Annual Report
(RIVERSOURCE INVESTMENTS(SM) LOGO)
RIVERSOURCE (SM)
DISCIPLINED INTERNATIONAL EQUITY FUND
ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2006
- - RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM CAPITAL GROWTH.
FROM THE CHAIRMAN
(PHOTO OF ARNE H. CARLSON)
Arne H. Carlson
Chairman of the Board
Fellow Shareholder:
Retirement has become an extraordinarily challenging issue both to the corporate
and government worlds as well as to individuals. To that end, the mutual fund
industry is increasingly moving in the direction of providing life cycle funds
that essentially build portfolios to meet specific retirement expectations based
on age and risk tolerance. According to the Investment Company Institute, the
assets of these life cycle funds grew by 64% in 2005. The goal here is to
provide to the individual investor the best management relative to asset
allocation. There is little doubt that this approach will continue to grow.
RiverSource Investments has invested significantly to provide these types of
offerings to our shareholders. On one hand, we are pleased with the progress
that has been made in terms of investment performance and equally pleased with
the positive coverage in the financial media. Nevertheless, our focus is on
solid consistent performance over the long term and making certain that the
costs to the shareholders are at or below the median levels of the competition.
With an eye on those planning their retirement, RiverSource launched a variety
of investments specifically for this market in 2004: the RiverSource(SM)
Portfolio Builder Series, and, more recently in 2006, the RiverSource(SM) Income
Builder Series and RiverSource Retirement Plus(SM) Series. These products help
provide solutions for today's investors in an integrated fashion -- through
asset allocation, income provision over a set period of years and a one-stop
retirement solution that allocates assets differently depending upon the number
of years to or in retirement.
Asset allocation does not assure a profit or protect against loss in declining
markets.
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
Saving for a comfortable retirement as well as other long-term goals are top
priorities for many of our shareholders. Investing takes discipline -- not only
to stick to your strategy, but also to weather the proverbial ups and downs of
the markets. As you know, the economy is cyclical and markets are inherently
volatile, so there will ultimately be those periods when the economic or market
conditions throw a wrench into your well-oiled portfolio. In good -- and
not-so-good -- times, a diversified mutual fund portfolio and a knowledgeable
financial advisor can help you keep your expectations in line with current
market realities.
On behalf of the Boards, I thank you for the confidence you have shown in our
funds. As always, I am grateful for your business and assure you that all
members of the Boards are working diligently on your behalf.
Sincerely,
/s/ Arne H. Carlson
Arne H. Carlson
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
TABLE OF CONTENTS
Fund Snapshot ............................................................. 3
Questions & Answers with Portfolio Management ............................. 5
Investments in Securities ................................................. 8
Financial Statements ...................................................... 16
Notes to Financial Statements ............................................. 19
Report of Independent Registered Public Accounting Firm ................... 35
Fund Expenses Example ..................................................... 36
Board Members and Officers ................................................ 38
Proxy Voting .............................................................. 41
2 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
FUND SNAPSHOT AT OCT. 31, 2006
FUND OVERVIEW
RiverSource Disciplined International Equity Fund seeks to provide shareholders
with long-term capital growth. The Fund's managers utilize computer-based
quantitative models to purchase international stocks that they believe are
undervalued or have the potential for significant price appreciation at the time
of investment. The team manages risk on many dimensions in an effort to minimize
volatility and maximize risk-adjusted returns. The Fund provides equity exposure
to both developed international markets and emerging markets.
COUNTRY BREAKDOWN
Percentage of portfolio assets
(PIE CHART)
Other(1) 28.1%
Germany 6.3%
France 9.5%
United Kingdom 18.9%
Japan 15.8%
Netherlands 11.5%
United States 9.9%
(1) Includes Australia 5.1%, Italy 3.2%, Sweden 2.6%, Switzerland 2.6%, South
Africa 2.3%, Spain 2.0%, Belgium 1.5%, Norway 1.5%, Hong Kong 1.3%, Finland
1.2%, Denmark 1.0%, Ireland 0.5%, Singapore 0.5%, Austria 0.3%, Portugal
0.3%, Bermuda 0.1%, Greece 0.1% and Cash & Cash Equivalents 2.0%.
TOP TEN HOLDINGS
Percentage of portfolio assets
Vanguard Emerging Markets
Index Fund (United States) 4.9%
iShares MSCI Emerging Markets
Index Fund (United States) 4.9%
Royal Dutch Shell Series A
(Netherlands) 3.7%
Anglo American (South Africa) 2.2%
ABN AMRO Holding (Netherlands) 1.8%
DaimlerChrysler (Germany) 1.7%
Honda Motor (Japan) 1.7%
Lloyds TSB Group (United
Kingdom) 1.7%
ING Groep (Netherlands) 1.6%
Vodafone Group (United Kingdom) 1.5%
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
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.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 3
FUND SNAPSHOT AT OCT. 31, 2006
STYLE MATRIX
(Style Matrix indicating BLEND and LARGE)
Shading within the style matrix indicates areas in which the Fund generally
invests.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a mutual fund, and serves as a guideline for helping
you build a portfolio.
Investment products, including shares of mutual funds, are not federally or
FDIC-insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
PORTFOLIO MANAGERS
YEARS IN
INDUSTRY
--------
Dimitris Bertsimas, Ph.D 13
Alexander Sauer-Budge, Ph.D. 3
FUND FACTS
TICKER INCEPTION
SYMBOL DATE
------ -------------
Class A -- 5/18/06
Class B -- 5/18/06
Class C -- 5/18/06
Class I RSDIX 5/18/06
Class Y -- 5/18/06
Total net assets $74.0 million
Number of holdings 255
4 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
Below, Dimitris Bertsimas, portfolio manager for RiverSource Disciplined
International Equity Fund, discusses the Fund's results and positioning for the
period since the Fund's inception on May 18, 2006 through Oct. 31, 2006.
Effective Nov. 10, 2006, Alexander Sauer-Budge, portfolio manager, replaced
Jonathan Calvert.
At Oct. 31, 2006, approximately 85% of the Fund's shares were owned in the
aggregate by affiliated funds-of-funds managed by RiverSource Investments, LLC
(RiverSource). As a result of asset allocation decisions by RiverSource, it is
possible that RiverSource Disciplined International Equity Fund may experience
relatively large purchases or redemptions from affiliated funds-of-funds (see
page 27, Class I capital share transactions for related activity during the most
recent fiscal period). RiverSource seeks to minimize the impact of these
transactions by structuring them over a reasonable period of time. RiverSource
Disciplined International Equity Fund may experience increased expenses as it
buys and sells securities as a result of purchases or redemptions by affiliated
funds-of-funds. For more information on the Fund's expenses, see the discussions
beginning on pages 25 and 36.
Q: What factors most significantly affected the Fund's performance?
A: The Fund's performance was driven primarily by the performance of the three
quantitative investment models -- momentum, value and quality-adjusted
value -- we employ in selecting stocks for the Fund's portfolio. The three
models choose the international stocks for the portfolio; and we then
weight the stocks chosen. During the reporting period, the value and
quality-adjusted value models significantly outperformed the MSCI EAFE
Index, while the momentum model underperformed. We believe the style
diversification provided by the three very different quantitative
investment models may be a significant investment advantage.
- The momentum model is designed to single out groups of companies that
appear to be having improving prospects based on the pattern of stock
returns observed through history.
- The value model selects undervalued stocks based on proprietary
estimates of future corporate earnings.
- The quality-adjusted value model is designed to select undervalued
securities by adjusting the valuations of stocks to take into account
each stock's historical earnings stability and debt load.
In seeking to manage risk associated with international equity investing,
we use a proprietary risk management system that allows us to manage the
Fund's exposure
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 5
QUESTIONS & ANSWERS
to several key factors, including country, region, industry, sector, market
capitalization and portfolio turnover. We also use quantitative asset
allocation models to help determine the mix between developed international
markets and emerging markets. During the period, we used these and other
techniques to manage the expected risk of the portfolio and to avoid large
deviations from the MSCI EAFE Index.
DURING THE REPORTING PERIOD, THE VALUE AND QUALITY-ADJUSTED VALUE MODELS
SIGNIFICANTLY OUTPERFORMED THE MSCI EAFE INDEX, WHILE THE MOMENTUM MODEL
UNDERPERFORMED.
From a sector perspective, stock selection in the consumer discretionary
and industrials sectors contributed positively. The Fund's performance also
benefited from both strong stock selection and effective positioning within
the financials sector. A less-than-MSCI EAFE Index exposure to the strongly
performing consumer staples sector detracted from performance, despite
strong stock selection within the sector.
On a country selection basis, a significant allocation to and effective
stock selection in UK stocks particularly helped performance. In
particular, Anglo American, Lloyds TSB Group and HBOS were all among the
top contributors to Fund performance during the period. Other positive
contributing factors to the Fund's results were the selection of both
cyclical and defensive stocks and the Fund's selection of high-quality
stocks.
Individual stocks that contributed most to the Fund's return were
Australian transportation infrastructure company Macquarie Infrastructure
Group, a quality model selection; South African miner Anglo American,
selected by both the momentum and quality models; Australian airline Qantas
Airways, selected by both the momentum and quality models; the Netherlands'
diversified financial services firm Euronext, a momentum model selection;
and, as mentioned above, UK commercial bank Lloyds TSB Group, selected by
both the quality and value models.
Stocks that detracted from the Fund's results were mostly all Japanese
companies. These were machinery company Komatsu, financial services firm
ORIX, automobile giant Toyota Motor, electronics equipment manufacturer
Hitachi, and trading company and distributor Sojitz. Hitachi and Sojitz
were selected by the quality model; the other three names were selected by
the momentum model.
6 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
Q: What changes did you make to the Fund's portfolio during the period?
A: Given the Fund's inception in May of this year, the reporting period was
about building the portfolio using our three quantitative models to select
stocks for the portfolio. Any changes in the portfolio's sector or country
allocation over the period were modest and were the direct result of stock
selection by the models. That said, from May through October, the Fund's
significant allocations to energy and industrials decreased, and its modest
exposure to consumer staples decreased. The Fund's exposure to Japan
shifted from approximately equally weighted to the MSCI EAFE Index to a
more modest position, and its moderate allocation to Europe excluding UK
increased to a rather sizable exposure. The Fund's modest position in
defensive stocks decreased. Finally, we added additional risk controls for
market, size and growth factors.
THE COMBINATION OF OUR THREE WELL-TESTED QUANTITATIVE MODELS SHOULD HELP US
DELIVER VALUE RELATIVE TO THE MSCI EAFE INDEX OVER EXTENDED PERIODS OF
TIME.
Q: How do you intend to manage the Fund in the coming months?
A: We hold a positive view of the international equity market. That said, we
believe our consistent use of multiple investment disciplines serves the
Fund well in all investment environments over the long term, and the
diversified portfolio is well positioned for any potential market
conditions.
The combination of our three well-tested quantitative models should help us
deliver value relative to the MSCI EAFE Index over extended periods of
time. We firmly believe that employing style diversification remains a
critical advantage to the Fund. We are equally convinced of the merit of
our multifaceted, disciplined approach to controlling risk in the
portfolio. We will continue our strategy of monitoring weightings as a risk
control, so that no individual security, industry, sector, country or
region becomes too large within the Fund's portfolio. We also intend to
continue to employ the macroscopic aspects of our rigorous risk controls,
including constraints on market capitalization, price, quality, turnover,
transaction costs and more, as we seek to maintain the high quality of the
Fund's portfolio in whatever market conditions lie ahead.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 7
INVESTMENTS IN SECURITIES
OCT. 31, 2006
(Percentages represent value of investments compared to net assets)
COMMON STOCKS (96.9%)(c)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
AUSTRALIA (5.1%)
AIRLINES (0.6%)
Qantas Airways 136,568 $ 448,358
-----------
COMMERCIAL BANKS (0.1%)
Westpac Banking 4,419 81,948
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
Telstra 42,319 129,760
-----------
INSURANCE (0.1%)
AMP 12,997 95,604
-----------
METALS & MINING (1.6%)
BHP Billiton 29,914 631,870
BlueScope Steel 24,182 135,563
Rio Tinto 5,708 346,505
-----------
Total 1,113,938
-----------
OIL, GAS & CONSUMABLE FUELS (0.2%)
Woodside Petroleum 5,883 171,048
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (1.1%)
DB RREEF Trust 145,931 186,441
Macquarie Goodman Group 56,347 288,826
Stockland 25,726 150,991
Westfield Group 11,584 167,102
-----------
Total 793,360
-----------
TRANSPORTATION INFRASTRUCTURE (1.2%)
Macquarie
Infrastructure Group 352,321 922,071
-----------
AUSTRIA (0.2%)
METALS & MINING
voestalpine 3,565 168,136
-----------
BELGIUM (1.4%)
CHEMICALS (0.2%)
Solvay 493 63,808
Umicore 496 76,984
-----------
Total 140,792
-----------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
BELGIUM (CONT.)
COMMERCIAL BANKS (0.4%)
Dexia 6,153 $ 166,184
KBC Groep 1,390 151,871
-----------
Total 318,055
-----------
DIVERSIFIED FINANCIAL SERVICES (0.1%)
Fortis 1,128 47,354
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.6%)
Belgacom 11,696 478,617
-----------
FOOD & STAPLES RETAILING (0.1%)
Delhaize Group 990 80,051
-----------
BERMUDA (0.1%)
OIL, GAS & CONSUMABLE FUELS
Frontline 2,050 77,560
-----------
DENMARK (1.0%)
COMMERCIAL BANKS (0.4%)
Danske Bank 6,600 276,926
-----------
ELECTRICAL EQUIPMENT (0.1%)
Vestas Wind Systems 3,900(b) 109,871
-----------
INSURANCE (0.2%)
Topdanmark 950(b) 134,875
-----------
MARINE (0.2%)
AP Moller - Maersk 17 154,013
-----------
ROAD & RAIL (0.1%)
DSV 375 69,296
-----------
FINLAND (1.2%)
ELECTRIC UTILITIES (0.2%)
Fortum 5,200 143,100
-----------
FOOD & STAPLES RETAILING (0.1%)
Kesko Series B 1,500 70,898
-----------
METALS & MINING (0.2%)
Outokumpu 3,800 117,281
Rautaruukki 2,050 67,718
-----------
Total 184,999
-----------
See accompanying notes to investments in securities.
8 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
FINLAND (CONT.)
PAPER & FOREST PRODUCTS (0.7%)
Stora Enso Series R 19,000 $ 307,511
UPM - Kymmene 7,500 190,407
-----------
Total 497,918
-----------
FRANCE (9.4%)
AIRLINES (0.4%)
Air France-KLM 7,389 263,228
-----------
AUTO COMPONENTS (0.4%)
Michelin Series B 3,532 288,077
-----------
AUTOMOBILES (1.7%)
Peugeot 8,671 498,156
Renault 6,337 741,316
-----------
Total 1,239,472
-----------
BUILDING PRODUCTS (0.2%)
Compagnie de
Saint-Gobain 2,231 164,452
-----------
COMMERCIAL BANKS (2.7%)
BNP Paribas 9,975 1,096,870
Credit Agricole 13,720 583,332
Societe Generale 2,143 356,140
-----------
Total 2,036,342
-----------
CONSTRUCTION MATERIALS (0.3%)
Lafarge 1,842 247,574
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
France Telecom 11,599 301,281
-----------
ELECTRICAL EQUIPMENT (0.4%)
ALSTOM 3,569(b) 329,361
-----------
FOOD & STAPLES RETAILING (0.7%)
Carrefour 6,825 415,884
Casino Guichard Perrachon 826 70,059
-----------
Total 485,943
-----------
FOOD PRODUCTS (0.1%)
Groupe Danone 406 59,492
-----------
INSURANCE (0.3%)
AXA 1,629 62,066
CNP Assurances 1,665 175,223
-----------
Total 237,289
-----------
IT SERVICES (0.1%)
Cap Gemini 1,616 91,789
-----------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
FRANCE (CONT.)
MACHINERY (0.1%)
Vallourec 251 $ 62,473
-----------
MULTILINE RETAIL (0.1%)
PPR 495 73,860
-----------
MULTI-UTILITIES (1.1%)
SUEZ 14,243 637,383
Veolia Environnement 2,408 147,439
-----------
Total 784,822
-----------
PERSONAL PRODUCTS (0.2%)
L'Oreal 1,483 144,239
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (0.2%)
Unibail 741 161,356
-----------
GERMANY (5.9%)
AIRLINES (0.1%)
Deutsche Lufthansa 4,043 93,250
-----------
AUTO COMPONENTS (0.2%)
Continental 995 111,279
-----------
AUTOMOBILES (2.5%)
DaimlerChrysler 22,173 1,265,083
Volkswagen 5,978 589,824
-----------
Total 1,854,907
-----------
CHEMICALS (0.2%)
Bayer 2,870 144,516
-----------
COMMERCIAL BANKS (0.3%)
Commerzbank 7,298 259,055
-----------
DIVERSIFIED FINANCIAL SERVICES (0.3%)
Deutsche Boerse 1,149 185,288
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.9%)
Deutsche Telekom 40,161 695,106
-----------
HOTELS, RESTAURANTS & LEISURE (0.2%)
TUI 5,231 114,441
-----------
HOUSEHOLD PRODUCTS (0.1%)
Henkel 468 62,692
-----------
MACHINERY (0.3%)
MAN 2,530 224,920
-----------
METALS & MINING (0.6%)
ThyssenKrupp 12,545 465,642
-----------
See accompanying notes to investments in securities.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 9
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
GERMANY (CONT.)
MULTI-UTILITIES (0.1%)
RWE 647 $ 63,944
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.1%)
Infineon Technologies 7,997(b) 97,378
-----------
GREECE (0.1%)
CONSTRUCTION & ENGINEERING
Hellenic Technodomiki 5,390 54,488
-----------
HONG KONG (1.3%)
COMMERCIAL BANKS (0.2%)
Bank of East Asia 29,785 142,286
-----------
DIVERSIFIED FINANCIAL SERVICES (0.3%)
Hong Kong
Exchanges and Clearing 24,500 194,067
-----------
ELECTRIC UTILITIES (0.4%)
CLP Holdings 23,000 146,103
HongKong Electric Holdings 39,000 183,548
-----------
Total 329,651
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.4%)
Henderson Land
Development 39,000 214,641
Swire Pacific Series A 9,500 100,354
-----------
Total 314,995
-----------
IRELAND (0.5%)
BEVERAGES (0.4%)
C&C Group 19,487 323,849
-----------
COMMERCIAL BANKS (0.1%)
Bank of Ireland 3,148 63,446
-----------
ITALY (3.2%)
AUTOMOBILES (0.3%)
Fiat 14,146(b) 249,714
-----------
COMMERCIAL BANKS (1.3%)
Banca Monte dei
Paschi di Siena 11,881 72,943
Banche Popolari Unite 6,779 186,034
Banco Popolare
di Verona e Novara 10,404 280,068
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
ITALY (CONT.)
COMMERCIAL BANKS (CONT.)
Capitalia 28,759 $ 254,203
UniCredito Italiano 19,397 160,805
-----------
Total 954,053
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%)
Telecom Italia 189,837 487,778
-----------
OIL, GAS & CONSUMABLE FUELS (0.9%)
Eni 22,087 666,174
-----------
JAPAN (15.8%)
AUTO COMPONENTS (1.2%)
Aisin Seiki 13,500 415,562
Bridgestone 12,900 269,141
DENSO 5,100 194,493
-----------
Total 879,196
-----------
AUTOMOBILES (1.8%)
Honda Motor 35,600 1,260,231
-----------
BEVERAGES (0.1%)
Kirin Brewery 7,000 93,134
-----------
CAPITAL MARKETS (0.5%)
Daiwa Securities Group 16,000 181,548
Nikko Cordial 7,000 83,856
Nomura Holdings 6,800 120,068
-----------
Total 385,472
-----------
CHEMICALS (0.8%)
Mitsubishi Gas Chemical 6,000 57,153
Mitsui Chemicals 31,000 212,851
Nitto Denko 1,300 74,143
Sumitomo Chemical 22,000 156,887
Toray Inds 12,000 86,499
-----------
Total 587,533
-----------
COMMERCIAL BANKS (2.0%)
Mizuho Financial Group 48 373,903
Resona Holdings 50 152,202
Shinsei Bank 100,000 577,170
Sumitomo Mitsui
Financial Group 31 339,290
-----------
Total 1,442,565
-----------
COMPUTERS & PERIPHERALS (0.6%)
Seiko Epson 10,200 257,725
Toshiba 24,000 151,860
-----------
Total 409,585
-----------
See accompanying notes to investments in securities.
10 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
JAPAN (CONT.)
CONSUMER FINANCE (0.4%)
ORIX 1,120 $ 315,554
-----------
CONTAINERS & PACKAGING (0.2%)
Toyo Seikan Kaisha 7,700 149,457
-----------
ELECTRIC UTILITIES (0.4%)
Tokyo Electric Power 10,000 290,723
-----------
ELECTRICAL EQUIPMENT (0.1%)
Fujikura 7,000 74,878
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.6%)
Hitachi 72,000 415,562
-----------
HOUSEHOLD DURABLES (0.9%)
Daiwa House Industry 3,000 54,126
Pioneer 9,000 143,215
SANYO Electric 260,000(b) 497,990
-----------
Total 695,331
-----------
LEISURE EQUIPMENT & PRODUCTS (0.7%)
FUJIFILM Holdings 10,800 400,787
Nikon 4,000 82,257
-----------
Total 483,044
-----------
MACHINERY (1.0%)
Ishikawajima-Harima
Heavy Inds 22,000 74,117
Komatsu 15,900 286,866
Kubota 17,000 148,705
Mitsubishi Heavy Inds 19,000 84,805
NSK 7,000 58,658
Sumitomo Heavy Inds 9,000 77,110
-----------
Total 730,261
-----------
METALS & MINING (0.4%)
JFE Holdings 1,800 72,339
Kobe Steel 21,000 64,284
Sumitomo Metal Inds 25,000 94,057
Sumitomo Metal Mining 5,000 65,712
-----------
Total 296,392
-----------
OFFICE ELECTRONICS (0.2%)
Canon 3,000 160,838
-----------
OIL, GAS & CONSUMABLE FUELS (0.4%)
Nippon Oil 37,000 275,246
-----------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
JAPAN (CONT.)
PHARMACEUTICALS (1.4%)
Daiichi Sankyo 35,400 $ 1,053,373
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.7%)
Mitsubishi Estate 9,000 215,478
Mitsui Fudosan 8,000 197,007
Sumitomo Realty &
Development 4,000 132,706
-----------
Total 545,191
-----------
ROAD & RAIL (0.2%)
Nippon Express 30,000 162,377
-----------
SOFTWARE (0.4%)
Nintendo 1,600 327,251
-----------
TOBACCO (0.1%)
Japan Tobacco 25 109,021
-----------
TRADING COMPANIES & DISTRIBUTORS (0.7%)
Mitsubishi 18,700 361,368
Sumitomo 10,700 140,715
-----------
Total 502,083
-----------
NETHERLANDS (11.5%)
BEVERAGES (0.2%)
Heineken 3,884 176,042
-----------
CHEMICALS (0.1%)
Akzo Nobel 1,424 79,865
-----------
COMMERCIAL BANKS (1.8%)
ABN AMRO Holding 45,694 1,332,700
-----------
DIVERSIFIED FINANCIAL SERVICES (2.1%)
Euronext 3,731 373,837
ING Groep 26,977 1,195,185
-----------
Total 1,569,022
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.1%)
Koinklijke 4,908 65,590
-----------
FOOD & STAPLES RETAILING (0.1%)
Koninklijke Ahold 9,009(b) 94,868
-----------
FOOD PRODUCTS (0.7%)
Unilever 21,282 524,815
-----------
INSURANCE (0.9%)
Aegon 34,309 631,043
-----------
See accompanying notes to investments in securities.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 11
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
NETHERLANDS (CONT.)
MEDIA (0.5%)
Reed Elsevier 20,690 $ 355,725
-----------
OFFICE ELECTRONICS (0.1%)
Oce 3,033 46,340
-----------
OIL, GAS & CONSUMABLE FUELS (4.4%)
Royal Dutch Shell Series A 78,307 2,715,559
Royal Dutch Shell Series B 14,689 526,202
-----------
Total 3,241,761
-----------
REAL ESTATE INVESTMENT TRUSTS (REITS) (0.3%)
Corio 1,236 89,767
Wereldhave 1,276 146,338
-----------
Total 236,105
-----------
TRADING COMPANIES & DISTRIBUTORS (0.2%)
Hagemeyer 25,542(b) 131,059
-----------
NORWAY (1.5%)
COMMERCIAL BANKS (0.2%)
DNB NOR 11,500 150,633
-----------
ENERGY EQUIPMENT & SERVICES (0.6%)
Petroleum Geo-Services 5,580(b) 324,890
Prosafe 2,820 180,374
-----------
Total 505,264
-----------
INDUSTRIAL CONGLOMERATES (0.2%)
Orkla 2,760 141,482
-----------
OIL, GAS & CONSUMABLE FUELS (0.2%)
Norsk Hydro 5,350 123,003
-----------
PAPER & FOREST PRODUCTS (0.3%)
Norske Skogindustrier 12,300 193,861
-----------
PORTUGAL (0.3%)
ELECTRIC UTILITIES
Energias de Portugal 43,071 193,515
-----------
SINGAPORE (0.5%)
AIRLINES (0.2%)
Singapore Airlines 18,000 175,790
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.2%)
SingTel 69,000 117,483
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.1%)
CapitaLand 23,000 80,538
-----------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
SOUTH AFRICA (2.2%)
METALS & MINING
Anglo American 36,621 $ 1,651,363
-----------
SPAIN (2.0%)
CONSTRUCTION & ENGINEERING (0.6%)
Acciona 323 56,894
ACS Actividades de Construccion y Servicios 7,196 361,246
-----------
Total 418,140
-----------
ELECTRIC UTILITIES (0.4%)
Iberdrola 6,584 302,117
-----------
ELECTRICAL EQUIPMENT (0.1%)
Gamesa Tecnologica 2,885 66,247
-----------
OIL, GAS & CONSUMABLE FUELS (0.6%)
Repsol YPF 14,261 473,272
-----------
SPECIALTY RETAIL (0.3%)
Inditex 4,861 232,423
-----------
SWEDEN (2.6%)
COMMERCIAL BANKS (0.1%)
Nordea Bank 4,700 64,768
-----------
HOUSEHOLD DURABLES (0.7%)
Electrolux Series B 29,000 531,169
-----------
MACHINERY (1.1%)
Alfa Laval 2,050 75,948
Atlas Copco Series A 5,000 146,114
Atlas Copco Series B 4,800 136,945
Sandvik 5,200 63,556
Scania Series B 1,100 75,335
Volvo Series A 1,900 122,625
Volvo Series B 2,800 175,088
-----------
Total 795,611
-----------
METALS & MINING (0.2%)
SSAB Svenskt Stal Series A 5,000 106,296
SSAB Svenskt Stal Series B 3,200 63,819
-----------
Total 170,115
-----------
PAPER & FOREST PRODUCTS (0.5%)
Holmen Series B 1,600 70,467
Svenska Cellulosa Series B 5,900 270,878
-----------
Total 341,345
-----------
See accompanying notes to investments in securities.
12 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
SWITZERLAND (2.6%)
BUILDING PRODUCTS (0.1%)
Geberit 63 $ 82,092
-----------
CHEMICALS (0.2%)
Ciba Specialty Chemicals 2,767 169,379
-----------
ELECTRICAL EQUIPMENT (0.8%)
ABB 39,874 592,982
-----------
INSURANCE (1.0%)
Swiss Reinsurance 1,288 105,608
Zurich Financial Services 2,605 643,921
-----------
Total 749,529
-----------
MACHINERY (0.1%)
Sulzer 80 70,418
-----------
METALS & MINING (0.3%)
Xstrata 5,048 215,691
-----------
TEXTILES, APPAREL & LUXURY GOODS (0.1%)
Swatch Group 321 63,348
-----------
UNITED KINGDOM (18.8%)
AEROSPACE & DEFENSE (0.3%)
BAE Systems 7,938 63,520
Rolls-Royce Group 14,135(b) 126,656
Rolls-Royce Group Series B 518,754 990
-----------
Total 191,166
-----------
AUTO COMPONENTS (0.1%)
GKN 17,876 104,171
-----------
CAPITAL MARKETS (0.7%)
AMVESCAP 8,323 95,177
ICAP 5,738 55,711
Man Group 39,875 371,182
-----------
Total 522,070
-----------
CHEMICALS (0.1%)
Imperial Chemical Inds 7,428 57,632
-----------
COMMERCIAL BANKS (4.3%)
Barclays 63,352 854,972
HBOS 44,656 925,922
Lloyds TSB Group 115,903 1,236,970
Royal Bank of Scotland Group 5,261 187,461
-----------
Total 3,205,325
-----------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
UNITED KINGDOM (CONT.)
COMMERCIAL SERVICES & SUPPLIES (0.1%)
Biffa 3,815(b) $ 19,394
Capita Group 5,458 56,116
-----------
Total 75,510
-----------
DISTRIBUTORS (0.1%)
Inchcape 5,842 57,696
-----------
DIVERSIFIED FINANCIAL SERVICES (0.1%)
London Stock Exchange Group 3,578 86,132
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
BT Group 53,078 281,718
-----------
ELECTRIC UTILITIES (0.2%)
Scottish & Southern Energy 2,450 61,409
Scottish Power 4,527 56,431
-----------
Total 117,840
-----------
FOOD & STAPLES RETAILING (0.7%)
Alliance Boots 14,139 218,457
J Sainsbury 20,462 152,905
Tesco 22,520 169,036
-----------
Total 540,398
-----------
FOOD PRODUCTS (0.6%)
Tate & Lyle 4,433 66,633
Unilever 14,846 368,427
-----------
Total 435,060
-----------
HOTELS, RESTAURANTS & LEISURE (0.7%)
Carnival 1,215 59,308
Compass Group 40,018 214,117
InterContinental Hotels Group 4,948 95,233
Ladbrokes 7,267 56,626
Mitchells & Butlers 6,955 79,069
-----------
Total 504,353
-----------
HOUSEHOLD DURABLES (0.7%)
Barratt Developments 5,981 123,557
Berkeley Group Holdings Unit 2,320(b) 63,726
George Wimpey 12,271 123,121
Persimmon 4,838 123,200
Taylor Woodrow 16,900 117,261
-----------
Total 550,865
-----------
See accompanying notes to investments in securities.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 13
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
UNITED KINGDOM (CONT.)
HOUSEHOLD PRODUCTS (0.1%)
Reckitt Benckiser 1,313 $ 57,129
-----------
INDUSTRIAL CONGLOMERATES (0.2%)
Cookson Group 7,900 87,402
Tomkins 13,195 61,162
-----------
Total 148,564
-----------
INSURANCE (1.3%)
Aviva 38,572 570,215
Old Mutual 25,935 83,853
Royal & SunAlliance Insurance Group 103,405 290,937
-----------
Total 945,005
-----------
MACHINERY (0.1%)
Invensys 20,170(b) 87,914
-----------
MEDIA (0.2%)
Reed Elsevier 7,951 90,545
Reuters Group 6,675 56,946
-----------
Total 147,491
-----------
METALS & MINING (1.8%)
BHP Billiton 18,589 358,486
Corus Group 33,973 302,957
Rio Tinto 12,582 694,085
-----------
Total 1,355,528
-----------
MULTILINE RETAIL (0.5%)
Marks & Spencer Group 31,087 389,294
-----------
MULTI-UTILITIES (1.1%)
Centrica 75,554 477,396
Natl Grid 4,564 58,329
United Utilities 20,532 279,441
-----------
Total 815,166
-----------
OIL, GAS & CONSUMABLE FUELS (1.1%)
BG Group 59,754 792,737
-----------
PHARMACEUTICALS (0.8%)
AstraZeneca 9,831 580,957
-----------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.6%)
British Land 7,332 209,088
Hammerson 3,147 80,859
Land Securities Group 3,274 130,899
-----------
Total 420,846
-----------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
UNITED KINGDOM (CONT.)
SPECIALTY RETAIL (0.3%)
DSG intl 17,026 $ 70,638
Kingfisher 28,508 143,153
-----------
Total 213,791
-----------
WATER UTILITIES (0.1%)
Severn Trent 2,543 67,717
-----------
WIRELESS TELECOMMUNICATION SERVICES (1.5%)
Vodafone Group 429,153 1,105,123
-----------
UNITED STATES (9.8%)
DIVERSIFIED FINANCIAL SERVICES
iShares MSCI Emerging
Markets Index Fund 35,100 3,636,361
-----------
Vanguard Emerging
Markets Index Fund 51,100 3,609,704
-----------
Total 7,246,065
-----------
TOTAL COMMON STOCKS
(Cost: $68,078,917) $71,736,591
-----------
PREFERRED STOCKS & OTHER (0.4%)(c)
ISSUER SHARES VALUE(a)
- ------ ---------- -----------
GERMANY (0.3%)
Volkswagen 3,539 $ 233,764
-----------
UNITED KINGDOM (0.1%)
Xstrata 1,682 31,475
Rights
-----------
TOTAL PREFERRED STOCKS & OTHER
(Cost: $192,563) $ 265,239
-----------
MONEY MARKET FUND (2.0%)(d)
SHARES VALUE(a)
---------- -----------
RiverSource Short-Term
Cash Fund 1,501,298(e) $ 1,501,298
-----------
TOTAL MONEY MARKET FUND
(Cost: $1,501,298) $ 1,501,298
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $69,772,778)(f) $73,503,128
===========
See accompanying notes to investments in securities.
14 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Partially pledged as initial margin deposit on the following open stock
index futures contracts (see Note 6 to the financial statements):
TYPE OF SECURITY CONTRACTS
- ---------------- ---------
PURCHASE CONTRACTS
DJ Euro STOXX 50, Dec. 2006 19
FTSE 100 Index, Dec. 2006 5
Nikkei 225, Dec. 2006 7
(e) Affiliated Money Market Fund -- See Note 7 to the financial statements.
(f) At Oct. 31, 2006, the cost of securities for federal income tax purposes
was $69,898,791 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $4,257,105
Unrealized depreciation (652,768)
----------
Net unrealized appreciation $3,604,337
==========
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/funds.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 15
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCT. 31, 2006
ASSETS
Investments in securities, at value (Note 1)
Unaffiliated issuers (identified cost $68,271,480) $72,001,830
Affiliated money market fund (identified cost $1,501,298) (Note 7) 1,501,298
-----------
Total investments in securities (identified cost $69,772,778) 73,503,128
Cash in bank on demand deposit 1,075
Foreign currency holdings (identified cost $387,340) (Note 1) 392,876
Capital shares receivable 1,550
Dividends and accrued interest receivable 54,815
Receivable for investment securities sold 4,382
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 9,313
Margin deposits on futures contracts (Note 6) 116,275
-----------
Total assets 74,083,414
-----------
LIABILITIES
Payable for investment securities purchased 2,768
Accrued investment management services fee 1,617
Accrued distribution fee 80
Accrued transfer agency fee 8
Accrued administrative services fee 162
Other accrued expenses 44,288
-----------
Total liabilities 48,923
-----------
Net assets applicable to outstanding capital stock $74,034,491
===========
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 75,301
Additional paid-in capital 69,884,716
Undistributed net investment income 256,757
Accumulated net realized gain (loss) 66,128
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies (Notes 5 and 6) 3,751,589
-----------
Total -- representing net assets applicable to outstanding capital stock $74,034,491
===========
Net assets applicable to outstanding shares: Class A $10,874,410
Class B $ 190,838
Class C $ 31,275
Class I $62,926,083
Class Y $ 11,885
Net asset value per share of outstanding capital stock: Class A shares 1,107,013 $ 9.82
Class B shares 19,499 $ 9.79
Class C shares 3,195 $ 9.79
Class I shares 6,399,203 $ 9.83
Class Y shares 1,209 $ 9.83
-----------
See accompanying notes to financial statements.
16 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 18, 2006* TO OCT. 31, 2006
INVESTMENT INCOME
Income:
Dividends $ 410,781
Interest 58,217
Income distributions from affiliated money market fund (Note 7) 11,275
Less foreign taxes withheld (28,554)
----------
Total income 451,719
----------
Expenses (Note 2):
Investment management services fee 147,388
Distribution fee
Class A 10,920
Class B 278
Class C 104
Transfer agency fee 540
Incremental transfer agency fee
Class A 47
Class B 12
Class C 4
Service fee -- Class Y 6
Administrative services fees and expenses 14,739
Compensation of board members 402
Custodian fees 37,940
Printing and postage 6,500
Registration fees 58,491
Audit fees 21,000
Other 1,501
----------
Total expenses 299,872
Expenses waived/reimbursed by the Investment Manager and its
affiliates (Note 2) (76,054)
----------
223,818
Earnings and bank fee credits on cash balances (Note 2) (1,064)
----------
Total net expenses 222,754
----------
Investment income (loss) -- net 228,965
----------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) (187,176)
Foreign currency transactions (10,413)
Futures contracts 253,309
----------
Net realized gain (loss) on investments 55,720
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 4,597,273
----------
Net gain (loss) on investments and foreign currencies 4,652,993
----------
Net increase (decrease) in net assets resulting from operations $4,881,958
==========
* When shares became publicly available.
See accompanying notes to financial statements.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 17
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM MAY 18, 2006* TO OCT. 31, 2006
OPERATIONS
Investment income (loss) -- net $ 228,965
Net realized gain (loss) on investments 55,720
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 4,597,273
-----------
Net increase (decrease) in net assets resulting from operations 4,881,958
-----------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 1,040,948
Class B shares 175,276
Class C shares 24,800
Class I shares 61,124,069
Class Y shares 6,401
Payments for redemptions
Class A shares (23,234)
Class B shares (Note 2) (2,796)
Class C shares (Note 2) (4,965)
Class I shares (2,709,057)
Class Y shares (5,000)
-----------
Increase (decrease) in net assets from capital share transactions 59,626,442
-----------
Total increase (decrease) in net assets 64,508,400
Net assets at beginning of period (Note 1) 9,526,091**
-----------
Net assets at end of period $74,034,491
===========
Undistributed net investment income $ 256,757
-----------
* When shares became publicly available.
** Initial capital of $10,338,120 was contributed on May 11, 2006. The Fund
had a decrease in net assets resulting from operations of $812,029 during
the period from May 11, 2006 to May 18, 2006 (when shares became publicly
available).
See accompanying notes to financial statements.
18 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource International Series, Inc. (formerly AXP
International Series, Inc.) and is registered under the Investment Company Act
of 1940 (as amended) as a diversified, open-end management investment company.
RiverSource International Series, Inc. has 10 billion authorized shares of
capital stock that can be allocated among the separate series as designated by
the Board. The Fund invests primarily in equity securities of foreign issuers or
in instruments that provide exposure to foreign equity markets. The Fund may
invest in securities of or instruments that provide exposure to both developed
and emerging markets issuers. On May 11, 2006, Ameriprise Financial, Inc.
(Ameriprise Financial) invested $10,338,120* in the Fund (996,000 shares for
Class A, 1,000 shares for Class B, 1,000 shares for Class C, 34,812** shares for
Class I and 1,000 shares for Class Y), which represented the initial capital for
each class at $10 per share. Shares of the Fund were first offered to the public
on May 18, 2006.
The Fund offers Class A, Class B, Class C, Class I and Class Y shares.
- - Class A shares are sold with a front-end sales charge.
- - Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
- - Class C shares may be subject to a CDSC.
- - Class I and Class Y shares have no sales charge and are offered only to
qualifying institutional investors.
In September 2006, the Board approved renaming Class Y as Class R4, terminating
the shareholder servicing agreement, revising the fee structure under the
transfer agent agreement from account-based to asset-based, and adopting a plan
administration services agreement. These changes are effective Dec. 11, 2006.
At Oct. 31, 2006, Ameriprise Financial and the affiliated funds-of-funds owned
100% of Class I shares, which represents 85% of the Fund's net assets.
At Oct. 31, 2006, Ameriprise Financial and the affiliated fund-of-funds owned
approximately 98% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
* Includes $338,120 invested by the RiverSource Retirement Plus Funds.
** Includes 33,812 shares purchased by the RiverSource Retirement Plus Funds.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 19
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Directors of the funds, Ameriprise Financial utilizes Fair Value
Pricing (FVP). FVP determinations are made in good faith in accordance with
these procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or event
has actually caused the closing price to no longer reflect the actual value, the
closing prices, as determined at the close of the applicable foreign market, may
be adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include material
movements in the U.S. securities markets prior to the opening of foreign markets
on the following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
20 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2006, foreign currency holdings consisted of
multiple denominations, primarily European monetary units and British pounds.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 21
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income has been increased by $16,375
and accumulated net realized gain has been decreased by $11,830 resulting in a
net reclassification adjustment to decrease paid-in capital by $4,545.
22 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
The tax character of distributions paid for the period indicated is as follows:
FOR THE PERIOD FROM MAY 18, 2006* TO OCT. 31, 2006
- --------------------------------------------------
CLASS A
Distributions paid from:
Ordinary income........................................................ $--
Long-term capital gain ................................................ --
CLASS B
Distributions paid from:
Ordinary income ....................................................... --
Long-term capital gain ................................................ --
CLASS C
Distributions paid from:
Ordinary income ....................................................... --
Long-term capital gain ................................................ --
CLASS I
Distributions paid from:
Ordinary income ....................................................... --
Long-term capital gain ................................................ --
CLASS Y
Distributions paid from:
Ordinary income ....................................................... --
Long-term capital gain ................................................ --
* When shares became publicly available.
At Oct. 31, 2006, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income $ 399,377
Accumulated long-term gain (loss) $ 46,068
Unrealized appreciation (depreciation) $3,629,029
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 23
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 the Fund are being evaluated to
determine the impact, if any, to the Fund. The adoption of FIN 48 is not
anticipated to have a material impact on the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
24 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
2.EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. The management fee is a percentage of the Fund's average daily net assets
that declines from 0.80% to 0.57% annually as the Fund's assets increase. The
fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of the Fund to the
Lipper International Large-Cap Core Funds Index. In certain circumstances, the
Board may approve a change in the index. The maximum adjustment is 0.12% per
year. If the performance difference is less than 0.50%, the adjustment will be
zero. The first adjustment will be made on Dec. 1, 2006 and will cover the
six-month period beginning June 1, 2006
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.08% to 0.05% annually as the
Fund's assets increase.
Other expenses include, among other things, certain expenses of the Fund or the
Board (including its independent members) equal to $822 that are paid by the
Fund through Board Services Corporation, an entity that provides services to the
Board and the Fund pursuant to a separate agreement. These expenses include:
Fund boardroom expense, Board Services Corporation office expense, Board
Services Corporation employee compensation, including employee health and
retirement benefits, Board Services Corporation audit and legal fees, Fund legal
fees, certain taxes, filing fees and certain other expenses.
Compensation of board members includes compensation as well as retirement
benefits. Certain other aspects of the Board Chair's compensation, including
health benefits and payment of certain other expenses, are included under other
expenses.
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund until distributed in accordance with the
Plan.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation (the
Transfer Agent) maintains shareholder accounts and records. The Fund pays the
Transfer Agent an annual fee per shareholder account for this service as
follows:
- - Class A $19.50
- - Class B $20.50
- - Class C $20.00
- - Class Y $17.50
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 25
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with American Financial Services, Inc. (the Distributor)
for distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to
0.25% of the Fund's average daily net assets attributable to Class A shares and
up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by the Distributor and other servicing agents
with respect to those shares. The fee is calculated at a rate of 0.10% of the
Fund's average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$4,700 for Class A for the period ended Oct. 31, 2006.
For the period ended Oct. 31, 2006, the Investment Manager and its affiliates
waived certain fees and expenses to 1.42% for Class A, 2.21% for Class B, 2.21%
for Class C, 1.15% for Class I and 1.27% for Class Y. Of these waived fees and
expenses, the management fees waived at the Fund level were $76,054. In
addition, the Investment Manager and its affiliates have agreed to waive certain
fees and expenses until Oct. 31, 2007, unless sooner terminated at the
discretion of the Board, such that net expenses, before giving effect to any
performance incentive adjustment, will not exceed 1.50% for Class A, 2.27% for
Class B, 2.27% for Class C, 1.15% for Class I and 1.33% for Class Y of the
Fund's average daily net assets.
During the period ended Oct. 31, 2006, the Fund's custodian and transfer agency
fees were reduced by $1,064 as a result of earnings and bank fee credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust
Company, an affiliate of Ameriprise Financial.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $62,200,453 and $4,055,405, respectively, for the period
from May 18, 2006 (when shares became publicly available) to Oct. 31, 2006.
Realized gains and losses are determined on an identified cost basis.
26 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the period from May 18, 2006* to
Oct. 31, 2006 are as follows:
CLASS A CLASS B CLASS C CLASS I CLASS Y
------- ------- ------- --------- -------
Sold 113,455 18,823 2,732 6,650,482 743
Issued for reinvested
distributions -- -- -- -- --
Redeemed (2,442) (324) (537) (286,091) (534)
------- ------ ----- --------- ----
Net increase
(decrease) 111,013 18,499 2,195 6,364,391 209
------- ------ ----- --------- ----
* When shares became publicly available.
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Oct. 31, 2006, the Fund has a forward foreign currency exchange contract that
obligates it to deliver currency at a specified future date. The unrealized
appreciation and/or depreciation on this contract is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contract are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ------------- ------------ ----------------- ------------ ------------
Nov. 7, 2006 954,407 744,409 $9,313 $--
U.S. Dollar European Monetary
Unit
6. STOCK INDEX FUTURES CONTRACTS
At Oct. 31, 2006, $116,275 was held in a margin deposit account as collateral to
cover initial margin deposits on open purchase contracts. See "Summary of
significant accounting policies" and "Notes to investments in securities." The
terms of the open purchase contracts are as follows:
NUMBER OF NOTIONAL UNREALIZED
TYPE OF SECURITY CONTRACTS MARKET VALUE GAIN (LOSS)
- ---------------- --------- ------------ -----------
DJ Euro STOXX 50, Dec. 2006
(European Monetary Unit) 19 $ 972,975 $ 7,386
FTSE 100 Index, Dec. 2006
(British Pound) 5 585,650 1,510
Nikkei 225, Dec. 2006
(U.S. Dollar) 7 572,775 (3,453)
---------- -------
Total $2,131,400 $ 5,443
---------- -------
7. AFFILIATED MONEY MARKET FUND
The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund,
a money market fund established for the exclusive use of the RiverSource funds
and other institutional clients of RiverSource Investments.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 27
8. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency purposes.
The agreement went into effect Sept. 19, 2006. The Fund must maintain asset
coverage for borrowings of at least 300%. The agreement, which enables the Fund
to participate with other RiverSource funds, permits borrowings up to $500
million, collectively. Interest is charged to each Fund based on its borrowings
at a rate equal to either the higher of the Federal Funds Effective Rate plus
0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable within
60 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.06%
per annum. Prior to this agreement, the Fund paid a commitment fee equal to its
pro rata share of the amount of the credit facility at a rate of 0.07% per
annum. The Fund had no borrowings outstanding during the period ended Oct. 31,
2006.
9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American Express
Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc.
(Ameriprise Financial)), the parent company of RiverSource Investments, LLC
(RiverSource Investments), entered into settlement agreements with the
Securities and Exchange Commission (SEC) and Minnesota Department of Commerce
(MDOC) related to market timing activities. In connection with these matters,
the SEC and MDOC issued orders (the Orders) alleging that AEFC violated certain
provisions of the federal and Minnesota securities laws by failing to adequately
disclose market timing activities by allowing certain identified market timers
to continue to market time contrary to disclosures in mutual fund and variable
annuity product prospectuses. The Orders also alleged that AEFC failed to
implement procedures to detect and prevent market timing in 401(k) plans for
employees of AEFC and related companies and failed to adequately disclose that
there were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its employees.
28 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and various
Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay
disgorgement of $10 million and civil money penalties of $7 million. AEFC also
agreed to make presentations at least annually to its board of directors and the
relevant mutual funds' board that include an overview of policies and procedures
to prevent market timing, material changes to these policies and procedures and
whether disclosures related to market timing are consistent with the SEC order
and federal securities laws. AEFC also agreed to retain an independent
distribution consultant to assist in developing a plan for distribution of all
disgorgement and civil penalties ordered by the SEC in accordance with various
undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In
addition, AEFC agreed to complete and submit to the MDOC a compliance review of
its procedures regarding market timing within one year of the MDOC Order,
including a summary of actions taken to ensure compliance with applicable laws
and regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal, arbitration and regulatory proceedings, including
routine litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal, arbitration or regulatory proceedings that are likely to have a
material adverse effect on the Funds or the ability of Ameriprise Financial or
its affiliates to perform under their contracts with the Funds. Ameriprise
Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 29
10. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(b)
- ---------------------------- -------
Net asset value, beginning of period $9.21
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .01
Net gains (losses) (both realized and unrealized) .60
-----
Total from investment operations .61
-----
Net asset value, end of period $9.82
-----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 11
-----
Ratio of expenses to average daily net assets
(c), (d) 1.42%(e)
-----
Ratio of net investment income (loss) to average
daily net assets 1.48%(e)
-----
Portfolio turnover rate (excluding short-term
securities) 10%
-----
Total return(f) 6.62%(g)
-----
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class A would have been 1.92% for the period ended Oct. 31, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
30 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(b)
- ---------------------------- -------
Net asset value, beginning of period $9.21
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) --
Net gains (losses) (both realized and unrealized) .58
-----
Total from investment operations .58
-----
Net asset value, end of period $9.79
-----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ --
-----
Ratio of expenses to average daily net assets
(c),(d) 2.21%(e)
-----
Ratio of net investment income (loss) to average
daily net assets (.03%)(e)
-----
Portfolio turnover rate (excluding short-term
securities) 10%
-----
Total return(f) 6.30%(g)
-----
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class B would have been 2.71% for the period ended Oct. 31, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 31
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(b)
- ---------------------------- -------
Net asset value, beginning of period $9.21
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) --
Net gains (losses) (both realized and unrealized) .58
-----
Total from investment operations .58
-----
Net asset value, end of period $9.79
-----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ --
-----
Ratio of expenses to average daily net
assets(c),(d) 2.21%(e)
-----
Ratio of net investment income (loss) to average
daily net assets .74%(e)
-----
Portfolio turnover rate (excluding short-term
securities) 10%
-----
Total return(f) 6.30%(g)
-----
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class C would have been 2.71% for the period ended Oct. 31, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
32 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(b)
- ---------------------------- -------
Net asset value, beginning of period $9.21
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02
Net gains (losses) (both realized and unrealized) .60
-----
Total from investment operations .62
-----
Net asset value, end of period $9.83
-----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ 63
-----
Ratio of expenses to average daily net
assets(c),(d) 1.15%(e)
-----
Ratio of net investment income (loss) to average
daily net assets 1.17%(e)
-----
Portfolio turnover rate (excluding short-term
securities) 10%
-----
Total return(f) 6.73%(g)
-----
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class I would have been 1.65% for the period ended Oct. 31, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 33
CLASS Y*
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(b)
- ---------------------------- -------
Net asset value, beginning of period $9.21
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02
Net gains (losses) (both realized and unrealized) .60
-----
Total from investment operations .62
-----
Net asset value, end of period $9.83
-----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ --
-----
Ratio of expenses to average daily net
assets(c),(d) 1.27%(e)
-----
Ratio of net investment income (loss) to average
daily net assets 1.72%(e)
-----
Portfolio turnover rate (excluding short-term
securities) 10%
-----
Total return(f) 6.73%(g)
-----
* Effective Dec. 11, 2006, Class Y was renamed Class R4.
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from May 18, 2006 (when shares became publicly available) to
Oct. 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) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class Y would have been 1.77% for the period ended Oct. 31, 2006.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
34 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD AND SHAREHOLDERS
RIVERSOURCE INTERNATIONAL SERIES, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of RiverSource Disciplined
International Equity Fund (a series of RiverSource International Series, Inc.)
as of October 31, 2006, and the related statements of operations, changes in net
assets and the financial highlights for the period from May 18, 2006 (when
shares became publicly available) to October 31, 2006. These financial
statements and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and 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 October 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
RiverSource Disciplined International Equity Fund as of October 31, 2006, and
the results of its operations, changes in its net assets and the financial
highlights for the period stated in the first paragraph above, in conformity
with U.S. generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
December 20, 2006
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 35
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended Oct. 31, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
36 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
MAY 1, 2006 OCT. 31, 2006 THE PERIOD(a) EXPENSE RATIO
------------- ------------- ------------- -------------
Class A
Actual(b) N/A N/A N/A N/A
Hypothetical
(5% return before expenses) $1,000 $1,018.24 $ 7.30(c) 1.42%
Class B
Actual(b) N/A N/A N/A N/A
Hypothetical
(5% return before expenses) $1,000 $1,014.22 $11.34(c) 2.21%
Class C
Actual(b) N/A N/A N/A N/A
Hypothetical
(5% return before expenses) $1,000 $1,014.22 $11.34(c) 2.21%
Class I
Actual(b) N/A N/A N/A N/A
Hypothetical
(5% return before expenses) $1,000 $1,019.62 $ 5.92(c) 1.15%
Class Y
Actual(b) N/A N/A N/A N/A
Hypothetical
(5% return before expenses) $1,000 $1,019.01 $ 6.53(d) 1.27%
(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 186/365 (to reflect the one-half year period).
(b) The actual values and expenses paid are not presented because the Fund does
not have a full six months of history. The inception date of the Fund is
May 18, 2006.
(c) Effective as of Nov. 1, 2006, the investment manager and its affiliates
have contractually agreed to waive certain fees and to absorb certain
expenses until Oct. 31, 2007, unless sooner terminated at the discretion of
the Fund's Board, such that net expenses, before giving effect to any
performance incentive adjustment, will not exceed 1.50% for Class A; 2.27%
for Class B; 2.27% for Class C; and 1.15% for Class I. Any amounts waived
will not be reimbursed by the Fund. If these changes had been in place for
the six-month period ended Oct. 31, 2006, the actual and hypothetical
expenses paid would have been the same as those expenses presented in the
table for Class A, Class B, Class C and Class I.
(d) In September 2006, the Board approved renaming Class Y as Class R4,
terminating the shareholder servicing agreement, revising the fee structure
under the transfer agent agreement from account-based to asset-based, and
adopting a plan administration services agreement. In addition, the
investment manager and its affiliates have contractually agreed to waive
certain fees and to absorb certain expenses until Oct. 31, 2007, unless
sooner terminated at the discretion of the Fund's Board, such that net
expenses, before giving effect to any performance incentive adjustment,
will not exceed 1.33% for Class R4. These changes are effective Dec. 11,
2006. Any amounts waived will not be reimbursed by the Fund. If these
changes had been in place for the six-month period ended Oct. 31, 2006, the
hypothetical expenses paid for Class Y would have been $6.84.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 37
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 PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
------- ----------------- ---------------------- -------------
Kathleen Blatz Board member Chief Justice, Minnesota Supreme
901 S. Marquette Ave. since 2006 Court, 1998-2005
Minneapolis, MN 55402
Age 52
Arne H. Carlson Board member and Chair, Board Services Corporation
901 S. Marquette Ave. Chair of the Board (provides administrative services
Minneapolis, MN 55402 since 1999 to boards); former Governor
Age 72 of Minnesota
Patricia M. Flynn Board member Trustee Professor of Economics and
901 S. Marquette Ave. since 2004 Management, Bentley College;
Minneapolis, MN 55402 former Dean, McCallum Graduate
Age 56 School of Business, Bentley College
Anne P. Jones Board member Attorney and Consultant
901 S. Marquette Ave. since 1985
Minneapolis, MN 55402
Age 71
Jeffrey Laikind Board member Former Managing Director, American Progressive
901 S. Marquette Ave. since 2005 Shikiar Asset Management Insurance
Minneapolis, MN 55402
Age 71
Stephen R. Lewis, Jr.* Board member President Emeritus and Valmont Industries, Inc.
901 S. Marquette Ave. since 2002 Professor of Economics, (manufactures irrigation
Minneapolis, MN 55402 Carleton College systems)
Age 67
* As of Jan. 1, 2007 Stephen Lewis will replace Arne Carlson as Chair of the
Board.
38 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
------- ----------------- ---------------------- -------------
Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution,
901 S. Marquette Ave. since 2004 Management, Inc. (private real Inc. (transportation,
Minneapolis, MN 55402 estate and asset management distribution and logistics
Age 54 company) consultants)
Vikki L. Pryor Board member President and Chief Executive
901 S. Marquette Ave. since 2006 Officer, SBLI USA Mutual Life
Minneapolis, MN 55402 Insurance Company, Inc. since 1999
Age 53
Alison Taunton-Rigby Board member Chief Executive Officer, RiboNovix, Hybridon, Inc.
901 S. Marquette Ave. since 2002 Inc. since 2003 (biotechnology); (biotechnology);
Minneapolis, MN 55402 former President, Forester Biotech American Healthways,
Age 62 Inc. (health management
programs)
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS
------- ----------------- ---------------------- -------------
William F. Truscott Board member President, Ameriprise Certificate
53600 Ameriprise since 2001, Company since 2006; President -
Financial Center Vice President U.S. Asset Management and Chief
Minneapolis, MN 55474 since 2002 Investment Officer, Ameriprise
Age 46 Financial, Inc. and President,
Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC since 2005; Senior
Vice President - Chief Investment
Officer, Ameriprise Financial, Inc. and
Chairman of the Board and Chief
Investment Officer, RiverSource
Investments, LLC, 2001-2005
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 39
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 PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
------- ----------------- ----------------------
Neysa M. Alecu Money Laundering Compliance Director and Anti-Money Laundering Officer,
2934 Ameriprise Prevention Officer Ameriprise Financial, Inc. since 2004; Manager Anti-Money
Financial Center since 2004 Laundering, Ameriprise Financial, Inc., 2003-2004; Compliance
Minneapolis, MN 55474 Director and Bank Secrecy Act Officer, American Express
Age 42 Centurion Bank, 2000-2003
Patrick T. Bannigan President Senior Vice President - Asset Management, RiverSource
172 Ameriprise since 2006 Investments, LLC since 2006; Managing Director and Global
Financial Center Head of Product, Morgan Stanley Investment Management,
Minneapolis, MN 55474 2004-2006; President, Touchstone Investments, 2002-2004;
Age 41 Director of Strategic Planning, Evergreen Investments, 1995-2002
Jeffrey P. Fox Treasurer Vice President - Investment Accounting, Ameriprise Financial,
105 Ameriprise since 2002 Inc., since 2002; Vice President - Finance, American Express
Financial Center Company, 2000-2002
Minneapolis, MN 55474
Age 51
Amy K. Johnson Vice President Vice President - Asset Management and Trust Company Services,
5228 Ameriprise since 2006 RiverSource Investments, LLC, since 2006; Vice President -
Financial Center Operations and Compliance, RiverSource Investments, LLC,
Minneapolis, MN 55474 2004-2006; Director of Product Development - Mutual Funds,
Age 41 American Express Financial Corporation, 2001-2004
Michelle M. Keeley Vice President Executive Vice President - Equity and Fixed Income,
172 Ameriprise since 2004 Ameriprise Financial, Inc. and RiverSource Investments, LLC since
Financial Center 2006; Vice President - Investments, Ameriprise Certificate
Minneapolis, MN 55474 Company since 2003; Senior Vice President - Fixed Income,
Age 42 Ameriprise Financial, Inc., 2002-2006 and RiverSource
Investments, LLC, 2004-2006; Managing Director, Zurich Global
Assets, 2001-2002
Jennifer D. Lammers Chief Compliance U.S. Asset Management Chief Compliance Officer, RiverSource
172 Ameriprise Officer since 2006 Investments, LLC since 2006; Director - Mutual Funds,
Financial Center Voyageur Asset Management, 2003-2006; Director of Finance,
Minneapolis, MN 55474 Voyageur Asset Management, 2000-2003
Age 46
Scott R. Plummer Vice President, Vice President and Chief Counsel - Asset Management,
5228 Ameriprise General Counsel Ameriprise Financial, Inc. since 2005; Vice President,
Financial Center and Secretary General Counsel and Secretary, Ameriprise Certificate Company
Minneapolis, MN 55474 since 2006 since 2005; Vice President - Asset Management Compliance,
Age 47 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
The SAI has additional information about the Fund' s directors and is available,
without charge, upon request by calling RiverSource Funds at (888) 791-3380;
contacting your financial institution; or visiting riversource.com/funds.
40 RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
RiverSource Funds at (888) 791-3380; contacting your financial institution;
visiting riversource.com/funds; or searching the website of the Securities and
Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the
Fund voted proxies relating to portfolio securities during the 12-month period
ended June 30, 2006 is available without charge by visiting
riversource.com/funds; or searching the website of the SEC at www.sec.gov.
RIVERSOURCE DISCIPLINED INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 41
THROUGH THE RIVERSOURCE INVESTMENTS FAMILY OF FUNDS, YOU CAN BUILD A DIVERSIFIED
PORTFOLIO THAT IS DESIGNED TO HELP YOU REACH YOUR GOALS.
GROWTH FUNDS
RiverSource(SM) Growth Fund
RiverSource(SM) Fundamental Growth Fund
RiverSource(SM) Mid Cap Growth Fund
RiverSource(SM) Aggressive Growth Fund
RiverSource(SM) Small Cap Growth Fund
Sector: RiverSource(SM) Global Technology Fund
BLEND FUNDS
RiverSource(SM) Disciplined Equity Fund
RiverSource(SM) Large Cap Equity Fund
RiverSource(SM) S&P 500 Index Fund
RiverSource(SM) Disciplined Small and Mid Cap Equity Fund
RiverSource(SM) Small Cap Advantage Fund
RiverSource(SM) Small Company Index Fund
RiverSource(SM) Small Cap Equity Fund
Sector: RiverSource(SM) Precious Metals and Mining Fund
VALUE FUNDS
RiverSource(SM) Dividend Opportunity Fund
RiverSource(SM) Value Fund
RiverSource(SM) Fundamental Value Fund
RiverSource(SM) Equity Value Fund
RiverSource(SM) Large Cap Value Fund
RiverSource(SM) Diversified Equity Income Fund
RiverSource(SM) Select Value Fund
RiverSource(SM) Mid Cap Value Fund
RiverSource(SM) Disciplined Small Cap Value Fund
RiverSource(SM) Small Cap Value Fund
Sector: RiverSource(SM) Real Estate Fund
ASSET ALLOCATION FUNDS
RiverSource(SM) Portfolio Builder Conservative Fund
RiverSource(SM) Income Builder Basic Income Fund
RiverSource(SM) Income Builder Moderate Income Fund
RiverSource(SM) Income Builder Enhanced Income Fund
RiverSource(SM) Portfolio Builder Moderate Conservative Fund
RiverSource(SM) Portfolio Builder Moderate Fund
RiverSource Retirement Plus(SM) 2010 Fund
RiverSource(SM) Balanced Fund
RiverSource(SM) Portfolio Builder Moderate Aggressive Fund
RiverSource Retirement Plus(SM) 2015 Fund
RiverSource(SM) Strategic Allocation Fund
RiverSource Retirement Plus(SM) 2020 Fund
RiverSource(SM) Portfolio Builder Aggressive Fund
RiverSource Retirement Plus(SM) 2025 Fund
RiverSource Retirement Plus(SM) 2030 Fund
RiverSource Retirement Plus(SM) 2035 Fund
RiverSource Retirement Plus(SM) 2040 Fund
RiverSource Retirement Plus(SM) 2045 Fund
RiverSource(SM) Portfolio Builder Total Equity Fund
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
TAXABLE INCOME FUNDS
RiverSource(SM) Cash Management Fund
RiverSource(SM) Short Duration U.S. Government Fund
RiverSource(SM) U.S. Government Mortgage Fund
RiverSource(SM) Inflation Protected Securities Fund
RiverSource(SM) Floating Rate Fund
RiverSource(SM) Limited Duration Bond Fund
RiverSource(SM) Core Bond Fund
RiverSource(SM) Diversified Bond Fund
RiverSource(SM) Income Opportunities Fund
RiverSource(SM) High Yield Bond Fund
RiverSource(SM) Global Bond Fund
RiverSource(SM) Emerging Markets Bond Fund
TAX-EXEMPT FUNDS
RiverSource(SM) Tax-Exempt Money Market Fund
RiverSource(SM) Intermediate Tax-Exempt Fund
RiverSource(SM) Tax-Exempt Bond Fund
RiverSource(SM) State Tax-Exempt Funds
RiverSource(SM) Tax-Exempt High Income Fund
GLOBAL/INTERNATIONAL FUNDS
RiverSource(SM) Global Equity Fund
RiverSource(SM) International Select Value Fund
RiverSource(SM) International Equity Fund
RiverSource(SM) Disciplined International Equity Fund
RiverSource(SM) International Opportunity Fund
RiverSource(SM) International Small Cap Fund
RiverSource(SM) International Aggressive Growth Fund
RiverSource(SM) European Equity Fund
RiverSource(SM) Emerging Markets Fund
You should consider the investment objectives, risks, charges and expenses of a
mutual fund carefully before investing. For a free prospectus of any of the
funds listed above, which contains this and other important information about
the funds, contact your financial institution or visit riversource.com/funds.
Read the prospectus carefully before investing.
Investment products, including shares of mutual funds, involve risks including
possible loss of principal and fluctuation in value. Investing in certain funds
involves special risks, such as those related to investments in foreign
securities, small- and mid-capitalization stocks, fixed income securities
(especially high-yield securities), and funds which focus their investments in a
particular sector, such as real estate, technology and precious metals. See each
fund's prospectus for specific risks associated with the fund.
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.
"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.
THIS PAGE IS NOT PART OF THE ANNUAL REPORT
RIVERSOURCE(SM) DISCIPLINED INTERNATIONAL EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
RIVERSOURCE.COM/FUNDS
(RIVERSOURCE(SM) LOGO)
INVESTMENTS
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource(SM) mutual funds are distributed by RiverSource Distributors, Inc.
and Ameriprise Financial Services, Inc., Members NASD, and managed by
RiverSource Investments, LLC. These companies are part of Ameriprise Financial,
Inc.
S-6506 C (12/06)