.84 1,374,272(j) 1,382,641 Federal Natl Mtge Assn #849170 01-01-36 5.95 2,686,462(j) 2,703,125 Federal Natl Mtge Assn #850855 12-01-35 4.99 1,514,521(j) 1,503,889 Federal Natl Mtge Assn #865689 02-01-36 5.90 3,166,461(j) 3,211,013 Federal Natl Mtge Assn #866097 02-01-36 6.18 2,475,138(j) 2,518,478 Federal Natl Mtge Assn #878661 02-01-36 5.50 4,658,180 4,583,090 Federal Natl Mtge Assn #881629 02-01-36 5.50 3,492,756 3,436,453 Federal Natl Mtge Assn #885827 06-01-36 6.50 2,493,192 2,557,339 Federal Natl Mtge Assn #885871 06-01-36 7.00 1,921,797 1,985,846 Federal Natl Mtge Assn #886461 08-01-36 6.19 1,399,459(j) 1,417,246 Federal Natl Mtge Assn #887096 07-01-36 5.82 2,604,692(j) 2,636,783 Federal Natl Mtge Assn #900197 10-01-36 5.98 1,649,634(j) 1,659,911 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-24 Cl PI 12-25-12 20.00 398,225(i) 7,960 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-26 Cl MI 03-25-23 12.58 709,940(i) 123,490
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-71 Cl IM 12-25-31 14.12% $ 584,573(i) $ 91,501 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2003-81 Cl LI 11-25-13 10.08 1,178,953(i) 52,738 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2004-84 Cl GI 12-25-22 12.17 470,063(i) 62,984 Federal Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 367 Cl 2 01-25-36 8.45 2,037,292(i) 480,037 Federal Natl Mtge Assn Collateralized Mtge Obligation Series 2003-133 Cl GB 12-25-26 8.00 398,730 420,198 Federal Natl Mtge Assn Collateralized Mtge Obligation Series 2003-94 Cl QB 07-25-23 5.50 1,845,844 1,838,881 Federal Natl Mtge Assn Collateralized Mtge Obligation Series 2003-W11 Cl A1 06-25-33 8.02 32,941(j) 33,102 Federal Natl Mtge Assn Collateralized Mtge Obligation Series 2004-60 Cl PA 04-25-34 5.50 2,051,964 2,050,684 Govt Natl Mtge Assn #3501 01-20-34 6.00 7,360,817 7,449,457 Govt Natl Mtge Assn #3920 11-20-36 6.00 3,494,557 3,534,545 Govt Natl Mtge Assn #498182 05-15-16 6.00 836,999 851,324 Govt Natl Mtge Assn #605970 03-15-33 6.00 275,008 279,110 Govt Natl Mtge Assn #615738 03-15-18 7.00 983,440 1,013,547 Govt Natl Mtge Assn #615740 08-15-13 6.00 1,975,961 2,011,180 Govt Natl Mtge Assn #780758 04-15-13 7.00 177,629 183,339
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Govt Natl Mtge Assn #781507 09-15-14 6.00% $ 902,882 $ 918,915 Govt Natl Mtge Assn Collateralized Mtge Obligation Series 2002-16 Cl PB 04-16-31 6.00 103,318 103,144 Govt Natl Mtge Assn Collateralized Mtge Obligation Series 2003-17 Cl B 10-16-27 5.00 125,000 123,616 Govt Natl Mtge Assn Collateralized Mtge Obligation Series 2004-19 Cl DJ 03-20-34 4.50 1,272,750 1,248,497 Govt Natl Mtge Assn Collateralized Mtge Obligation Series 2006-32 Cl A 01-16-30 5.08 4,444,687 4,424,280 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2004-4 Cl 3A 06-19-34 2.98 1,115,569(j) 1,110,787 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2005-12 Cl 2A11 10-19-35 6.83 1,749,952(j) 1,802,000 Harborview Mtge Loan Trust Collateralized Mtge Obligation Series 2006-8 Cl 2A1B 08-21-46 5.57 990,357(j) 989,919 IndyMac Index Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR13 Cl A1 07-25-36 6.10 2,554,955(j) 2,561,215 Morgan Stanley Mtge Loan Trust Collateralized Mtge Obligation Series 2004-2AR Cl 3A 02-25-34 5.05 1,217,390(j) 1,201,637 Structured Adjustable Rate Mtge Loan Trust Collateralized Mtge Obligation Series 2005-15 Cl 4A1 07-25-35 5.52 2,956,993(j) 2,930,196 Structured Adjustable Rate Mtge Loan Trust Collateralized Mtge Obligation Series 2006-5 Cl 4A1 06-25-36 5.97 1,877,728(j) 1,882,936 Vendee Mtge Trust Collateralized Mtge Obligation Series 2003-1 Cl D 12-15-25 5.75 1,261,394 1,255,204
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 231 RiverSource VP - Short Duration U.S. Government Fund BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Vendee Mtge Trust Collateralized Mtge Obligation Series 2003-2 Cl D 11-15-23 5.00% $ 37,780 $ 37,530 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-10 Cl A1 10-25-35 5.00 4,449,087 4,278,064
BONDS (CONTINUED)
ISSUER COUPON PRINCIPAL VALUE(a) RATE AMOUNT MORTGAGE-BACKED (CONT.) Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2005-5 Cl 2A1 05-25-35 5.50% $ 1,699,697 $ 1,669,952 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2006-AR6 Cl 5A1 03-25-36 5.11 1,921,613(j) 1,899,204 --------------- Total 243,201,215 - ------------------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $483,101,407) $ 480,946,812 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (0.1%)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 668,494(l) $ 668,494 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $668,494) $ 668,494 - -------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES (1.4%)
ISSUER EFFECTIVE AMOUNT VALUE(a) YIELD PAYABLE AT MATURITY U.S. GOVERNMENT AGENCIES Federal Home Loan Bank Disc Nts 01-02-07 4.83% $ 6,200,000 $ 6,196,673 - ------------------------------------------------------------------------------------------------- TOTAL SHORT-TERM SECURITIES (Cost: $6,197,505) $ 6,196,673 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $489,967,406)(n) ` $ 487,811,979 ================================================================================================= NOTES TO INVESTMENTS IN SECURITIES (a) Securities are valued by procedures described in Note 1 to the financial statements (b) At Dec. 31, 2006, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $32,215,025. (c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2006, the value of foreign securities represented 2.2% 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 Dec. 31, 2006, the value of these securities amounted to $3,522,580 or 0.8% of net assets. (e) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (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) 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. (h) 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 Dec. 31, 2006. At Dec. 31, 2006, the value of inverse floaters represented 0.0% of net assets. (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 Dec. 31, 2006. (j) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2006. (k) 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, March 2007, 2-year $ 35,800,000 U.S. Treasury Note, March 2007, 5-year 9,800,000 SALE CONTRACTS U.S. Long Bond, March 2007, 20-year 5,700,000 U.S. Treasury Note, March 2007, 10-year 20,400,000 - ------------------------------------------------------------------------------ 232 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund NOTES TO INVESTMENTS IN SECURITIES (CONTINUED) (l) Affiliated Money Market Fund -- See Note 10 to the financial statements. (m) The following abbreviation is used in the portfolio security description to identify the insurer of the issue: MBIA -- MBIA Insurance Corporation (n) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $490,898,663 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 1,220,795 Unrealized depreciation (4,307,479) ----------------------------------------------------------------------- Net unrealized depreciation $ (3,086,684) -----------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 233 INVESTMENTS IN SECURITIES RiverSource VP - Small Cap Advantage Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (98.5%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.4%) Ceradyne 13,851(b) $ 782,582 Curtiss-Wright 12,000 444,960 HEICO 14,000 543,620 K&F Inds Holdings 19,900(b) 451,929 Teledyne Technologies 19,400(b) 778,522 --------------- Total 3,001,613 - ------------------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.6%) Hub Group Cl A 32,959(b) 908,020 Pacer Intl 15,200 452,504 --------------- Total 1,360,524 - ------------------------------------------------------------------------------------------------- AIRLINES (1.0%) AirTran Holdings 26,000(b) 305,240 Continental Airlines Cl B 20,300(b) 837,375 ExpressJet Holdings 42,000(b) 340,200 Republic Airways Holdings 25,000(b) 419,500 SkyWest 12,700 323,977 --------------- Total 2,226,292 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (0.7%) ArvinMeritor 31,295 570,508 Cooper Tire & Rubber 17,000 243,100 LKQ 14,000(b) 321,860 Tenneco 19,200(b) 474,624 --------------- Total 1,610,092 - ------------------------------------------------------------------------------------------------- BEVERAGES (0.4%) Boston Beer Cl A 25,900(b) 931,882 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (3.6%) Alkermes 21,000(b) 280,770 Applera - Celera Group 47,800(b,d) 668,722 Arena Pharmaceuticals 28,100(b) 362,771 BioMarin Pharmaceutical 26,244(b) 430,139 Cubist Pharmaceuticals 20,800(b) 376,688 CV Therapeutics 17,000(b) 237,320 Digene 7,000(b) 335,440 Enzon Pharmaceuticals 40,000(b) 340,400 Human Genome Sciences 46,200(b) 574,728 InterMune 11,200(b) 344,400 Isis Pharmaceuticals 38,000(b) 422,560 Lexicon Genetics 112,400(b) 405,764 Medarex 51,100(b) 755,769 Myriad Genetics 13,200(b) 413,160 Nabi Biopharmaceuticals 52,000(b) 352,560 OSI Pharmaceuticals 9,000(b) 314,820 Progenics Pharmaceuticals 17,800(b) 458,172 Regeneron Pharmaceuticals 13,200(b) 264,924 United Therapeutics 10,000(b) 543,700 --------------- Total 7,882,807 - ------------------------------------------------------------------------------------------------- BUILDING PRODUCTS (0.3%) Goodman Global 33,100(b) 569,320 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) CAPITAL MARKETS (1.3%) Ares Capital 26,000 $ 496,860 Knight Capital Group Cl A 46,373(b) 888,970 LaBranche & Co 35,101(b,e) 345,043 Piper Jaffray Companies 9,000(b) 586,350 TradeStation Group 38,000(b) 522,500 --------------- Total 2,839,723 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.7%) Arch Chemicals 13,000 433,030 CF Inds Holdings 18,000 461,520 HB Fuller 24,000 619,680 NewMarket 8,000 472,400 Pioneer Companies 16,000(b) 458,560 Sensient Technologies 22,934 564,176 Spartech 28,987 760,040 --------------- Total 3,769,406 - ------------------------------------------------------------------------------------------------- COMMERCIAL BANKS (4.5%) Central Pacific Financial 8,400 325,584 Chittenden 15,000 460,350 Citizens Banking 15,000 397,500 City Holding 21,700 887,313 First BanCorp 45,000(c) 428,850 Greater Bay Bancorp 29,552 778,104 Hancock Holding 12,423 656,431 Hanmi Financial 36,800 829,104 Oriental Financial Group 31,000(c) 401,450 Pacific Capital Bancorp 20,997 705,079 Preferred Bank 8,900 534,801 Prosperity Bancshares 14,000 483,140 Sterling Financial 27,700 936,538 SVB Financial Group 13,000(b) 606,060 Trustmark 24,999 817,717 United Community Banks 19,000 614,080 --------------- Total 9,862,101 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (4.5%) ABM Inds 34,000 772,140 American Reprographics 20,700(b) 689,517 CBIZ 61,300(b) 427,261 Clean Harbors 10,000(b) 484,100 Consolidated Graphics 9,900(b) 584,793 CRA Intl 8,700(b) 455,880 Deluxe 29,000 730,800 Ennis 20,000 489,200 GEO Group 18,000(b) 675,360 Global Cash Access Holdings 22,800(b) 370,044 Heidrick & Struggles Intl 8,000(b) 338,880 Herman Miller 18,200 661,752 IHS Cl A 19,100(b) 754,068 IKON Office Solutions 29,000 474,730 Knoll 27,000 594,000 Viad 13,479 547,247 Watson Wyatt Worldwide Cl A 17,500 790,125 --------------- Total 9,839,897 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMUNICATIONS EQUIPMENT (2.8%) 3Com 60,900(b) $ 250,299 ADTRAN 17,800 404,060 Anaren 17,800(b) 316,128 ARRIS Group 70,000(b) 875,700 CommScope 15,236(b) 464,393 Finisar 108,861(b) 351,621 Foundry Networks 62,100(b) 930,258 InterDigital Communications 7,400(b) 248,270 Polycom 37,800(b) 1,168,398 Sonus Networks 79,900(b) 526,541 Sycamore Networks 79,500(b) 298,920 UTStarcom 35,000(b) 306,250 --------------- Total 6,140,838 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (1.1%) Brocade Communications Systems 98,400(b) 807,864 Electronics for Imaging 20,700(b) 550,206 Emulex 18,800(b) 366,788 Imation 15,241 707,640 --------------- Total 2,432,498 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.4%) EMCOR Group 7,000(b) 397,950 Granite Construction 9,000 452,880 --------------- Total 850,830 - ------------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS (0.4%) Headwaters 22,000(b) 527,120 Texas Inds 5,400 346,842 --------------- Total 873,962 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (0.9%) Cash America Intl 16,189 759,264 EZCORP Cl A 31,100(b) 505,375 First Cash Financial Services 24,000(b) 620,880 --------------- Total 1,885,519 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (0.7%) Greif Cl A 6,100 722,240 Rock-Tenn Cl A 13,986 379,160 Silgan Holdings 10,000 439,200 --------------- Total 1,540,600 - ------------------------------------------------------------------------------------------------- DISTRIBUTORS (0.2%) Building Materials Holding 17,000 419,730 - ------------------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.8%) Coinstar 18,000(b) 550,260 DeVry 16,000 448,000 Pre-Paid Legal Services 10,000 391,300 Regis 8,000 316,320 --------------- Total 1,705,880 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 234 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) DIVERSIFIED FINANCIAL SERVICES (0.5%) Financial Federal 11,100 $ 326,451 Intl Securities Exchange Holdings 17,700 828,183 --------------- Total 1,154,634 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.4%) Alaska Communications Systems Group 30,400 461,776 Cbeyond 12,100(b) 370,139 Cincinnati Bell 81,200(b) 371,084 CT Communications 14,000 320,880 General Communication Cl A 30,000(b) 471,900 Golden Telecom 8,100(c) 379,404 Time Warner Telecom Cl A 32,300(b) 643,739 --------------- Total 3,018,922 - ------------------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.4%) Cleco 27,534 694,683 Idacorp 16,800 649,320 Unisource Energy 27,000 986,310 Westar Energy 29,200 758,032 --------------- Total 3,088,345 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.9%) Acuity Brands 21,600 1,124,064 General Cable 22,809(b) 996,981 Genlyte Group 15,900(b) 1,241,949 Regal-Beloit 15,992 839,740 --------------- Total 4,202,734 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (2.8%) Aeroflex 47,174(b) 552,879 Anixter Intl 9,400(b) 510,420 Benchmark Electronics 16,000(b) 389,760 FLIR Systems 23,400(b) 744,822 Global Imaging Systems 32,000(b) 702,400 Itron 12,100(b) 627,264 KEMET 47,000(b) 343,100 Plexus 18,824(b) 449,517 Rofin-Sinar Technologies 7,980(b) 482,471 Rogers 9,000(b) 532,350 ScanSource 14,000(b) 425,600 Technitrol 13,000 310,570 --------------- Total 6,071,153 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (3.0%) BASiC Energy Services 17,800(b) 438,770 Dril-Quip 12,600(b) 493,416 Grey Wolf 110,500(b) 758,030 GulfMark Offshore 9,000(b) 336,690 Lone Star Technologies 5,700(b) 275,937 Matrix Service 31,000(b) 499,100 NATCO Group Cl A 13,900(b) 443,132 Oil States Intl 21,600(b) 696,168 Parker Drilling 64,714(b) 528,713 RPC 24,750 417,780 Trico Marine Services 7,900(b) 302,649 Veritas DGC 6,349(b) 543,665 W-H Energy Services 17,296(b) 842,142 --------------- Total 6,576,192 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (0.6%) Longs Drug Stores 12,400 $ 525,512 Pantry 7,964(b) 373,034 Spartan Stores 24,400 510,692 --------------- Total 1,409,238 - -------------------------------------------------------------------------------------------------- FOOD PRODUCTS (0.6%) Imperial Sugar 14,000 338,940 Premium Standard Farms 22,800 423,396 Ralcorp Holdings 6,000(b) 305,340 Sanderson Farms 8,000 242,320 --------------- Total 1,309,996 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (1.2%) Laclede Group 18,900 662,067 Nicor 21,413 1,002,128 Southwest Gas 24,400 936,228 --------------- Total 2,600,423 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.1%) DJO 12,800(b) 548,096 Greatbatch 12,300(b) 331,116 Hologic 22,027(b) 1,041,437 ICU Medical 9,500(b) 386,460 Immucor 18,000(b) 526,140 Mentor 11,400 557,118 Palomar Medical Technologies 10,100(b) 511,767 Quidel 24,000(b) 326,880 West Pharmaceutical Services 8,889 455,383 --------------- Total 4,684,397 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.5%) Air Methods 13,000(b) 362,960 AMN Healthcare Services 24,300(b) 669,222 Apria Healthcare Group 14,000(b) 373,100 Emergency Medical Services LP Cl A 18,000(b) 377,640 Healthways 14,000(b) 667,940 inVentiv Health 21,701(b) 767,130 Kindred Healthcare 12,915(b) 326,104 LHC Group 13,000(b) 370,630 Magellan Health Services 16,500(b) 713,130 MedCath 10,000(b) 273,600 Molina Healthcare 13,800(b) 448,638 Psychiatric Solutions 24,600(b) 922,992 Radiation Therapy Services 15,000(b) 472,800 Sunrise Senior Living 13,900(b) 427,008 WellCare Health Plans 8,900(b) 613,210 --------------- Total 7,786,104 - ------------------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (0.4%) Omnicell 23,000(b) 428,490 TriZetto Group 20,900(b) 383,933 --------------- Total 812,423 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (2.4%) Buffalo Wild Wings 6,000(b) 319,200 CBRL Group 12,000 537,120 CEC Entertainment 11,000(b) 442,750 Chipotle Mexican Grill Cl B 12,000(b) 624,000 CKE Restaurants 34,200 629,280
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HOTELS, RESTAURANTS & LEISURE (CONT.) Domino's Pizza 20,400 $ 571,200 Dover Downs Gaming & Entertainment 26,000 347,620 Jack in the Box 11,523(b) 703,364 Speedway Motorsports 14,800 568,320 Triarc Companies Cl B 12,000 240,000 Vail Resorts 7,300(b) 327,186 --------------- Total 5,310,040 - ------------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (1.0%) American Greetings Cl A 29,000 692,230 Blyth 13,000 269,750 Champion Enterprises 62,600(b) 585,936 Hovnanian Enterprises Cl A 11,000(b) 372,900 Meritage Homes 7,000(b) 334,040 --------------- Total 2,254,856 - ------------------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (0.5%) Black Hills 27,000 997,380 - ------------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.2%) Tredegar 21,600 488,376 - ------------------------------------------------------------------------------------------------- INSURANCE (5.5%) American Physicians Capital 15,964(b) 639,199 Commerce Group 28,052 834,547 Delphi Financial Group Cl A 31,425 1,271,455 Horace Mann Educators 50,378 1,017,636 LandAmerica Financial Group 15,623 985,968 Navigators Group 19,200(b) 925,056 Odyssey Re Holdings 23,000 857,900 Ohio Casualty 12,200 363,682 Phoenix Companies 32,300 513,247 ProAssurance 24,500(b) 1,223,040 RLI 9,700 547,274 Safety Insurance Group 15,645 793,358 Selective Insurance Group 19,650 1,125,749 Zenith Natl Insurance 19,100 895,981 --------------- Total 11,994,092 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) FTD Group 19,000(b) 339,910 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (1.8%) Digital River 11,400(b) 636,006 Internap Network Services 30,000(b) 596,100 j2 Global Communications 15,500(b) 422,375 NIC 79,900(b) 397,103 RealNetworks 53,300(b) 583,102 Travelzoo 14,200(b) 425,290 ValueClick 28,796(b) 680,449 Websense 12,000(b) 273,960 --------------- Total 4,014,385 - ------------------------------------------------------------------------------------------------- IT SERVICES (2.1%) BISYS Group 28,000(b) 361,480 CSG Systems Intl 24,393(b) 652,025 Forrester Research 19,000(b) 515,090 Gartner 24,800(b) 490,792 infoUSA 37,900 451,389
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 235 RiverSource VP - Small Cap Advantage Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) IT SERVICES (CONT.) Lightbridge 29,000(b) $ 392,660 MPS Group 40,500(b) 574,290 Sykes Enterprises 38,500(b) 679,140 Tyler Technologies 38,000(b) 534,280 --------------- Total 4,651,146 - ------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (1.0%) JAKKS Pacific 15,000(b) 327,600 K2 38,000(b) 501,220 Marvel Entertainment 27,900(b) 750,789 RC2 14,000(b) 616,000 --------------- Total 2,195,609 - ------------------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (1.4%) Bio-Rad Laboratories Cl A 9,300(b) 767,436 Exelixis 45,600(b) 410,400 Illumina 16,000(b) 628,960 Nektar Therapeutics 25,000(b,e) 380,250 Varian 17,900(b) 801,741 --------------- Total 2,988,787 - ------------------------------------------------------------------------------------------------- MACHINERY (3.5%) Accuride 30,000(b) 337,800 Ampco-Pittsburgh 10,000 334,800 Cascade 8,000 423,200 Columbus McKinnon 19,000(b) 399,380 EnPro Inds 10,500(b) 348,705 Gardner Denver 14,800(b) 552,188 Middleby 8,100(b) 847,827 Miller Inds 15,000(b) 360,000 Mueller Inds 14,998 475,437 Navistar Intl 12,000(b) 401,160 Nordson 16,100 802,263 RBC Bearings 23,000(b) 659,180 Valmont Inds 16,800 932,232 Wabtec 15,200 461,776 Watts Water Technologies Cl A 11,000 452,210 --------------- Total 7,788,158 - ------------------------------------------------------------------------------------------------- MARINE (0.5%) American Commercial Lines 16,500(b) 1,080,915 - ------------------------------------------------------------------------------------------------- MEDIA (1.6%) Belo Cl A 24,000 441,120 Charter Communications Cl A 81,000(b) 247,860 Cox Radio Cl A 40,600(b) 661,780 Interactive Data 25,000 601,000 Journal Communications Cl A 38,000 479,180 LodgeNet Entertainment 11,000(b) 275,330 Scholastic 11,800(b) 422,912 Sinclair Broadcast Group Cl A 36,000 378,000 --------------- Total 3,507,182 - ------------------------------------------------------------------------------------------------- METALS & MINING (1.5%) AK Steel Holding 36,000(b) 608,400 Chaparral Steel 18,800 832,276 Cleveland-Cliffs 17,400 842,856 Hecla Mining 50,000(b) 383,000 Metal Management 11,713 443,337 Worthington Inds 11,000 194,920 --------------- Total 3,304,789 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) MULTILINE RETAIL (0.7%) 99 Cents Only Stores 39,310(b) $ 478,403 Big Lots 44,100(b) 1,010,772 --------------- Total 1,489,175 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (0.1%) Avista 12,000 303,720 - ------------------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.3%) Alon USA Energy 12,000 315,720 Arena Resources 20,800(b) 888,368 Atlas America 12,632(b) 643,853 Carrizo Oil & Gas 10,000(b) 290,200 Mariner Energy 23,800(b) 466,480 Penn Virginia 13,300 931,532 Petrohawk Energy 18,000(b) 207,000 Swift Energy 12,000(b) 537,720 VAALCO Energy 63,400(b) 427,950 VeraSun Energy 19,533(b) 385,777 --------------- Total 5,094,600 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.2%) Buckeye Technologies 44,700(b) 535,506 - ------------------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.4%) NBTY 10,000(b) 415,700 Prestige Brands Holdings 29,000(b) 377,580 --------------- Total 793,280 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (1.4%) Adams Respiratory Therapeutics 10,000(b) 408,100 Medicis Pharmaceutical Cl A 13,900 488,307 MGI PHARMA 24,600(b) 452,886 Noven Pharmaceuticals 14,000(b) 356,300 Perrigo 30,400 525,920 Sciele Pharma 21,300(b) 511,200 ViroPharma 22,000(b) 322,080 --------------- Total 3,064,793 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (6.2%) Agree Realty 13,000 446,810 American Home Mtge Investment 20,289 712,550 Arbor Realty Trust 13,800 415,242 BioMed Realty Trust 16,000 457,600 Capital Trust Cl A 9,000 449,460 Cousins Properties 20,000 705,400 EastGroup Properties 12,000 642,720 Entertainment Properties Trust 6,300 368,172 FelCor Lodging Trust 25,000 546,000 Home Properties 11,600 687,532 IMPAC Mtge Holdings 46,347 407,854 Inland Real Estate 35,000 655,200 LaSalle Hotel Properties 20,000 917,000 Nationwide Health Properties 30,400 918,688 Natl Retail Properties 29,000 665,550 Newcastle Investment 7,000 219,240 Potlatch 11,000 482,020 PS Business Parks 9,700 685,887 Realty Income 33,000 914,100 Redwood Trust 8,000 464,640 Sovran Self Storage 9,600 549,888
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) REAL ESTATE INVESTMENT TRUSTS (REITS) (CONT.) Tanger Factory Outlet Centers 20,400 $ 797,232 Winston Hotels 33,000 437,250 --------------- Total 13,546,035 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (0.5%) Florida East Coast Inds 9,500 566,200 Heartland Express 24,000 360,480 Old Dominion Freight Line 11,050(b) 265,974 --------------- Total 1,192,654 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.9%) Advanced Energy Inds 22,800(b) 430,236 Amkor Technology 46,000(b) 429,640 Atheros Communications 25,393(b) 541,379 Atmel 67,200(b) 406,560 Brooks Automation 24,000(b) 345,600 Cirrus Logic 46,900(b) 322,672 Cohu 13,000 262,080 Cymer 13,900(b) 610,905 FormFactor 6,700(b) 249,575 Lattice Semiconductor 54,500(b) 353,160 Micrel 39,000(b) 420,420 MKS Instruments 30,400(b) 686,432 ON Semiconductor 37,100(b) 280,847 RF Micro Devices 64,700(b) 439,313 Silicon Image 42,600(b) 541,872 Silicon Storage Technology 78,600(b) 354,486 Supertex 10,000(b) 392,500 Tessera Technologies 11,400(b) 459,876 Trident Microsystems 28,000(b) 509,040 Varian Semiconductor Equipment Associates 14,000(b) 637,280 --------------- Total 8,673,873 - ------------------------------------------------------------------------------------------------- SOFTWARE (3.2%) Actuate 77,000(b) 457,380 Ansoft 9,000(b) 250,200 ANSYS 6,822(b) 296,689 Aspen Technology 40,083(b) 441,715 Blackbaud 12,000 312,000 Hyperion Solutions 13,900(b) 499,566 Magma Design Automation 29,800(b) 266,114 Manhattan Associates 9,700(b) 291,776 MICROS Systems 15,100(b) 795,769 MicroStrategy Cl A 2,300(b) 262,223 OPNET Technologies 25,400(b) 367,030 Parametric Technology 17,000(b) 306,340 Quality Systems 13,000 484,510 Sybase 31,700(b) 782,990 THQ 12,000(b) 390,240 TIBCO Software 62,100(b) 586,224 VA Software 47,000(b) 236,410 --------------- Total 7,027,176 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 236 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) SPECIALTY RETAIL (3.7%) Aeropostale 16,000(b) $ 493,920 Blockbuster Cl A 94,000(b) 497,260 Cato Cl A 13,753 315,081 Charlotte Russe Holding 12,000(b) 369,000 Charming Shoppes 36,800(b) 497,904 CSK Auto 26,600(b) 456,190 Dress Barn 29,000(b) 676,570 DSW Cl A 15,200(b) 586,264 GUESS? 9,500(b) 602,585 Gymboree 5,800(b) 221,328 Hibbett Sporting Goods 14,000(b) 427,420 J Crew Group 15,000(b) 578,250 Men's Wearhouse 18,100 692,506 Payless ShoeSource 25,600(b) 840,192 Rent-A-Center 19,800(b) 584,298 Talbots 14,000 337,400 --------------- Total 8,176,168 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) TEXTILES, APPAREL & LUXURY GOODS (2.6%) Carter's 13,000(b) $ 331,500 Deckers Outdoor 10,719(b) 642,604 Kellwood 11,000 357,720 K-Swiss Cl A 19,000 584,060 Movado Group 30,400 881,600 Phillips-Van Heusen 20,500 1,028,485 Quiksilver 32,200(b) 507,150 Steven Madden 8,000 280,720 Warnaco Group 19,176(b) 486,687 Wolverine World Wide 24,100 687,332 --------------- Total 5,787,858 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (2.5%) BankUnited Financial Cl A 29,000 810,840 Corus Bankshares 15,800 364,506 Downey Financial 9,200 667,736 FirstFed Financial 11,392(b) 762,922 Ocwen Financial 42,225(b) 669,689 TierOne 30,900 976,749 Triad Guaranty 14,367(b) 788,317 WSFS Financial 6,700 448,431 --------------- Total 5,489,190 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) TRADING COMPANIES & DISTRIBUTORS (0.6%) Applied Industrial Technologies 16,300 $ 428,853 Interline Brands 22,900(b) 514,563 Williams Scotsman Intl 23,000(b) 451,260 --------------- Total 1,394,676 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.3%) iPCS 10,000(b) 553,600 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $198,284,179) $ 216,496,004 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (1.5%)(f)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 3,218,242(g) $ 3,218,242 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $3,218,242) $ 3,218,242 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $201,502,421)(h) $ 219,714,246 ================================================================================================= 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 Dec. 31, 2006, the value of foreign securities represented 0.6% of net assets. (d) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (e) At Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 0.3% of net assets. See Note 6 to the financial statements. 1.2% of net assets is the Fund's cash equivalent position. (g) Affiliated Money Market Fund -- See Note 10 to the financial statements. (h) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $202,002,122 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $21,783,092 Unrealized depreciation (4,070,968) ------------------------------------------------------------------------- Net unrealized appreciation $17,712,124 -------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 237 INVESTMENTS IN SECURITIES RiverSource VP - Small Cap Value Fund DEC. 31, 2006 (Percentages represent value of investments compared to net assets) COMMON STOCKS (92.6%)
ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.3%) Ceradyne 9,200(b) $ 519,800 Orbital Sciences 66,300(b) 1,222,572 --------------- Total 1,742,372 - ------------------------------------------------------------------------------------------------- AIRLINES (1.6%) Air France-KLM ADR 56,650(c) 2,371,369 Alaska Air Group 155,700(b) 6,150,150 ExpressJet Holdings 36,000(b) 291,600 SkyWest 38,500 982,135 --------------- Total 9,795,254 - ------------------------------------------------------------------------------------------------- AUTO COMPONENTS (3.0%) American Axle & Mfg Holdings 258,500 4,908,915 ArvinMeritor 25,600 466,688 Lear 223,800(f) 6,608,814 Modine Mfg 5,500 137,665 STRATTEC SECURITY 26,256(b) 1,223,530 Superior Inds Intl 189,400(f) 3,649,738 Visteon 159,000(b) 1,348,320 --------------- Total 18,343,670 - ------------------------------------------------------------------------------------------------- BEVERAGES (1.3%) Coca-Cola Bottling Company Consolidated 81,902 5,604,554 National Beverage 177,530(f) 2,490,746 --------------- Total 8,095,300 - ------------------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.2%) BioMarin Pharmaceutical 65,700(b) 1,076,823 Savient Pharmaceuticals 37,700(b) 422,617 --------------- Total 1,499,440 - ------------------------------------------------------------------------------------------------- CAPITAL MARKETS (1.0%) Knight Capital Group Cl A 72,800(b) 1,395,576 LaBranche & Co 44,100(b,f) 433,503 Oppenheimer Holdings Cl A 122,972(c) 4,107,265 --------------- Total 5,936,344 - ------------------------------------------------------------------------------------------------- CHEMICALS (1.5%) Georgia Gulf 15,200 293,512 Olin 39,200 647,584 Pioneer Companies 6,000(b) 171,960 PolyOne 663,800(b) 4,978,500 Sensient Technologies 39,200 964,320 Spartech 43,100 1,130,082 Stepan 29,080 920,964 --------------- Total 9,106,922 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMERCIAL BANKS (4.3%) Bank of Hawaii 60,300 $ 3,253,185 Boston Private Financial Holdings 81,540 2,300,243 Central Pacific Financial 11,700 453,492 Chemical Financial 5,200 173,160 Citizens Banking 42,300 1,120,950 City Holding 12,100 494,769 Community Bank System 18,500 425,500 Community Trust Bancorp 3,700 153,661 Cullen/Frost Bankers 39,510 2,205,448 First BanCorp 39,800(c) 379,294 First Community Bancorp 20,600 1,076,762 Greater Bay Bancorp 41,500 1,092,695 Hanmi Financial 25,200 567,756 Independent Bank 25,730 650,712 Intl Bancshares 71,720 2,216,865 Mercantile Bank 8,001 301,638 Nara Bancorp 6,900 144,348 Pacific Capital Bancorp 38,900 1,306,262 Preferred Bank 6,500 390,585 Republic Bancorp 29,080 391,417 Republic Bancorp Cl A 76,460 1,918,381 Security Bank 5,500 125,510 Sterling Bancshares 58,500 761,670 Sterling Financial 9,800 331,338 Susquehanna Bancshares 46,500 1,249,920 UCBH Holdings 47,300 830,588 Umpqua Holdings 62,240 1,831,723 United Community Banks 20,500 662,560 --------------- Total 26,810,432 - ------------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (4.5%) ADESA 37,120 1,030,080 Bowne & Co 52,510 837,009 Brady Cl A 115,700 4,313,295 Brink's 22,310 1,426,055 CBIZ 54,300(b) 378,471 Central Parking 29,300 527,400 Consolidated Graphics 4,200(b) 248,094 Ennis 35,600 870,776 Exponent 38,760(b) 723,262 First Advantage Cl A 56,360(b) 1,294,026 IKON Office Solutions 91,200 1,492,944 John H Harland 20,800 1,044,160 Labor Ready 75,920(b) 1,391,614 Layne Christensen 7,200(b) 236,376 Mac-Gray 345,380(b) 4,116,929 Pike Electric 68,040(b) 1,111,093 Spherion 90,400(b) 671,672 Synagro Technologies 595,262 2,631,058 Viad 26,700 1,084,020 WCA Waste 346,038(b) 2,778,685 --------------- Total 28,207,019 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) COMMUNICATIONS EQUIPMENT (1.2%) 3Com 1,131,000(b) $ 4,648,410 Anaren 20,600(b) 365,856 ARRIS Group 28,700(b) 359,037 CommScope 22,600(b) 688,848 EMS Technologies 5,900(b) 118,177 Oplink Communications 26,400(b) 542,784 Sycamore Networks 19,000(b) 71,440 UTStarcom 71,900(b) 629,125 --------------- Total 7,423,677 - ------------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (1.8%) Brocade Communications Systems 48,300(b) 396,543 Diebold 113,300 5,279,780 Hutchinson Technology 142,500(b) 3,358,725 Imation 44,990 2,088,886 --------------- Total 11,123,934 - ------------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (0.8%) Comfort Systems USA 17,500 221,200 Infrasource Services 13,700(b) 298,249 Insituform Technologies Cl A 182,700(b) 4,724,622 --------------- Total 5,244,071 - ------------------------------------------------------------------------------------------------- CONSUMER FINANCE (0.2%) Advanta Cl B 27,200 1,186,736 - ------------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (1.2%) AptarGroup 107,550 6,349,752 Greif Cl A 3,900 461,760 Myers Inds 38,200 598,212 --------------- Total 7,409,724 - ------------------------------------------------------------------------------------------------- DISTRIBUTORS (0.4%) Audiovox Cl A 168,688(b) 2,376,814 - ------------------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (1.5%) Coinmach Service Cl A 211,570 2,517,683 Coinmach Service Unit 121,640(d) 2,238,176 Regis 114,210 4,515,863 --------------- Total 9,271,722 - ------------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (1.6%) Financial Federal 38,500 1,132,285 Medallion Financial 285,708 3,534,208 PICO Holdings 127,050(b) 4,417,529 Prospect Energy 44,063 754,799 --------------- Total 9,838,821 - ------------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.8%) Alaska Communications Systems Group 18,600 282,534 Atlantic Tele-Network 62,894 1,842,794 CT Communications 49,000 1,123,080 IDT 120,160(b) 1,625,765 --------------- Total 4,874,173 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 238 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Value Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) ELECTRIC UTILITIES (1.9%) Cleco 47,800 $ 1,205,994 Idacorp 10,100 390,365 MGE Energy 17,400 636,492 Reliant Energy 534,000(b) 7,588,140 Sierra Pacific Resources 73,300(b) 1,233,639 Unisource Energy 23,700 865,761 --------------- Total 11,920,391 - ------------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.4%) Belden CDT 14,300 558,987 General Cable 4,000(b) 174,840 Regal-Beloit 136,200 7,151,862 Thomas & Betts 5,100(b) 241,128 Woodward Governor 8,900 353,419 --------------- Total 8,480,236 - ------------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS (3.7%) Agilysys 46,350 775,899 Anixter Intl 20,500(b) 1,113,150 Benchmark Electronics 5,800(b) 141,288 Coherent 12,600(b) 397,782 Ingram Micro Cl A 94,400(b) 1,926,704 Insight Enterprises 23,700(b) 447,219 Littelfuse 137,600(b) 4,386,688 Mercury Computer Systems 169,000(b) 2,257,840 Methode Electronics 12,600 136,458 Newport 54,900(b) 1,150,155 Plexus 114,600(b) 2,736,648 ScanSource 18,800(b) 571,520 SYNNEX 8,900(b) 195,266 Tech Data 50,000(b) 1,893,500 Technitrol 11,200 267,568 TTM Technologies 20,000(b) 226,600 Vishay Intertechnology 298,200(b) 4,037,628 --------------- Total 22,661,913 - ------------------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.2%) Bristow Group 51,470(b) 1,857,552 CHC Helicopter Cl A 124,270(c) 2,622,097 Hornbeck Offshore Services 10,500(b) 374,850 Input/Output 29,000(b) 395,270 Oil States Intl 37,200(b) 1,198,956 Trico Marine Services 29,600(b) 1,133,976 --------------- Total 7,582,701 - ------------------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.7%) Casey's General Stores 253,750 5,975,812 Ingles Markets Cl A 11,000 327,690 Longs Drug Stores 25,000 1,059,500 Pantry 3,400(b) 159,256 Performance Food Group 80,210(b) 2,217,004 Ruddick 65,030 1,804,583 Spartan Stores 9,500 198,835 Topps 60,800 541,120 Village Super Market Cl A 53,797 4,599,106 --------------- Total 16,882,906 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) FOOD PRODUCTS (2.9%) American Dairy 73,900(b,f) $ 1,463,220 Darling Intl 224,630(b) 1,237,711 Flowers Foods 3,900 105,261 Imperial Sugar 10,700 259,047 Industrias Bachoco ADR 222,008(c) 6,438,232 J & J Snack Foods 69,470 2,876,058 Maui Land & Pineapple 19,660(b) 666,867 Omega Protein 161,970(b) 1,252,028 Ralcorp Holdings 6,600(b) 335,874 Reddy Ice Holdings 34,030 878,655 Zapata 304,450(b) 2,131,150 --------------- Total 17,644,103 - ------------------------------------------------------------------------------------------------- GAS UTILITIES (0.2%) Laclede Group 29,500 1,033,385 Northwest Natural Gas 6,600 280,104 Piedmont Natural Gas 7,200 192,600 Southern Union 1 27 --------------- Total 1,506,116 - ------------------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.1%) Greatbatch 24,000(b) 646,080 - ------------------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.6%) AMERIGROUP 30,000(b) 1,076,700 AmSurg 12,700(b) 292,100 Emergency Medical Services LP Cl A 137,830(b) 2,891,673 Genesis HealthCare 134,000(b) 6,328,820 LCA-Vision 48,730 1,674,363 MedCath 22,000(b) 601,920 Molina Healthcare 14,800(b) 481,148 Owens & Minor 90,450 2,828,372 --------------- Total 16,175,096 - ------------------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (4.5%) Benihana Cl A 37,850(b) 1,161,995 Canterbury Park Holding 51,790 709,523 CBRL Group 109,970 4,922,256 Centerplate Unit 74,130(d,f) 1,408,470 Frisch's Restaurants 82,425 2,423,295 Interstate Hotels & Resorts 366,250(b) 2,732,225 Intl Speedway Cl A 24,630 1,257,115 Isle of Capri Casinos 59,320(b) 1,576,726 Jack in the Box 24,900(b) 1,519,896 Lodgian 149,300(b) 2,030,480 Luby's 13,100(b) 142,659 Marcus 8,300 212,314 Morgans Hotel Group 87,046(b) 1,473,689 Nathan's Famous 5,900(b) 84,724 Pinnacle Entertainment 9,400(b) 311,516 Ruby Tuesday 40,800 1,119,552 Speedway Motorsports 116,040 4,455,936 --------------- Total 27,542,371 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) HOUSEHOLD DURABLES (2.2%) Avatar Holdings 12,100(b) $ 978,285 California Coastal Communities 165,640(b) 3,552,978 Champion Enterprises 406,500(b) 3,804,840 Ethan Allen Interiors 26,100 942,471 Furniture Brands Intl 52,300 848,829 Helen of Troy 139,400(b,c) 3,381,844 Tarragon 13,200 160,644 --------------- Total 13,669,891 - ------------------------------------------------------------------------------------------------- INSURANCE (3.4%) 21st Century Insurance Group 136,800 2,414,520 Alleghany 5,720(b) 2,079,792 American Natl Insurance 35,700 4,073,727 American Physicians Capital 21,450(b) 858,858 Commerce Group 43,300 1,288,175 Delphi Financial Group Cl A 2,400 97,104 Hilb Rogal & Hobbs 49,760 2,095,891 LandAmerica Financial Group 43,240 2,728,876 Midland 4,890 205,136 NYMAGIC 22,260 814,716 Odyssey Re Holdings 16,200 604,260 Ohio Casualty 47,100 1,404,051 Presidential Life 7,800 171,210 Quanta Capital Holdings 689,300(b,c) 1,481,995 Unitrin 16,230 813,285 Zenith Natl Insurance 3,700 173,567 --------------- Total 21,305,163 - ------------------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.2%) FTD Group 34,300(b) 613,627 Systemax 18,100(b) 315,845 --------------- Total 929,472 - ------------------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.7%) Interwoven 22,900(b) 335,943 NIC 117,420(b) 583,577 RealNetworks 91,900(b) 1,005,386 United Online 110,010 1,460,933 Vignette 59,200(b) 1,010,544 --------------- Total 4,396,383 - ------------------------------------------------------------------------------------------------- IT SERVICES (1.5%) Cass Information Systems 52,587 1,902,598 Ciber 32,700(b) 221,706 Forrester Research 4,500(b) 121,995 MAXIMUS 136,800 4,210,704 MPS Group 70,100(b) 994,018 Perot Systems Cl A 38,100(b) 624,459 Sykes Enterprises 57,900(b) 1,021,356 --------------- Total 9,096,836 - ------------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS (1.0%) Arctic Cat 18,500 325,415 Brunswick 106,300 3,390,970 Callaway Golf 98,940 1,425,725 Head 139,000(b,c) 514,300 Oakley 16,900 339,014 --------------- Total 5,995,424 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 239 RiverSource VP - Small Cap Value Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) LIFE SCIENCES TOOLS & SERVICES (0.4%) Invitrogen 28,920(b) $ 1,636,583 Molecular Devices 29,500(b) 621,565 --------------- Total 2,258,148 - ------------------------------------------------------------------------------------------------- MACHINERY (4.3%) EnPro Inds 21,200(b) 704,052 Flowserve 82,400(b) 4,158,728 FreightCar America 12,400 687,580 Harsco 54,500 4,147,450 IDEX 89,600 4,247,936 Kaydon 136,100 5,408,614 Mueller Inds 32,300 1,023,910 Terex 97,500(b) 6,296,549 --------------- Total 26,674,819 - ------------------------------------------------------------------------------------------------- MARINE (0.6%) Kirby 106,800(b) 3,645,084 TBS Intl Cl A 38,641(b,c) 337,722 --------------- Total 3,982,806 - ------------------------------------------------------------------------------------------------- MEDIA (1.9%) Belo Cl A 41,800 768,284 Interactive Data 16,200 389,448 Lee Enterprises 9,600 298,176 Media General Cl A 26,500 985,005 Meredith 61,240 3,450,874 RCN 21,100(b) 636,165 Valassis Communications 306,500(b) 4,444,250 Value Line 16,886 767,469 --------------- Total 11,739,671 - ------------------------------------------------------------------------------------------------- METALS & MINING (4.2%) AK Steel Holding 581,700(b) 9,830,730 AM Castle & Co 14,400 366,480 Century Aluminum 121,800(b) 5,438,370 Chaparral Steel 10,400 460,408 Gibraltar Inds 7,500 176,325 Metal Management 17,800 673,730 Quanex 10,250 354,548 Steel Dynamics 36,800 1,194,160 Stillwater Mining 595,000(b) 7,431,550 --------------- Total 25,926,301 - ------------------------------------------------------------------------------------------------- MULTILINE RETAIL (1.9%) 99 Cents Only Stores 22,900(b) 278,693 Big Lots 13,900(b) 318,588 Dillard's Cl A 193,700 6,773,689 Dollar General 267,200 4,291,232 --------------- Total 11,662,202 - ------------------------------------------------------------------------------------------------- MULTI-UTILITIES (0.2%) PNM Resources 45,300 1,408,830 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (3.5%) Barnwell Inds 53,910 $ 1,291,145 Callon Petroleum 32,400(b) 486,972 Chesapeake Energy 129,400 3,759,070 Cimarex Energy 3,687 134,576 Eastern American Natural Gas 39,500 1,109,160 Encore Acquisition 122,200(b) 2,997,566 Evolution Petroleum 212,480(b) 637,440 EXCO Resources 173,700(b) 2,937,267 Harvest Natural Resources 71,300(b) 757,919 Holly 5,600 287,840 Houston Exploration 47,130(b) 2,440,391 Petrohawk Energy 12,900(b) 148,350 Stone Energy 48,909(b) 1,728,933 TC Pipelines LP 37,240 1,340,640 USEC 122,000(b) 1,551,840 Western Refining 12,000 305,520 --------------- Total 21,914,629 - ------------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (1.2%) Domtar 708,000(c) 5,975,520 Glatfelter 81,890 1,269,295 Schweitzer-Mauduit Intl 7,600 197,980 --------------- Total 7,442,795 - ------------------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.3%) NBTY 28,500(b) 1,184,745 Parlux Fragrances 37,260(b) 207,538 Prestige Brands Holdings 22,600(b) 294,252 --------------- Total 1,686,535 - ------------------------------------------------------------------------------------------------- PHARMACEUTICALS (0.2%) Alpharma Cl A 12,600 303,660 Sciele Pharma 47,000(b) 1,128,000 --------------- Total 1,431,660 - ------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (2.6%) Arbor Realty Trust 26,000 782,340 Ashford Hospitality Trust 75,400 938,730 Capital Trust Cl A 4,300 214,742 Crescent Real Estate Equities 16,400 323,900 Deerfield Triarc Capital 78,800 1,334,084 DiamondRock Hospitality 28,600 515,086 Extra Space Storage 20,600 376,156 FelCor Lodging Trust 50,100 1,094,184 Franklin Street Properties 14,900 313,645 Highland Hospitality 74,300 1,058,775 Inland Real Estate 51,300 960,336 Innkeepers USA Trust 64,500 999,750 Investors Real Estate Trust 41,100 421,686 Kite Realty Group Trust 16,000 297,920 LaSalle Hotel Properties 29,100 1,334,235 Natl Health Investors 6,500 214,500 Natl Retail Properties 14,200 325,890
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) REAL ESTATE INVESTMENT TRUSTS (REITS) (CONT.) Omega Healthcare Investors 37,900 $ 671,588 Parkway Properties 12,000 612,120 Ramco-Gershenson Properties Trust 6,600 251,724 Realty Income 21,100 584,470 Redwood Trust 3,100 180,048 Resource Capital 12,000 203,400 Spirit Finance 96,700 1,205,849 Winston Hotels 43,400 575,050 --------------- Total 15,790,208 - ------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT (0.8%) Affordable Residential Communities LP 15,400(b) 179,410 Gyrodyne Company of America 20,097(b) 1,241,392 MI Developments Cl A 100,500(c) 3,587,850 Wellsford Real Properties 9,500(b) 71,440 --------------- Total 5,080,092 - ------------------------------------------------------------------------------------------------- ROAD & RAIL (2.2%) Arkansas Best 3,100 111,600 Covenant Transport Cl A 77,800(b) 886,920 Laidlaw Intl 177,060 5,387,936 Marten Transport 95,680(b) 1,753,814 Saia 33,400(b) 775,214 Swift Transportation 134,400(b) 3,530,688 YRC Worldwide 36,960(b) 1,394,501 --------------- Total 13,840,673 - ------------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.3%) Advanced Energy Inds 57,000(b) 1,075,590 Cirrus Logic 80,300(b) 552,464 Cymer 7,700(b) 338,415 Integrated Silicon Solution 182,800(b) 1,051,100 Semiconductor Mfg Intl ADR 985,400(b,c) 6,345,976 Spansion Cl A 461,800(b,f) 6,862,348 TriQuint Semiconductor 830,587(b) 3,737,642 Zoran 22,800(b) 332,424 --------------- Total 20,295,959 - ------------------------------------------------------------------------------------------------- SOFTWARE (1.5%) Aspen Technology 15,200(b) 167,504 Manhattan Associates 39,500(b) 1,188,160 Mentor Graphics 389,100(b) 7,015,473 OPNET Technologies 8,400(b) 121,380 TIBCO Software 62,300(b) 588,112 Ulticom 13,800(b) 132,342 --------------- Total 9,212,971 - ------------------------------------------------------------------------------------------------- SPECIALTY RETAIL (2.1%) Asbury Automotive Group 23,400 551,304 Barnes & Noble 105,130 4,174,712 Charming Shoppes 25,300(b) 342,309 Dress Barn 11,800(b) 275,294 Group 1 Automotive 15,600 806,832 Guitar Center 22,960(b) 1,043,762 Haverty Furniture Companies 44,300 655,640 Men's Wearhouse 126,450 4,837,977 --------------- Total 12,687,830 - -------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities. - ------------------------------------------------------------------------------ 240 RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT RiverSource VP - Small Cap Value Fund COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) TEXTILES, APPAREL & LUXURY GOODS (0.9%) Hampshire Group 85,340(b) $ 1,414,084 Kellwood 36,400 1,183,728 K-Swiss Cl A 34,300 1,054,382 Lazare Kaplan Intl 134,320(b) 1,336,484 Wolverine World Wide 12,700 362,204 --------------- Total 5,350,882 - ------------------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (1.7%) Astoria Financial 64,030 1,931,145 BankAtlantic Bancorp Cl A 47,020 649,346 BankUnited Financial Cl A 41,100 1,149,156 BFC Financial Cl A 218,422(b) 1,395,717 Corus Bankshares 46,100(f) 1,063,527 Federal Agricultural Mtge Cl C 4,600 124,798 FirstFed Financial 20,400(b) 1,366,188 Fremont General 53,000 859,130 ITLA Capital 3,900 225,849 Ocwen Financial 65,600(b) 1,040,416 TierOne 27,300 862,953 Willow Financial Bancorp 9,200 137,264 --------------- Total 10,805,489 - -------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a) TRADING COMPANIES & DISTRIBUTORS (1.0%) Applied Industrial Technologies 34,800 $ 915,588 BlueLinx Holdings 37,900 394,160 Houston Wire & Cable 28,600(b,f) 597,740 NuCO2 170,320(b) 4,188,169 --------------- Total 6,095,657 - ------------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (--%) Sea Containers Cl A 61,000(b,c) 43,005 - ------------------------------------------------------------------------------------------------- WATER UTILITIES (0.3%) SJW 52,390 2,030,636 - ------------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.1%) USA Mobility 26,700 597,279 - ------------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $506,886,794) $ 572,680,584 - -------------------------------------------------------------------------------------------------
OTHER (0.1%)
ISSUER SHARES VALUE(a) Affordable Residential Communities LP Rights 15,400(b) $ 13,603 Air France-KLM ADR Warrants 51,500(b,c,h) 547,445 - ------------------------------------------------------------------------------------------------- TOTAL OTHER (Cost: $--) $ 561,048 - -------------------------------------------------------------------------------------------------
MONEY MARKET FUND (10.1%)(G)
SHARES VALUE(a) RiverSource Short-Term Cash Fund 62,517,146(e) $ 62,517,146 - ------------------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $62,517,146) $ 62,517,146 - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $569,403,940)(i) $ 635,758,778 - ------------------------------------------------------------------------------------------------- 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 Dec. 31, 2006, the value of foreign securities represented 6.2% of net assets. (d) An Income Deposit Security (IDS) also known as an enhanced income security (EIS), is an exchange-traded security composed of both an issuer's common shares and its subordinated notes. The holder of the IDS may receive dividends from the common stock and interest income from the debt instrument. (e) Affiliated Money Market Fund -- See Note 10 to the financial statements. (f) At Dec. 31, 2006, security was partially or fully on loan. See Note 6 to the financial statements. (g) Cash collateral received from security lending activity is invested in an affiliated money market fund and represents 2.7% of net assets. See Note 6 to the financial statements. 7.4% of net assets is the Fund's cash equivalent position. (h) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities may be valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Dec. 31, 2006, is as follows: SECURITY ACQUISITION COST DATES -------------------------------------------------------------------------- Air France-KLM ADR Warrants 05-05-04 $-- (i) At Dec. 31, 2006, the cost of securities for federal income tax purposes was $570,584,357 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 82,065,228 Unrealized depreciation (16,890,807) -------------------------------------------------------------------------- Net unrealized appreciation $ 65,174,421 --------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at riversource.com. - ------------------------------------------------------------------------------ RIVERSOURCE VARIABLE PORTFOLIO FUNDS - ANNUAL REPORT 241 RiverSource Variable Portfolio Funds 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by RiverSource Distributors, Inc. Member NASD. Insurance and Annuities are issued by RiverSource Life Insurance Company. S-6466 AA (3/07) Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Jeffrey Laikind and Anne P. Jones, each qualify as audit committee financial experts. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Fund - Related Fees(1),(2) (a) Audit Fees. The fees paid for the periods represented below, to KPMG LLP for professional services rendered for the audits of the annual financial statements for RiverSource Variable Portfolio - Investment Series, Inc. were as follows:
Period ended Dec. 31, 2006: Year ended Aug. 31, 2006: Year ended Aug. 31, 2005: $208,500; $180,200; $213,600
(b) Audit - Related Fees. The fees paid for the periods represented below, to KPMG LLP for additional professional services rendered in connection with the registrant's security count pursuant to Rule 17f-2 for RiverSource Variable Portfolio - Investment Series, Inc. were as follows:
Period ended Dec. 31, 2006: Year ended Aug. 31, 2006: Year ended Aug. 31, 2005: None; $2,059; $1,829
(c) Tax Fees. The fees paid for the periods represented below, to KPMG LLP for tax compliance related services for RiverSource Variable Portfolio - Investment Series, Inc. were as follows:
Period ended Dec. 31, 2006: Year ended Aug. 31, 2006: Year ended Aug. 31, 2005: None; $22,680; $18,700
(d) All Other Fees. The fees paid for the periods represented below, to KPMG LLP for additional professional services rendered for RiverSource Variable Portfolio - Investment Series, Inc. were as follows:
Period ended Dec. 31, 2006: Year ended Aug. 31, 2006: Year ended Aug. 31, 2005: None; $7,262; $3,924
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by KPMG LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2006 and 2005 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees paid for the periods represented below, by the registrant for non-audit services to KPMG LLP were as follows:
Period ended Dec. 31, 2006: Year ended Aug. 31, 2006: Year ended Aug. 31, 2005: $22,900; $59,442; $109,624
The fees paid for the periods represented below, to KPMG LLP by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows:
Period ended Dec. 31, 2006: Year ended Aug. 31, 2006: Year ended Aug. 31, 2005: $22,900; $29,500; $87,000
(h) 100% of the services performed for item (g) above during 2006 and 2005 were pre-approved by the audit committee. (1) Year ended Aug. 31, 2005 represents bills paid 9/1/04 - 8/31/05 Year ended Aug. 31, 2006 represents bills paid 9/1/05 - 8/31/06 Period ended Dec. 31, 2006 represents bills paid 9/1/06 - 12/31/06 (2) The By-Laws of each Fund were amended on April 13, 2006, changing their fiscal year end from Aug. 31 to Dec. 31, effective Dec. 31, 2006. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) RiverSource Variable Portfolio - Investment Series, Inc. By /s/ Patrick T. Bannigan ----------------------- Patrick T. Bannigan President and Principal Executive Officer Date March 6, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ----------------------- Patrick T. Bannigan President and Principal Executive Officer Date March 6, 2007 By /s/ Jeffrey P. Fox ----------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date March 6, 2007 EX-99.CERT 2 vpinvestment_cert.txt CERTIFICATION PURSUANT TO 270.30A-2 OF THE INVESTMENT COMPANY ACT OF 1940 Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Patrick T. Bannigan, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Variable Portfolio - Investment Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 26, 2007 Name: /s/ Patrick T. Bannigan ----------------------- Patrick T. Bannigan Title: President and Principal Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey P. Fox, certify that: 1. I have reviewed this report on Form N-CSR of RiverSource Variable Portfolio - Investment Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 26, 2007 Name: /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Title: Treasurer and Principal Financial Officer EX-99.906CERT 3 vpinvestment_cert906.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION RIVERSOURCE VARIABLE PORTFOLIO - INVESTMENT SERIES, INC. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: February, 26, 2007 /s/ Patrick T. Bannigan ------------------ ------------------- Patrick T. Bannigan President and Principal Executive Officer Date: February, 26, 2007 /s/ Jeffrey P. Fox ------------------ -------------- Jeffrey P. Fox Treasurer and Principal Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. EX-99.CODE ETH 4 code-of_ethicsnov27.txt CODE OF ETHICS RIVERSOURCE FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS PURPOSE OF THE CODE; COVERED OFFICERS This code of ethics ("Code") for the RiverSource Funds (collectively, "Funds," and each, "Fund") applies to the Funds' Principal Executive Officer and Principal Financial Officer (the "Covered Officers," each of whom is identified in Exhibit A) for the purpose of promoting, in connection with his or her duties: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; o compliance with laws and governmental rules and regulations applicable to the conduct of the Funds' business and their financial reporting; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions, such as the purchase or sale of securities or other property, with the Funds because of their status as "affiliated persons" of the Funds. The compliance programs and procedures of the Funds and of Ameriprise Financial, Inc. and its affiliates ("Ameriprise") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Funds and Ameriprise, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties, whether formally for the Funds or for Ameriprise, or for both, be involved in establishing policies and implementing decisions that will have different effects on Ameriprise and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and Ameriprise and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Each Covered Officer must: o not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; o not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; and o not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. DISCLOSURE AND COMPLIANCE Each Covered Officer o should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; o should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including any member of the Board of Directors or Board of Trustees of any Fund ("Boards"), auditors, governmental regulators, and representatives of self-regulatory organizations; o should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and Ameriprise with the goal of promoting full, fair, accurate, timely, and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules, and regulations. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he or she has received, read, and understands the Code; o annually thereafter affirm to the Boards that he or she has complied with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of Ameriprise for reports of potential violations that are made in good faith; and o notify the Funds' General Counsel promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. APPLYING THE CODE The Funds' General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular -2- situation. Any approvals or waivers sought by a Covered Officers will be considered by each Board or appropriate committee of the Board. The Funds' General Counsel o shall notify the Boards whenever any evidence of a material violation has been reported, it being understood that the Funds' General Counsel may determine whether to provide such notice immediately or at the next meetings of the Boards based on the nature of the violation; o will take all appropriate action to investigate such reported violations; o shall make a determination after the investigation and o if the Funds' General Counsel believes that no violation has occurred, the Boards will be so notified and no further action is required; o if the Funds' General Counsel believes a violation has occurred, the matter shall be reported to the Boards or the committees of the Funds affected by the potential violation for further determination; o if the Boards or the committees determine that a violation has occurred the Boards will consider appropriate action, which may include: a review of applicable policies and procedures; the appropriate modifications to such policies and procedures; the notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o will cause to be made such disclosures as are required by SEC rules if any changes to or waivers of this Code is made by the Boards; and o shall maintain a record of each reported evidence of material violation, the response thereto, and all related correspondence for a period of not less than 10 years. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or Ameriprise govern or purport to govern the activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. Ameriprise's code of ethics under Rule 17j-1 under the Investment Company Act is a separate requirement applying to the Covered Officers and others, and is not part of this Code. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of each Fund's Board, including a majority of its independent directors. Adopted: July 9, 2003; Amended: April 12, 2006 EXHIBIT A Persons Covered by this Code of Ethics Patrick T. Bannigan President Jeffrey P. Fox Treasurer Paula R. Meyer* William F. Truscott** * Until August 5, 2006. ** Until November 9, 2006. -3- -----END PRIVACY-ENHANCED MESSAGE-----