Annual Report
(RIVERSOURCE INVESTMENTS(SM) LOGO)
RIVERSOURCE(SM)
INTERNATIONAL EQUITY FUND
ANNUAL REPORT FOR THE PERIOD ENDED OCT. 31, 2006
- - RIVERSOURCE INTERNATIONAL EQUITY FUND SEEKS TO PROVIDE SHAREHOLDERS WITH
LONG-TERM GROWTH OF CAPITAL.
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
Performance Summary ....................................................... 5
Questions & Answers with Portfolio Management ............................. 7
The Fund's Long-term Performance .......................................... 12
Investments in Securities ................................................. 14
Financial Statements ...................................................... 20
Notes to Financial Statements ............................................. 23
Report of Independent Registered Public Accounting Firm ................... 39
Federal Income Tax Information ............................................ 40
Fund Expenses Example ..................................................... 42
Board Members and Officers ................................................ 44
Proxy Voting .............................................................. 47
(DALBAR LOGO)
The RiverSource mutual fund shareholder reports have been awarded the
Communications Seal from Dalbar Inc., an independent financial services research
firm. The Seal recognizes communications demonstrating a level of excellence in
the industry.
2 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
FUND SNAPSHOT AT OCT. 31, 2006
FUND OVERVIEW
RiverSource International Equity Fund holds a blend of non-U.S. growth and value
stocks and may, at times, favor one over the other based on market conditions
and opportunities. Although the Fund invests primarily in large-cap companies,
it may also purchase stocks of small- and mid-cap companies. The Fund offers
access to multiple managers. The result is a broadly diversified portfolio in
terms of sector and country allocation mixed with consideration of current
conditions in the world's economies.
COUNTRY BREAKDOWN
Percentage of portfolio assets
(PIE CHART)
Other(1) 31.7%
Italy 4.3%
Germany 6.5%
France 8.7%
Japan 20.0%
United Kingdom 16.5%
Switzerland 12.3%
(1) Includes Australia 3.6%, Mexico 3.4%, Netherlands 3.2%, Hong Kong 2.5%,
Singapore 2.4%, South Korea 2.0%, Brazil 1.6%, Canada 1.6%, China 1.4%,
Sweden 1.4%, Taiwan 0.9%, Austria 0.8%, South Africa 0.8%, Ireland 0.7%,
Spain 0.7%, Finland 0.6%, India 0.6%, Belgium 0.5%, Greece 0.5% and Cash &
Cash Equivalents 2.5%.
TOP TEN HOLDINGS
PERCENTAGE OF PORTFOLIO ASSETS
UBS (Switzerland) 2.3%
Roche Holding (Switzerland) 2.1%
Nestle (Switzerland) 2.0%
BAE Systems (United Kingdom) 1.6%
America Movil ADR Series L (Mexico) 1.5%
Diageo (United Kingdom) 1.5%
Continental (Germany) 1.5%
Veolia Environnement (France) 1.5%
Esprit Holdings (Hong Kong) 1.4%
Lonza Group (Switzerland) 1.4%
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
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 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
THE BOSTON COMPANY ASSET
MANAGEMENT, LLC
YEARS IN
INDUSTRY
--------
D. Kirk Henry, CFA 25
Clifford A. Smith, CFA 20
MARSICO CAPITAL MANAGEMENT, LLC
YEARS IN
INDUSTRY
--------
James G. Gendelman 19
FUND FACTS
TICKER
SYMBOL INCEPTION DATE
------ --------------
Class A AAICX 10/3/02
Class B APCBX 10/3/02
Class C -- 10/3/02
Class I AILIX 3/4/04
Class Y -- 10/3/02
Total net assets $195.2 million
Number of holdings 168
4 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the year ended Oct. 31, 2006
(PERFORMANCE GRAPH)
RiverSource International Equity
Fund Class A (excluding sales
charge) +26.50%
Morgan Stanley Capital
International (MSCI) EAFE Index
(unmanaged) +28.04%
Lipper International Funds Index +27.27%
(see "The Fund's Long-term Performance" for Index descriptions)
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting riversource.com/funds.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
It is not possible to invest directly in an index.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 5
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS
AT OCT. 31, 2006
SINCE
Without sales charge 1 YEAR 3 YEARS INCEPTION
- -------------------- ------ ------- ---------
Class A (inception 10/3/02) +26.50% +19.07% +20.43%
Class B (inception 10/3/02) +25.37% +18.11% +19.46%
Class C (inception 10/3/02) +25.46% +18.11% +19.47%
Class I (inception 3/4/04) +27.11% N/A +16.72%
Class Y (inception 10/3/02) +26.66% +19.28% +20.64%
With sales charge
Class A (inception 10/3/02) +19.22% +16.74% +18.69%
Class B (inception 10/3/02) +20.37% +17.14% +19.18%
Class C (inception 10/3/02) +24.46% +18.11% +19.47%
AT SEPT. 30, 2006
SINCE
Without sales charge 1 YEAR 3 YEARS INCEPTION
- -------------------- ------ ------- ---------
Class A (inception 10/3/02) +20.28% +19.77% +20.07%
Class B (inception 10/3/02) +19.26% +18.78% +19.12%
Class C (inception 10/3/02) +19.34% +18.79% +19.12%
Class I (inception 3/4/04) +20.75% N/A +16.02%
Class Y (inception 10/3/02) +20.46% +19.93% +20.25%
With sales charge
Class A (inception 10/3/02) +13.37% +17.43% +18.30%
Class B (inception 10/3/02) +14.26% +17.83% +18.67%
Class C (inception 10/3/02) +18.34% +18.79% +19.12%
Class A share performance reflects the maximum sales charge of 5.75%. Class B
share performance reflects a contingent deferred sales charge (CDSC) applied as
follows: first year 5%; second and third years 4%; fourth year 3%; fifth year
2%; sixth year 1%; no sales charge thereafter. Class C shares may be subject to
a 1% CDSC if shares are sold within one year after purchase. Sales charges do
not apply to Class I and Class Y shares. These share classes are available to
institutional investors only.
6 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS WITH PORTFOLIO MANAGEMENT
RiverSource International Equity Fund rose 26.50% for the 12-month period ending
Oct. 31, 2006 (Class A shares, excluding sales charge), underperforming its
benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index, which
increased 28.04% during the same period. The Fund also underperformed the Lipper
International Funds Index, which gained 27.27%.
At Oct. 31, 2006, approximately 35% 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 International Equity Fund may experience relatively
large purchases or redemptions from affiliated funds-of-funds (see page 30,
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 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 28
and 42.
RiverSource International Equity Fund's portfolio is managed by two independent
money management firms that each invest a portion of the Fund's assets in a
blend of growth and value stocks of foreign companies to seek long-term growth
of capital. The Boston Company Asset Management, LLC (The Boston Company) and
Marsico Capital Management, LLC (Marsico) each managed approximately 50% of the
Fund's assets as of Oct. 31, 2006. Below, each subadviser discusses results and
positioning for their portion of the Fund for the fiscal year.
Q: What factors affected performance for this period?
THE BOSTON COMPANY: Our portion of the Fund's strategy slightly trailed the
MSCI EAFE Index during the period despite solid performance in mainland
Europe, specifically the Netherlands and Germany. Industrial production in
Germany beat expectations and the Dutch market continues to advance on the
back of corporate restructuring. Industrial conglomerate Koninklijke
Philips Electronics and Ahold, a grocery retailer, are actively shedding
nonperforming business units to focus on core operations. In addition, the
country continues to have one of the lowest unemployment levels in the
region.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 7
QUESTIONS & ANSWERS
Mixed economic news weighed heavily on Japan, which is emerging from a
decade of deflation and scarce local consumption. Japan is still heavily
dependent on exports and a U.S. slowdown has weakened the Japanese market,
a top performer last year. As a result, the large exposure to Japan
detracted from our portion of the Fund's performance during the period.
A lower weight in the materials sector, specifically the large metal
producers, was a positive contributor to the performance of the Fund
relative to the MSCI EAFE Index as a slowing global economy sent metal
stocks down during the period. The portfolio's overweight relative to the
MSCI EAFE Index in the consumer staples sector also contributed positively
to performance when consumer staples stocks rose sharply later in the
period. Within consumer staples, grocery retailers Carrefour and Nestle
continued to gain market share and benefit from higher prices. Low exposure
to the utilities sector detracted from our portion of the Fund's
performance as a flurry of merger activity and defensive investing moved
the utility sector up sharply.
8 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
MARSICO: The largest positive contributor to our portion of the Fund's
12-month performance was the industrials sector. Positions in French steel
tubing manufacturer Vallourec, Canadian National Railway, French
construction contractor Vinci and Swiss power plant operator ABB were among
our portion of the Fund's largest positive individual contributors during
the period. Other individual holdings in a variety of sectors, such as
Latin American mobile communications services provider America Movil,
German tire and auto parts manufacturer Continental, Swiss diversified
financials company UBS, French water plant operator Veolia Environnement
and Japanese real estate developer Sumitomo Realty & Development, were all
strong performers and contributed positively to our portion of the Fund's
performance. Maintaining smaller positions in the telecommunications
services and energy sectors, both of which were relatively weak performers
for the MSCI EAFE Index during the period, also helped our portion of the
Fund's return relative to the MSCI EAFE Index.
MAINTAINING SMALLER POSITIONS IN THE TELECOMMUNICATIONS SERVICES AND ENERGY
SECTORS, BOTH OF WHICH WERE RELATIVELY WEAK PERFORMERS FOR THE MSCI EAFE
INDEX DURING THE PERIOD, ALSO HELPED OUR PORTION OF THE FUND'S RETURN
RELATIVE TO THE MSCI EAFE INDEX.
-- MARSICO
Negatively impacting the Fund's results included positions in Japanese
video games manufacturer Sega Sammy Holdings, Japanese consumer staples
retailer Seiyu, British oil company BP, Japanese consumer credit card
company Credit Saison and the UK-based mining company BHP Billiton. Large
exposure to the consumer durables and apparel industry group, which emerged
as one of the strongest performers for the MSCI EAFE Index during the
period, also detracted from returns. Currency fluctuations at times affect
the Fund's investment results because foreign holdings are denominated in
foreign currencies and the value of the currencies may rise or fall against
the dollar. Such fluctuations were a modest negative factor in our portion
of the Fund's performance during the reporting period.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 9
QUESTIONS & ANSWERS
Q: What changes did you make to the portfolio during the period?
THE BOSTON COMPANY: A broader market allowed us to take profits in KDDI,
which moved higher against a weak Japanese market. The country's second
largest telecom company rebounded from oversold conditions triggered by the
sale of Vodafone's mobile license to Softbank. Consumer staples investments
have become a top pick for investors shifting from cyclical stocks. Premium
spirits and beverage company Diageo was sold on price strength as the
company continues to generate volume growth in the U.S. European airlines
have reported solid load factors and profitability due to diligent fuel
hedging. Deutsche Lufthansa was liquidated following a steady flow of
positive results. Weakness in UK financials provided an opportunity to
acquire Friends Provident. Bank of East Asia was sold after reporting
stellar growth in its Chinese business. Barclays was also sold after
reporting ahead of expectations due to its capital markets division. The
weakness in commodity prices provided an opportunity to purchase Rio Tinto,
a diversified mining company that is trading at historically low levels.
MARSICO: On a sector allocation basis, there were a few significant shifts
during the reporting period. Our portion of the Fund's sector weightings
are a residual of the investment process, not a central decision-making
tool. As the investment team identifies macroeconomic themes and companies
with the litany of attributes we look for, individual stocks are purchased
and sold. The shifts that occurred during the period resulted from
macroeconomic thematic changes as well as finding new ideas for inclusion
into the portfolio mix.
The most significant increases were in the financials, consumer staples,
industrials and materials sectors. The largest allocation decreases
occurred in the consumer discretionary, health care, information technology
and energy sectors. Allocations in the telecommunications services and
utilities sectors remained approximately the same at the end of the
reporting period as they were at the beginning of the period.
10 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
QUESTIONS & ANSWERS
Q: How are you positioning the fund going forward?
THE BOSTON COMPANY: Markets stabilized and drifted higher during the summer
after the market correction experienced during the second quarter. However,
a slowing U.S. economy could reign in the performance momentum that has
dominated market returns. The most likely outcome is a pullback in gross
domestic product growth to trend levels. Stock selection should invariably
become a more important factor in portfolio performance as discernable
trends, such as commodity prices, diminish. As always, we continue to
search for cheap stocks that are out of favor in the market but have the
potential to be significant performers in the near to medium term.
STOCK SELECTION SHOULD INVARIABLY BECOME A MORE IMPORTANT FACTOR IN
PORTFOLIO PERFORMANCE AS DISCERNABLE TRENDS, SUCH AS COMMODITY PRICES,
DIMINISH.
-- THE BOSTON COMPANY
MARSICO: Our portion of the Fund currently has an emphasis on consumer
discretionary, consumer staples, industrials and information technology
investments. Compared to the MSCI EAFE Index, our portion of the Fund has
significant exposure to the financials, consumer discretionary, consumer
staples, industrials and information technology investments.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 11
THE FUND'S LONG-TERM PERFORMANCE
The chart on the facing page illustrates the total value of an assumed $10,000
investment in RiverSource International Equity Fund Class A shares (from 10/1/02
to 10/31/06)* as compared to the performance of two widely cited performance
indices, the Morgan Stanley Capital International (MSCI) EAFE Index and the
Lipper International Funds Index. In comparing the Fund's Class A shares to
these indices, you should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5.75%, while such charges are not reflected
in the performance of the indices. Returns for the Fund include the reinvestment
of any distribution paid during each period.
The performance information shown represents past performance and is not a
guarantee of future results. The table below and the chart on the facing page do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The investment return and
principal value of your investment will fluctuate so that your shares, when
redeemed, may be worth more or less than their original cost. Current
performance may be lower or higher than the performance information shown. You
may obtain performance information current to the most recent month-end by
contacting your financial institution or visiting riversource.com/funds. Also
see "Past Performance" in the Fund's current prospectus.
* Fund data is from Oct. 3, 2002. MSCI EAFE Index and Lipper peer group data
is from Oct. 1, 2002.
COMPARATIVE RESULTS
Results at Oct. 31, 2006
SINCE
1 YEAR 3 YEARS INCEPTION(3)
------- ------- ------------
RIVERSOURCE INTERNATIONAL EQUITY FUND
(INCLUDES SALES CHARGE)
Class A Cumulative value of $10,000 $11,922 $15,910 $20,110
Average annual total return +19.22% +16.74% +18.69%
MSCI EAFE INDEX(1)
Cumulative value of $10,000 $12,804 $18,109 $24,346
Average annual total return +28.04% +21.89% +24.35%
LIPPER INTERNATIONAL FUNDS INDEX(2)
Cumulative value of $10,000 $12,727 $17,637 $23,478
Average annual total return +27.27% +20.82% +23.25%
Results for other share classes can be found on page 6.
12 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN
RIVERSOURCE INTERNATIONAL EQUITY FUND
<Table>
<Caption>
RIVERSOURCE INTERNATIONAL MORGAN STANLEY CAPITAL
EQUITY FUND CLASS A INTERNATIONAL (MSCI) LIPPER INTERNATIONAL
INDEX(2) (INCLUDES SALES CHARGE) EAFE INDEX(1) FUNDS INDEX(2)
10/1/02 $9425 $10000 $10000
10/02 $9744 $10538 $10519
10/03 $11912 $13443 $13312
10/04 $13746 $16034 $15514
10/05 $15897 $19015 $18447
10/06 $20110 $24346 $23478
</Table>
(1) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged
index, is compiled from a composite of securities markets of Europe,
Australia and the Far East. The index is widely recognized by investors in
foreign markets as the measurement index for portfolios of non-North
American securities. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or other
fees.
(2) The Lipper International Funds Index includes the 30 largest international
funds (growth and value) tracked by Lipper Inc. The index's returns include
net reinvested dividends. The Fund's performance is currently measured
against this index for purposes of determining the performance incentive
adjustment.
(3) Fund data is from Oct. 3, 2002. MSCI EAFE Index and Lipper peer group data
is from Oct. 1, 2002.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 13
INVESTMENTS IN SECURITIES
OCT. 31, 2006
(Percentages represent value of investments compared to net assets)
COMMON STOCKS (97.9%)(c)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
AUSTRALIA (3.7%)
BEVERAGES (0.3%)
Coca-Cola Amatil 106,585 $ 574,400
------------
BIOTECHNOLOGY (0.7%)
CSL 31,329 1,360,634
------------
CAPITAL MARKETS (1.4%)
Macquarie Bank 44,298 2,557,061
------------
COMMERCIAL BANKS (0.4%)
Natl Australia Bank 27,662 817,766
------------
CONTAINERS & PACKAGING (0.4%)
Amcor 136,088 729,181
------------
HOTELS, RESTAURANTS & LEISURE (0.4%)
Tabcorp Holdings 63,805 815,170
------------
INSURANCE (0.1%)
Insurance Australia Group 63,680 273,656
------------
AUSTRIA (0.8%)
COMMERCIAL BANKS
Erste Bank der Oesterreichischen Sparkassen 24,112 1,641,930
------------
BELGIUM (0.5%)
DIVERSIFIED FINANCIAL SERVICES
Fortis 21,540 903,717
------------
BRAZIL (1.6%)
COMMERCIAL BANKS (0.9%)
UNIBANCO - Uniao de
Bancos Brasileiros ADR 24,245 1,909,294
------------
HOUSEHOLD DURABLES (0.4%)
Gafisa 48,815(b) 718,270
------------
OIL, GAS & CONSUMABLE FUELS (0.3%)
Petroleo Brasileiro ADR 6,560 582,266
------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
CANADA (1.6%)
FOOD & STAPLES RETAILING (0.8%)
Shoppers Drug Mart 36,450 $ 1,485,541
------------
ROAD & RAIL (0.8%)
Canadian Natl Railway 34,296 1,633,862
------------
CHINA (1.4%)
COMMERCIAL BANKS (0.9%)
Industrial & Commercial
Bank of China
Series H 4,126,000(b) 1,846,346
------------
OIL, GAS & CONSUMABLE FUELS (0.5%)
CNOOC ADR 11,658 977,174
------------
FINLAND (0.6%)
COMMUNICATIONS EQUIPMENT (0.1%)
Nokia 4,600 91,301
Nokia ADR 9,340 185,679
------------
Total 276,980
------------
PAPER & FOREST PRODUCTS (0.5%)
M-real Series B 45,990 271,202
UPM - Kymmene 24,784 629,206
------------
Total 900,408
------------
FRANCE (8.8%)
AUTO COMPONENTS (0.5%)
Valeo 23,857 898,003
------------
AUTOMOBILES (0.3%)
Peugeot 9,070 521,079
------------
COMMERCIAL BANKS (0.9%)
BNP Paribas 6,960 765,335
Credit Agricole 21,900 931,120
------------
Total 1,696,455
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%)
France Telecom 53,800 1,397,441
------------
See accompanying notes to investments in securities.
14 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
FRANCE (CONT.)
FOOD & STAPLES RETAILING (0.2%)
Carrefour 5,350 $ 326,004
------------
HOUSEHOLD DURABLES (0.4%)
Thomson 40,260 694,250
------------
MACHINERY (0.7%)
Vallourec 5,629 1,401,048
------------
MEDIA (0.7%)
JC Decaux 34,130 871,271
Lagardere 6,890 495,565
------------
Total 1,366,836
------------
MULTI-UTILITIES (1.4%)
Veolia Environnement 46,681 2,858,228
------------
OIL, GAS & CONSUMABLE FUELS (1.0%)
Total 28,572 1,934,697
------------
PHARMACEUTICALS (0.9%)
Sanofi-Aventis 20,070 1,706,116
------------
TEXTILES, APPAREL & LUXURY GOODS (1.1%)
LVMH Moet Hennessy
Louis Vuitton 21,946 2,287,171
------------
GERMANY (6.5%)
AIR FREIGHT & LOGISTICS (0.9%)
Deutsche Post 64,380 1,783,191
------------
AUTO COMPONENTS (1.4%)
Continental 25,820 2,887,663
------------
CAPITAL MARKETS (0.3%)
Deutsche Bank 3,980 500,946
------------
DISTRIBUTORS (0.1%)
Medion 10,000 106,324
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.4%)
Deutsche Telekom 50,410 872,496
------------
ELECTRIC UTILITIES (0.3%)
E.ON 4,630 555,515
------------
FOOD & STAPLES RETAILING (0.5%)
Metro 16,000 950,663
------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
GERMANY (CONT.)
INDUSTRIAL CONGLOMERATES (0.9%)
Siemens 18,890 $ 1,699,840
------------
INSURANCE (0.8%)
Allianz 3,890 722,039
Hannover
Rueckversicherung 19,210(b) 815,524
------------
Total 1,537,563
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.4%)
Infineon Technologies 68,880(b) 838,742
------------
THRIFTS & MORTGAGE FINANCE (0.5%)
Hypo Real Estate Holding 15,099 949,164
------------
GREECE (0.4%)
ELECTRIC UTILITIES
Public Power 29,250 746,695
------------
HONG KONG (2.5%)
COMMERCIAL BANKS (0.3%)
BOC Hong Kong
Holdings 234,500 524,683
------------
HOTELS, RESTAURANTS & LEISURE (0.5%)
Shangri-La Asia 444,000 963,740
------------
INDUSTRIAL CONGLOMERATES (0.4%)
Citic Pacific 57,100 175,484
Hutchison Whampoa 67,500 598,905
------------
Total 774,389
------------
SPECIALTY RETAIL (1.3%)
Esprit Holdings 275,500 2,667,603
------------
INDIA (0.6%)
COMMERCIAL BANKS
ICICI Bank ADR 31,134 1,094,360
------------
IRELAND (0.7%)
COMMERCIAL BANKS
Bank of Ireland 64,240 1,293,077
------------
See accompanying notes to investments in securities.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 15
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
ITALY (4.3%)
COMMERCIAL BANKS (2.3%)
Banca Intesa 246,250 $ 1,683,149
Sanpaolo IMI 77,968 1,664,943
UniCredito Italiano 123,660 1,025,169
------------
Total 4,373,261
------------
ELECTRIC UTILITIES(0.3%)
Enel 59,270 568,905
------------
INSURANCE (0.3%)
Unipol 186,700 645,804
------------
MEDIA (0.5%)
Mediaset 91,670 1,028,497
------------
OIL, GAS & CONSUMABLE FUELS (0.9%)
Eni 41,200 1,242,648
Saras 109,480(b) 570,490
------------
Total 1,813,138
------------
JAPAN (20.1%)
AUTO COMPONENTS (0.2%)
Toyoda Gosei 14,400 334,297
------------
AUTOMOBILES (1.6%)
Nissan Motor 96,000 1,150,030
Toyota Motor 34,300 2,032,484
------------
Total 3,182,514
------------
BUILDING PRODUCTS (0.7%)
Daikin Inds 25,593 722,162
JS Group 31,200 640,274
------------
Total 1,362,436
------------
CAPITAL MARKETS (0.5%)
Nomura Holdings 55,100 972,907
------------
CHEMICALS (0.2%)
Kuraray 37,300 422,276
------------
COMMERCIAL BANKS (2.9%)
77 Bank 84,400 554,969
Mitsubishi UFJ Financial Group 67 842,155
Mitsui Trust Holdings 168,400 1,982,785
Shinsei Bank 136,000 784,951
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
JAPAN (CONT.)
COMMERCIAL BANKS (CONT.)
Sumitomo Mitsui Financial Group 155 $ 1,696,451
------------
Total 5,861,311
------------
CONSUMER FINANCE (1.4%)
Aiful 15,954 551,126
Credit Saison 27,300 987,422
ORIX 640 180,316
SFCG 1,810 334,761
Takefuji 19,970 724,009
------------
Total 2,777,634
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (1.1%)
Mabuchi Motor 4,100 239,094
Nippon Electric Glass 62,000 1,335,955
TDK 7,800 610,261
------------
Total 2,185,310
------------
FOOD & STAPLES RETAILING (1.0%)
AEON 40,600 956,418
Lawson 14,200 482,035
Matsumotokiyoshi 22,531 544,250
------------
Total 1,982,703
------------
FOOD PRODUCTS (0.2%)
Ajinomoto 36,100 417,643
------------
HOUSEHOLD DURABLES(1.5%)
Funai Electric 7,500 657,332
Rinnai 11,500 326,464
Sekisui Chemical 103,400 914,199
Sekisui House 61,800 977,070
------------
Total 2,875,065
------------
HOUSEHOLD PRODUCTS (0.5%)
Kao 38,100 1,000,145
------------
LEISURE EQUIPMENT & PRODUCTS (1.4%)
FUJIFILM Holdings 32,800 1,217,204
Sankyo 8,700 444,113
Sega Sammy Holdings 44,041 1,107,144
------------
Total 2,768,461
------------
MACHINERY (0.5%)
Hino Motors 161,300 797,190
Minebea 26,400 160,951
------------
Total 958,141
------------
See accompanying notes to investments in securities.
16 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
JAPAN (CONT.)
MEDIA (0.6%)
Dentsu 399 $ 1,098,572
------------
OFFICE ELECTRONICS (0.8%)
Canon 10,106 541,809
Ricoh 46,700 922,420
------------
Total 1,464,229
------------
PAPER & FOREST PRODUCTS (0.3%)
Nippon Paper Group 144 515,913
------------
PHARMACEUTICALS (0.4%)
Astellas Pharma 16,000 720,992
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.8%)
Sumitomo Realty & Development 46,000 1,526,123
------------
ROAD & RAIL (0.8%)
Nippon Express 281,900 1,525,803
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%)
Advantest 13,700 692,322
Rohm 16,500 1,518,084
------------
Total 2,210,406
------------
SPECIALTY RETAIL (0.7%)
Yamada Denki 14,300 1,423,275
------------
TRADING COMPANIES & DISTRIBUTORS (0.9%)
Marubeni 270,000 1,382,899
Mitsubishi 18,300 353,638
------------
Total 1,736,537
------------
MEXICO (3.4%)
BEVERAGES (0.3%)
Coca-Cola Femsa ADR 15,900 552,366
------------
CONSTRUCTION MATERIALS (1.3%)
CEMEX ADR 83,838(b) 2,577,180
------------
DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%)
Telefonos de Mexico
ADR Series L 18,640 491,910
------------
WIRELESS TELECOMMUNICATION SERVICES (1.5%)
America Movil ADR
Series L 70,294 3,013,505
------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
NETHERLANDS (3.2%)
COMMERCIAL BANKS (0.5%)
ABN AMRO Holding 33,912 $ 989,069
------------
DIVERSIFIED FINANCIAL SERVICES (0.8%)
ING Groep 36,429 1,613,946
------------
HOUSEHOLD DURABLES (0.6%)
Koninklijke Philips
Electronics 32,710 1,142,727
------------
INSURANCE (0.4%)
Aegon 46,377 853,009
------------
OIL, GAS & CONSUMABLE FUELS (0.9%)
Royal Dutch Shell
Series A 48,707 1,688,044
------------
SINGAPORE (2.4%)
COMMERCIAL BANKS (1.9%)
DBS Group Holdings 200,820 2,632,182
United Overseas Bank 101,800 1,157,710
------------
Total 3,789,892
------------
REAL ESTATE MANAGEMENT & DEVELOPMENT (0.5%)
CapitaLand 266,000 931,444
------------
SOUTH AFRICA (0.8%)
COMMERCIAL BANKS (0.3%)
Nedbank Group 30,976 512,866
------------
METALS & MINING (0.5%)
Anglo American 22,101 996,608
------------
SOUTH KOREA (2.0%)
DIVERSIFIED TELECOMMUNICATION SERVICES (0.3%)
KT ADR 21,900 490,122
------------
ELECTRIC UTILITIES (0.3%)
Korea Electric Power
ADR 24,850 491,533
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%)
Samsung Electronics 3,650 2,367,966
------------
WIRELESS TELECOMMUNICATION SERVICES (0.3%)
SK Telecom ADR 24,980 601,518
------------
See accompanying notes to investments in securities.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 17
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
SPAIN (0.8%)
COMMERCIAL BANKS (0.2 %)
Banco Santander
Central Hispano 25,640 $ 443,777
------------
OIL, GAS & CONSUMABLE FUELS (0.6%)
Repsol YPF 30,820 1,022,805
------------
SWEDEN (1.5%)
COMMUNICATIONS EQUIPMENT (1.3%)
Telefonaktiebolaget
LM Ericsson ADR 63,677 2,408,264
------------
PAPER & FOREST PRODUCTS (0.2%)
Svenska Cellulosa
Series B 9,440 433,405
------------
SWITZERLAND (12.4%)
CAPITAL MARKETS (2.6%)
Credit Suisse Group 11,610 699,960
UBS 74,602 4,455,729
------------
Total 5,155,689
------------
CHEMICALS (3.5%)
Ciba Specialty Chemicals 19,897 1,217,972
Clariant 32,130(b) 444,241
Lonza Group 34,387 2,653,659
Syngenta 15,065(b) 2,432,925
------------
Total 6,748,797
------------
ELECTRICAL EQUIPMENT (0.9%)
ABB 116,674 1,735,104
------------
FOOD PRODUCTS (2.0%)
Nestle 11,422 3,902,210
------------
INSURANCE (0.6%)
Swiss Reinsurance 14,915 1,222,934
------------
PHARMACEUTICALS (2.8%)
Novartis 22,700 1,377,693
Roche Holding 23,265 4,071,374
------------
Total 5,449,067
------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
TAIWAN (0.9%)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.9%)
Taiwan Semiconductor Mfg ADR 114,721 $ 1,112,794
United Microelectronics ADR 194,495 589,320
------------
Total 1,702,114
------------
UNITED KINGDOM (16.5%)
AEROSPACE & DEFENSE (1.6%)
BAE Systems 401,839 3,215,503
------------
BEVERAGES (1.9%)
Diageo 159,658 2,954,114
SABMiller 49,540 958,206
------------
Total 3,912,320
------------
CAPITAL MARKETS (1.2%)
Man Group 252,689 2,352,183
------------
COMMERCIAL BANKS (2.0%)
HBOS 34,786 721,272
HSBC Holdings 77,666 1,472,591
Royal Bank of Scotland Group 56,063 1,997,644
------------
Total 4,191,507
------------
COMMERCIAL SERVICES & SUPPLIES (0.5%)
Rentokil Initial 354,500 1,024,457
------------
ENERGY EQUIPMENT & SERVICES (0.7%)
Acergy 76,713(b) 1,388,091
------------
FOOD & STAPLES RETAILING (1.1%)
Tesco 274,603 2,061,176
------------
FOOD PRODUCTS (1.2%)
Cadbury Schweppes 61,849 622,329
Unilever 65,395 1,622,881
------------
Total 2,245,210
------------
HOTELS, RESTAURANTS & LEISURE (0.2%)
Carnival 7,300 356,335
------------
HOUSEHOLD PRODUCTS (1.1%)
Reckitt Benckiser 47,471 2,065,469
------------
See accompanying notes to investments in securities.
18 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
UNITED KINGDOM (CONT.)
INDUSTRIAL CONGLOMERATES (0.5%)
Smiths Group 51,370 $ 926,970
------------
INSURANCE (0.2%)
Friends Provident 100,490 396,788
------------
MEDIA (0.8%)
Reed Elsevier 79,540 905,785
Trinity Mirror 64,470 603,200
------------
Total 1,508,985
------------
MULTILINE RETAIL (0.3%)
Debenhams 164,150(b) 588,659
------------
MULTI-UTILITIES (0.5%)
Centrica 140,430 887,321
------------
OIL, GAS & CONSUMABLE FUELS (0.8%)
BP 144,863 1,610,983
------------
PHARMACEUTICALS (1.0%)
GlaxoSmithKline 74,316 1,984,610
------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
- ------ --------- ------------
UNITED KINGDOM (CONT.)
THRIFTS & MORTGAGE FINANCE (0.1%)
Northern Rock 5,025 $ 114,735
------------
WIRELESS TELECOMMUNICATION SERVICES (0.8%)
Vodafone Group 569,009 1,465,270
------------
TOTAL COMMON STOCKS
(Cost: $166,257,171) $191,214,379
------------
MONEY MARKET FUND (2.5%)
SHARES VALUE(a)
--------- ------------
RiverSource Short-Term
Cash Fund 4,923,513(d) $ 4,923,513
------------
TOTAL MONEY MARKET FUND
(Cost: $4,923,513) $ 4,923,513
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $171,180,684)(e) $196,137,892
============
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) Affiliated Money Market Fund -- See Note 6 to the financial statements.
(e) At Oct. 31, 2006, the cost of securities for federal income tax purposes
was $172,517,282 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $26,681,085
Unrealized depreciation (3,060,475)
-----------
Net unrealized appreciation $23,620,610
===========
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 INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 19
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCT. 31, 2006
ASSETS
Investments in securities, at value (Note 1)
Unaffiliated issuers (identified cost $166,257,171) $191,214,379
Affiliated money market fund (identified cost $4,923,513) (Note 6) 4,923,513
------------
Total investments in securities (identified cost $171,180,684) 196,137,892
Cash in bank on demand deposit 403
Foreign currency holdings (identified cost $1,653,452) (Note 1) 1,666,317
Capital shares receivable 1,482
Dividends and accrued interest receivable 275,388
Receivable for investment securities sold 1,310,548
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 3,150
------------
Total assets 199,395,180
------------
LIABILITIES
Capital shares payable 3,000
Payable for investment securities purchased 4,046,801
Unrealized depreciation on foreign currency contracts held, at value (Note 5) 3,237
Accrued investment management services fee 5,174
Accrued distribution fee 1,423
Accrued service fee 1
Accrued transfer agency fee 447
Accrued administrative services fee 427
Other accrued expenses 102,232
------------
Total liabilities 4,162,742
------------
Net assets applicable to outstanding capital stock $195,232,438
============
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 230,575
Additional paid-in capital 137,897,875
Undistributed net investment income 2,127,274
Accumulated net realized gain (loss) 30,004,135
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 5) 24,972,579
------------
Total -- representing net assets applicable to outstanding capital stock $195,232,438
============
Net assets applicable to outstanding shares: Class A $ 99,431,354
Class B $ 25,438,560
Class C $ 1,752,171
Class I $ 68,401,947
Class Y $ 208,406
Net asset value per share of outstanding capital stock: Class A shares 11,739,511 $ 8.47
Class B shares 3,052,687 $ 8.33
Class C shares 210,053 $ 8.34
Class I shares 8,030,624 $ 8.52
Class Y shares 24,590 $ 8.48
See accompanying notes to financial statements.
20 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
STATEMENT OF OPERATIONS
YEAR ENDED OCT. 31, 2006
INVESTMENT INCOME
Income:
Dividends $ 4,535,906
Interest 114,839
Income distributions from affiliated money market fund
(Note 6) 25,699
Less foreign taxes withheld (411,576)
-----------
Total income 4,264,868
-----------
Expenses (Note 2):
Investment management services fee 1,767,556
Distribution fee
Class A 242,885
Class B 263,442
Class C 16,516
Transfer agency fee 246,565
Incremental transfer agency fee
Class A 18,821
Class B 10,526
Class C 671
Service fee -- Class Y 185
Administrative services fees and expenses 146,048
Compensation of board members 9,977
Custodian fees 147,816
Printing and postage 57,920
Registration fees 72,585
Audit fees 21,500
Other 12,174
-----------
Total expenses 3,035,187
Expenses waived/reimbursed by the Investment Manager
and its affiliates (Note 2) (50,304)
-----------
2,984,883
Earnings and bank fee credits on cash balances
(Note 2) (5,829)
-----------
Total net expenses 2,979,054
-----------
Investment income (loss) -- net 1,285,814
-----------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 32,184,337
Foreign currency transactions 51,538
Payment from affiliate (Note 2) 106
-----------
Net realized gain (loss) on investments 32,235,981
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and
liabilities in foreign currencies 9,190,596
-----------
Net gain (loss) on investments and foreign currencies 41,426,577
-----------
Net increase (decrease) in net assets resulting from
operations $42,712,391
===========
See accompanying notes to financial statements.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 21
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED OCT. 31, 2006 2005
- ------------------- ------------ ------------
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) net $ 1,285,814 $ 861,289
Net realized gain (loss) on investments 32,235,981 15,183,813
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and
liabilities in foreign currencies 9,190,596 6,463,767
------------ ------------
Net increase (decrease) in net assets resulting from
operations 42,712,391 22,508,869
------------ ------------
Distributions to shareholders from:
Net investment income
Class A (753,806) (1,253,898)
Class B (25,488) (122,931)
Class C (721) (8,024)
Class I (647,101) (414,331)
Class Y (1,400) (1,215)
Net realized gain
Class A (7,774,435) (9,179,533)
Class B (2,150,509) (2,090,538)
Class C (124,742) (142,248)
Class I (4,219,032) (2,339,204)
Class Y (10,738) (7,591)
------------ ------------
Total distributions (15,707,972) (15,559,513)
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 22,068,658 23,041,476
Class B shares 5,442,646 7,220,863
Class C shares 391,948 404,157
Class I shares 21,631,905 24,665,418
Class Y shares 102,976 --
Reinvestment of distributions at net asset value
Class A shares 7,613,975 7,416,121
Class B shares 2,153,921 2,188,789
Class C shares 121,098 144,989
Class I shares 4,865,078 2,752,451
Class Y shares 10,687 7,306
Payments for redemptions
Class A shares (35,580,645) (40,711,099)
Class B shares (Note 2) (9,742,706) (8,469,283)
Class C shares (Note 2) (447,625) (690,357)
Class I shares (12,368,616) (5,737,247)
Class Y shares (23,501) --
------------ ------------
Increase (decrease) in net assets from capital share
transactions 6,239,799 12,233,584
------------ ------------
Total increase (decrease) in net assets 33,244,218 19,182,940
Net assets at beginning of year 161,988,220 142,805,280
------------ ------------
Net assets at end of year $195,232,438 $161,988,220
============ ============
Undistributed net investment income $ 2,127,274 $ 855,940
------------ ------------
See accompanying notes to financial statements.
22 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource International Managers Series, Inc.
(formerly AXP Partners International Series, Inc.) and is registered under the
Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. RiverSource International Managers Series, Inc.
has 10 billion authorized shares of capital stock that can be allocated among
the separate series as designated by the Board. The Fund invests primarily in
equity securities of foreign issuers.
The Fund offers Class A, Class B, Class C, 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, Inc. (Ameriprise Financial) and the
affiliated funds-of-funds owned 100% of Class I shares, which represents 35.04%
of the Fund's net assets.
At Oct. 31, 2006, Ameriprise Financial and the affiliated funds-of-funds owned
approximately 35% of the total outstanding Fund shares.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 23
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Directors of the funds, Ameriprise Financial utilizes Fair Value
Pricing (FVP). FVP determinations are made in good faith in accordance with
these procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or event
has actually caused the closing price to no longer reflect the actual value, the
closing prices, as determined at the close of the applicable foreign market, may
be adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include material
movements in the U.S. securities markets prior to the opening of foreign markets
on the following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
24 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At Oct. 31, 2006, foreign currency holdings consisted of
multiple denominations.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 25
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
$1,414,036 and accumulated net realized gain has been decreased by $1,414,036.
The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED OCT. 31, 2006 2005
- ------------------- ---------- ----------
CLASS A
Distributions paid from:
Ordinary income .......... $4,661,301 $3,787,808
Long-term capital gain ... 3,866,940 6,645,623
CLASS B
Distributions paid from:
Ordinary income .......... 1,106,351 700,001
Long-term capital gain ... 1,069,646 1,513,468
CLASS C
Distributions paid from:
Ordinary income .......... 63,417 47,290
Long-term capital gain ... 62,046 102,982
CLASS I
Distributions paid from:
Ordinary income .......... 2,767,621 1,060,043
Long-term capital gain ... 2,098,512 1,693,492
CLASS Y
Distributions paid from:
Ordinary income .......... 6,797 3,310
Long-term capital gain ... 5,341 5,496
26 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
At Oct. 31, 2006, the components of distributable earnings on a tax basis are as
follows:
Undistributed ordinary income ........... $14,625,128
Accumulated long-term gain (loss) ....... $18,842,879
Unrealized appreciation (depreciation) .. $23,635,981
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.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 27
2.EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. The management fee is a percentage of the Fund's average daily net assets
that declines from 0.97% to 0.845% annually as the Fund's assets increase. The
fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of the Fund to the
Lipper International Funds Index. In certain circumstances, the Board may
approve a change in the index. The maximum adjustment is 0.12% per year. If the
performance difference is less than 0.50%, the adjustment will be zero. The
adjustment decreased the fee by $3,284 for the year ended Oct. 31, 2006.
The Investment Manager has Subadvisory Agreements with The Boston Company Asset
Management, LLC and Marsico Capital Management, LLC. New investments in the
Fund, net of any redemptions, are allocated in accordance with the Investment
Manager's determination of the allocation that is in the best interests of the
Fund's shareholders. Each subadviser's proportionate share of investments in the
Fund will vary due to market fluctuations.
Under 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 $4,000 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.
28 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
Under a separate Transfer Agency Agreement, RiverSource Service Corporation (the
Transfer Agent) maintains shareholder accounts and records. The Fund pays the
Transfer Agent an annual fee per shareholder account for this service as
follows:
Class A $19.50
Class B $20.50
Class C $20.00
Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with American Financial Services, Inc. (the Distributor)
for distribution and shareholder services. Under a Plan and Agreement of
Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate up to
0.25% of the Fund's average daily net assets attributable to Class A shares and
up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by 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
$215,294 for Class A, $28,308 for Class B and $151 for Class C for the year
ended Oct. 31, 2006.
For the year ended Oct. 31, 2006, the Investment Manager and its affiliates
waived certain fees and expenses to 1.65% for Class A, 2.43% for Class B, 2.43%
for Class C and 1.48% for Class Y. Of these waived fees and expenses, the
transfer agency fees waived for Class A, Class B, Class C and Class Y were
$41,531, $8,131, $580 and $62, respectively. Under this agreement which was
effective until Oct. 31, 2006, net expenses, before giving effect to any
performance incentive adjustment, would not exceed 1.65% for Class A, 2.43% for
Class B, 2.43% for Class C, 1.30% for Class I and 1.48% for Class Y of the
Fund's average daily net assets. Effective as of Nov. 1, 2006, 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 1.60% for Class A, 2.37% for Class B, 2.37% for Class C, 1.25%
for Class I and 1.43% for Class Y of the Fund's average daily net assets.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 29
During the year ended Oct. 31, 2006, the Fund's custodian and transfer agency
fees were reduced by $5,829 as a result of earnings and bank fee credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust
Company, an affiliate of Ameriprise Financial.
In addition, the Fund receive a one time payment of $106 by Ameriprise Financial
for additional earnings from overnight cash balances determined to be owed for
prior years. This amount was insignificant to the Fund's net assets value and
total return.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $159,448,613 and $167,287,260, respectively, for the
year ended Oct. 31, 2006. Realized gains and losses are determined on an
identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
YEAR ENDED OCT. 31, 2006
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
---------- ---------- ------- ---------- -------
Sold 2,810,800 702,782 49,785 2,717,056 13,168
Issued for reinvested
distributions 1,040,171 297,084 16,703 663,721 1,462
Redeemed (4,532,570) (1,265,856) (57,499) (1,473,794) (2,848)
---------- ---------- ------- ---------- -------
Net increase (decrease) (681,599) (265,990) 8,989 1,906,983 11,782
---------- ---------- ------- ---------- -------
YEAR ENDED OCT. 31, 2005
-------------------------------------------------------
CLASS A CLASS B CLASS C CLASS I CLASS Y
---------- ---------- ------- --------- -------
Sold 3,263,694 1,042,312 58,126 3,489,973 --
Issued for reinvested
distributions 1,085,816 322,830 21,385 402,405 1,070
Redeemed (5,807,671) (1,215,028) (99,587) (826,320) --
---------- ---------- ------- --------- -------
Net increase (decrease) (1,458,161) 150,114 (20,076) 3,066,058 1,070
---------- ---------- ------- --------- -------
30 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
5. FORWARD FOREIGN CURRENCY CONTRACTS
At Oct. 31, 2006, the Fund has forward foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts are included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ------------- ---------------- ---------------------- ------------ ------------
Nov. 1, 2006 45,745 24,111 $ 248 $ --
U.S. Dollar British Pound
Nov. 1, 2006 66,135 34,859 358 --
U.S. Dollar British Pound
Nov. 1, 2006 95,351 50,258 517 --
U.S. Dollar British Pound
Nov. 1, 2006 253,634 481,199 -- 2,608
British Pound U.S. Dollar
Nov. 1, 2006 47,261 37,127 127 --
U.S. Dollar European Monetary Unit
Nov. 1, 2006 1,520,469 11,828,871 596 --
U.S. Dollar Hong Kong Dollar
Nov. 1, 2006 8,294,156 70,568 -- 352
Japanese Yen U.S. Dollar
Nov. 1, 2006 51,440 64,243 203 --
U.S. Dollar Swiss Franc
Nov. 2, 2006 33,164 26,051 88 --
U.S. Dollar European Monetary Unit
Nov. 2, 2006 80,443 9,440,350 278 --
U.S. Dollar Japanese Yen
Nov. 2, 2006 25,683 32,057 86 --
U.S. Dollar Swiss Franc
Nov. 2, 2006 29,564 36,901 99 --
U.S. Dollar Swiss Franc
Nov. 3, 2006 114,939 60,222 -- 66
U.S. Dollar British Pound
Nov. 3, 2006 122,341 96,116 349 --
U.S. Dollar European Monetary Unit
Nov. 3, 2006 61,136 39,163 -- 117
Singapore Dollar U.S. Dollar
Nov. 6, 2006 72,040 56,366 -- 94
U.S. Dollar European Monetary Unit
Nov. 6, 2006 7,065,268 60,470 57 --
Japanese Yen U.S. Dollar
Nov. 6, 2006 7,733,107 66,185 62 --
Japanese Yen U.S. Dollar
Nov. 6, 2006 10,131,888 86,716 82 --
Japanese Yen U.S. Dollar
------ ------
Total $3,150 $3,237
------ ------
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 31
6. 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.
7. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency purposes.
The agreement went into effect Sept. 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 year ended Oct. 31,
2006.
8. 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.
32 RIVERSOURCE 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 INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 33
9. 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 2005 2004 2003 2002(b)
- ---------------------------- ------ ------- ------- ------ -------
Net asset value, beginning of period $ 7.34 $ 7.03 $ 6.34 $ 5.20 $ 5.03
------ ------- ------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .05 .04 .05 .02 --
Net gains (losses) (both realized
and unrealized) 1.78 1.01 .90 1.13 .17
------ ------- ------- ------ ------
Total from investment operations 1.83 1.05 .95 1.15 .17
------ ------- ------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.06) (.09) (.09) (.01) --
Distributions from realized gains (.64) (.65) (.17) -- --
------ ------- ------- ------ ------
Total distributions (.70) (.74) (.26) (.01) --
------ ------- ------- ------ ------
Net asset value, end of period $ 8.47 $ 7.34 $ 7.03 $ 6.34 $ 5.20
------ ------- ------- ------ ------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $ 99 $ 91 $ 98 $ 63 $ 22
------ ------- ------- ------ ------
Ratio of expenses to average
daily net assets(c) 1.65%(d) 1.63%(d) 1.73% 1.74%(d) 1.67%(d),(e)
------ ------- ------- ------ ------
Ratio of net investment income
(loss) to average daily net
assets .68% .59% .51% .73% (1.01%)(e)
------ ------- ------- ------ ------
Portfolio turnover rate
(excluding short-term securities) 89% 110% 111% 58% 2%
------ ------- ------- ------ ------
Total return(f) 26.50% 15.65% 15.39% 22.26% 3.38%(g)
------ ------- ------- ------ ------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Oct. 3, 2002 (when shares became publicly available) to
Oct. 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class A would have been 1.69%, 1.64%, 2.21% and 5.51% for the periods ended
Oct. 31, 2006, 2005, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
34 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006 2005 2004 2003 2002(b)
- ---------------------------- ------ ------- ------- ------ -------
Net asset value, beginning of period $ 7.24 $ 6.94 $ 6.29 $ 5.20 $5.03
------ ------ ------- ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net gains (losses) (both realized
and unrealized) 1.74 .98 .89 1.10 .17
------ ------ ------- ------ -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) (.03) (.07) (.01) --
Distributions from realized gains (.64) (.65) (.17) -- --
------ ------ ------- ------ -----
Total distributions (.65) (.68) (.24) (.01) --
------ ------ ------- ------ -----
Net asset value, end of period $ 8.33 $ 7.24 $ 6.94 $ 6.29 $5.20
------ ------ ------- ------ -----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $ 25 $ 24 $ 22 $ 13 $ 1
------ ------ ------- ------ -----
Ratio of expenses to average
daily net assets(c) 2.43%(d) 2.41%(d) 2.51% 2.52%(d) 2.52%(d),(e)
------ ------ ------- ------ -----
Ratio of net investment income
(loss) to average daily net assets (.07%) (.18%) (.22%) .04% (1.46%)(e)
------ ------ ------- ------ -----
Portfolio turnover rate
(excluding short-term securities) 89% 110% 111% 58% 2%
------ ------ ------- ------ -----
Total return(f) 25.37% 14.86% 14.41% 21.23% 3.38%(g)
------ ------ ------- ------ -----
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Oct. 3, 2002 (when shares became publicly available) to
Oct. 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class B would have been 2.46%, 2.42%, 2.98% and 6.28% for the periods ended
Oct. 31, 2006, 2005, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 35
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES (a)
Fiscal period ended Oct. 31, 2006 2005 2004 2003 2002(b)
- ---------------------------- ------ ------- ------- ------ -------
Net asset value, beginning of period $ 7.24 $ 6.95 $ 6.29 $ 5.20 $ 5.03
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net gains (losses) (both realized
and unrealized) 1.75 .97 .89 1.10 .17
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (.01) (.03) (.06) (.01) --
Distributions from realized gains (.64) (.65) (.17) -- --
------ ------ ------ ------ ------
Total distributions (.65) (.68) (.23) (.01) --
------ ------ ------ ------ ------
Net asset value, end of period $ 8.34 $ 7.24 $ 6.95 $ 6.29 $ 5.20
------ ------ ------ ------ ------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $ 2 $ 1 $ 2 $ 1 $--
------ ------ ------ ------ ------
Ratio of expenses to
average daily net assets(c) 2.43%(d) 2.41%(d) 2.51% 2.52%(d) 2.51%(d),(e)
------ ------ ------ ------ ------
Ratio of net investment income
(loss) to average daily net
assets (.08%) (.21%) (.24%) (.01%) (1.60%)(e)
------ ------ ------ ------ ------
Portfolio turnover rate
(excluding short-term securities) 89% 110% 111% 58% 2%
------ ------ ------ ------ ------
Total return(f) 25.46% 14.67% 14.54% 21.23% 3.38%(g)
------ ------ ------ ------ ------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) For the period from Oct. 3, 2002 (when shares became publicly available) to
Oct. 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class C would have been 2.46%, 2.42%, 2.98% and 6.28% for the periods ended
Oct. 31, 2006, 2005, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
36 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
CLASS I
PER SHARE INCOME AND CAPITAL CHANGES (a)
Fiscal period ended Oct. 31, 2006 2005 2004(b)
- ---------------------------- ------ ------- -------
Net asset value, beginning of period $ 7.38 $ 7.06 $6.91
------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .06 --
Net gains (losses) (both realized
and unrealized) 1.81 1.02 .15
------ ------ -----
Total from investment operations 1.88 1.08 .15
------ ------ -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.10) (.11) --
Distributions from realized gains (.64) (.65) --
------ ------ -----
Total distributions (.74) (.76) --
------ ------ -----
Net asset value, end of period $ 8.52 $ 7.38 $7.06
------ ------ -----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $ 68 $ 45 $ 22
------ ------ -----
Ratio of expenses to
average daily net assets(c) 1.23% 1.19% 1.29%(d)
------ ------ -----
Ratio of net investment income
(loss) to average daily net
assets 1.12% .96% .78%(d)
------ ------ -----
Portfolio turnover rate
(excluding short-term securities) 89% 110% 111%
------ ------ -----
Total return(e) 27.11% 16.17% 2.17%(f)
------ ------ -----
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits and bank fee credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 37
CLASS Y*
PER SHARE INCOME AND CAPITAL CHANGES (a)
Fiscal period ended Oct. 31, 2006 2005 2004 2003 2002(b)
- ---------------------------- ------ ------- ------- ------ -------
Net asset value, beginning of period $ 7.36 $ 7.05 $ 6.35 $ 5.20 $5.03
------ ------- ------ ------ -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .07 .05 .06 .03 --
Net gains (losses) (both realized
and unrealized) 1.78 1.01 .91 1.13 .17
------ ------- ------ ------ -----
Total from investment operations 1.85 1.06 .97 1.16 .17
------ ------- ------ ------ -----
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.10) (.10) (.01) --
Distributions from realized gains (.64) (.65) (.17) -- --
------ ------- ------ ------ -----
Total distributions (.73) (.75) (.27) (.01) --
------ ------- ------ ------ -----
Net asset value, end of period $ 8.48 $ 7.36 $ 7.05 $ 6.35 $5.20
------ ------- ------ ------ -----
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
millions) $ -- $ -- $ -- $ -- $ --
------ ------- ------ ------ -----
Ratio of expenses to
average daily net assets(c) 1.48%(d) 1.46%(d) 1.57% 1.57%(d) 1.52%(d),(e)
------ ------- ------ ------ -----
Ratio of net investment income
(loss) to average daily net
assets .96% .74% .37% .86% (.80%)(e)
------ ------- ------ ------ -----
Portfolio turnover rate
(excluding short-term securities) 89% 110% 111% 58% 2%
------ ------- ------ ------ -----
Total return(f) 26.66% 15.86% 15.63% 22.48% 3.38%(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 Oct. 3, 2002 (when shares became publicly available) to
Oct. 31, 2002.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits and bank fee credits on cash balances.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses for
Class Y would have been 1.51%, 1.47%, 2.04% and 5.34% for the periods ended
Oct. 31, 2006, 2005, 2003 and 2002, respectively.
(e) Adjusted to an annual basis.
(f) Total return does not reflect payment of a sales charge.
(g) Not annualized.
38 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD AND SHAREHOLDERS
RIVERSOURCE INTERNATIONAL MANAGERS SERIES, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of RiverSource International Equity
Fund (a series of RiverSource International Managers Series, Inc.) as of October
31, 2006, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
ended October 31, 2006, and the financial highlights for each of the years in
the four-year period ended October 31, 2006 and for the period from October 3,
2002 (when shares became publicly available) to October 31, 2002. These
financial statements and the financial highlights are the responsibility of fund
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
RiverSource International Equity Fund as of October 31, 2006, and the results of
its operations, changes in its net assets and the financial highlights for each
of the periods stated in the first paragraph above, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Minneapolis, Minnesota
December 20, 2006
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 39
FEDERAL INCOME TAX INFORMATION
(UNAUDITED)
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Fiscal year ended Oct. 31, 2006
CLASS A
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals....................... 39.74%
Dividends Received Deduction for corporations................... 0.00%
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.38496
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.31943
Total distributions................................................ $ 0.70439
CLASS B
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals....................... 39.74%
Dividends Received Deduction for corporations................... 0.00%
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.33057
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.31943
Total distributions................................................ $ 0.65000
CLASS C
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals....................... 39.74%
Dividends Received Deduction for corporations................... 0.00%
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.32649
Capital gain distribution -- taxable as long-term capital gain
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.31943
Total distributions................................................ $ 0.64592
40 RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT
CLASS I
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals....................... 39.74%
Dividends Received Deduction for corporations................... 0.00%
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.42128
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.31943
Total distributions................................................ $ 0.74071
CLASS Y
INCOME DISTRIBUTIONS -- taxable as dividend income:
Qualified Dividend Income for individuals....................... 39.74%
Dividends Received Deduction for corporations................... 0.00%
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.40650
CAPITAL GAIN DISTRIBUTION -- taxable as long-term capital gain
PAYABLE DATE PER SHARE
---------
Dec. 21, 2005...................................................... $ 0.31943
Total distributions................................................ $ 0.72593
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 41
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.
42 RIVERSOURCE 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) $1,000 $1,008.30 $ 8.55(c) 1.67%
Hypothetical
(5% return before expenses) $1,000 $1,016.97 $ 8.58(c) 1.67%
Class B
Actual(b) $1,000 $1,003.60 $12.51(c) 2.45%
Hypothetical
(5% return before expenses) $1,000 $1,012.99 $12.57(c) 2.45%
Class C
Actual(b) $1,000 $1,004.80 $12.51(c) 2.45%
Hypothetical
(5% return before expenses) $1,000 $1,012.99 $12.57(c) 2.45%
Class I
Actual(b) $1,000 $1,010.70 $ 6.46(c) 1.26%
Hypothetical
(5% return before expenses) $1,000 $1,019.06 $ 6.48(c) 1.26%
Class Y
Actual(b) $1,000 $1,009.50 $ 7.68(d) 1.50%
Hypothetical
(5% return before expenses) $1,000 $1,017.84 $ 7.71(d) 1.50%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 186/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended Oct. 31, 2006: +0.83%
for Class A, +0.36% for Class B, +0.48% for Class C, +1.07% for Class I and
+0.95% for Class Y.
(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 1.60% for Class A; 2.37%
for Class B; 2.37% for Class C and 1.25% 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 expenses paid would
have been $8.29 for Class A, $12.20 for Class B, $12.21 for Class C and
$6.51 for Class I; the hypothetical expenses paid would have been $8.33 for
Class A, $12.26 for Class B, $12.26 for Class C and $6.53 for 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 1.43% 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
actual expenses paid for Class Y would have been $7.42 and the hypothetical
expenses paid for Class Y would have been $7.46.
RIVERSOURCE INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 43
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.
44 RIVERSOURCE 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, Hybridon, Inc.
901 S. Marquette Ave. since 2002 RiboNovix, Inc. since 2003 (biotechnology);
Minneapolis, MN 55402 (biotechnology); former President, American Healthways,
Age 62 Forester Biotech 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 INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 45
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.
46 RIVERSOURCE 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 INTERNATIONAL EQUITY FUND -- 2006 ANNUAL REPORT 47
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) 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-6259 H (12/06)