UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-4075
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RIVERSOURCE INTERNATIONAL SERIES, INC.
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(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 330-9283
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Date of fiscal year end: 10/31
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Date of reporting period: 4/30
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Semiannual Report
[RIVERSOURCE(SM) INVESTMENTS LOGO]
RIVERSOURCE(SM)
EUROPEAN EQUITY FUND
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SEMIANNUAL REPORT FOR THE
PERIOD ENDED APRIL 30, 2006
> RIVERSOURCE EUROPEAN EQUITY FUND
SEEKS TO PROVIDE SHAREHOLDERS WITH
CAPITAL APPRECIATION.
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TABLE OF CONTENTS
Fund Snapshot 2
Performance Summary 3
Questions & Answers
with Portfolio Management 5
Investments in Securities 9
Financial Statements 13
Notes to Financial Statements 16
Fund Expenses Example 29
Approval of Investment Management
Services Agreement 31
Proxy Voting 31
Results of Meeting of Shareholders 32
[2006 DALBAR LOGO]
RiverSource Funds' shareholder reports have been awarded the Communications Seal
from Dalbar Inc., an independent financial services research firm. The Seal
recognizes communications demonstrating a level of excellence in the industry.
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1 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
FUND SNAPSHOT AT APRIL 30, 2006
PORTFOLIO MANAGERS
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY
Dominic Baker* 10/03 13
Rob Jones* 10/03 13
* The Fund is managed by a team led by Dominic Baker and Rob Jones.
FUND OBJECTIVE
For investors seeking capital appreciation.
Inception dates by class
A: 6/26/00 B: 6/26/00 C: 6/26/00 I: 7/15/04 Y: 6/26/00
Ticker symbols by class
A: AXEAX B: AEEBX C: -- I: -- Y: --
Total net assets $117.1 million
Number of holdings 95
STYLE MATRIX
[STYLE/SIZE BOX]
Shading within the style matrix indicates areas in which the Fund generally
invests.
COUNTRY COMPOSITION
[PIE CHART]
Percentage of portfolio assets
United Kingdom 26.1%
France 20.2%
Switzerland 13.1%
Germany 11.7%
Italy 7.8%
Netherlands 3.9%
Spain 3.9%
Sweden 3.4%
Finland 2.2%
Denmark 1.5%
Greece 1.4%
Norway 1.2%
South Africa 1.1%
Other* 2.5%
* Includes Austria, Belgium, Bermuda and Ireland.
TOP TEN HOLDINGS
Percentage of portfolio assets
BP (United Kingdom) 4.1%
UBS (Switzerland) 3.4
BG Group (United Kingdom) 3.2
Total (France) 2.9
Standard Chartered (United Kingdom) 2.6
Banco Bilbao Vizcaya Argentaria (Spain) 2.5
Roche Holding (Switzerland) 2.4
Sanofi-Aventis (France) 2.3
Eni (Italy) 2.3
AXA (France) 2.1
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
Investment products involve risks including possible loss of principal and
fluctuation in value.
International investing involves increased risk and volatility, not typically
associated with domestic investing, due to potential political and economic
instability, limited liquidity, volatile prices, lack of accounting, auditing,
and financial reporting standards, changes in currency exchange rates, and
differences in how trades are cleared and settled. Risks are particularly
significant in emerging markets due to the dramatic pace of economic, social,
and political changes.
Fund holdings are as of the date given, are subject to change at any time and
are not recommendations to buy or sell any security.
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2 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2006
[BAR CHART]
RiverSource European Equity Fund
Class A (excluding sales charge) +25.05%
Morgan Stanley Capital International (MSCI)
Europe Index(1) (unmanaged) +22.79%
Lipper European Funds Index(2) +27.61%
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when redeemed, may be worth more
or less than their original cost. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by contacting your financial institution or
visiting www.riversource.com/funds.
(1) The Morgan Stanley Capital International (MSCI) Europe Index, compiled by
MSCI in Geneva, is an unmanaged market-capitalization-weighted index of
equity securities from various European countries. Income is included. The
index reflects reinvestment of all distributions and changes in market
prices, but excludes brokerage commissions or other fees.
(2) The Lipper European Funds Index includes the 30 largest European funds
tracked by Lipper Inc. The index's returns include net reinvested
dividends. The Fund's performance is currently measured against this index
for purposes of determining the performance incentive adjustment. See "Fund
Management and Compensation" for more information.
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart. If reflected, returns would be lower than those shown. The
performance of other classes may vary from that shown because of differences in
expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
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3 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (6/26/00) (6/26/00) (6/26/00) (7/15/04) (6/26/00)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5)
AT APRIL 30, 2006
6 months* +25.05% +17.85% +24.62% +19.62% +24.76% +23.76% +25.50% +25.28%
1 year +34.01% +26.29% +33.27% +28.27% +33.16% +32.16% +34.81% +34.58%
3 years +23.57% +21.15% +22.63% +21.73% +22.71% +22.71% N/A +23.89%
5 years +5.12% +3.89% +4.31% +3.97% +4.34% +4.34% N/A +5.35%
Since inception +1.58% +0.56% +0.83% +0.67% +0.81% +0.81% +26.84% +1.77%
AT MARCH 31, 2006
6 months* +14.47% +7.88% +13.90% +8.90% +13.80% +12.80% +14.65% +14.71%
1 year +23.63% +16.52% +22.53% +17.53% +22.42% +21.42% +24.11% +24.17%
3 years +25.66% +23.20% +24.72% +23.86% +24.66% +24.66% N/A +25.99%
5 years +5.79% +4.55% +4.98% +4.64% +4.95% +4.95% N/A +6.02%
Since inception +0.59% -0.44% -0.17% -0.35% -0.19% -0.19% +23.88% +0.78%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies as
follows: first year 5%; second and third year 4%; fourth year 3%; fifth
year 2%; sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
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4 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
WITH PORTFOLIO MANAGEMENT
Below, RiverSource European Equity Fund portfolio managers Dominic Baker and Rob
Jones of Threadneedle International Limited (Threadneedle) discuss the Fund's
results and positioning for the six months ended April 30, 2006. Threadneedle,
an indirect wholly-owned subsidiary of Ameriprise Financial, Inc., acts as the
subadviser to the Fund.
Q: How did RiverSource European Equity Fund perform for the six months ended
April 30, 2006?
A: RiverSource European Equity Fund's Class A shares gained 25.05% (excluding
sales charge) for the six months ended April 30, 2006. The Fund outperformed
the Fund's benchmark, the Morgan Stanley Capital International (MSCI) Europe
Index (MSCI Europe Index), which advanced 22.79%. The Fund underperformed
the Lipper European Funds Index, representing the Fund's peer group, which
rose 27.61% for the same time frame.
Q: What factors most significantly affected performance?
A: The strength of European markets, a weak U.S. dollar, strategic sector
allocation and strong stock selection were key factors contributing to the
Fund's performance over the reporting period.
REGIONAL MARKETS: During the period under review, markets in Europe have
demonstrated consistent and well founded strength.
DOLLAR WEAKNESS: A key factor helping performance for U.S. based investors
has been the weakness of the U.S. dollar versus the euro and other European
currencies. Currency rates can contribute significantly to the performance
of the Fund as it is entirely invested in European markets. When the dollar
is weaker than the euro, the Fund benefits because of the translational
effect. To briefly put this in context, the weakness of the dollar over this
six-month reporting period benefited the Fund and approximately 5% of the
RiverSource European Equity Fund's performance can be attributed to currency
gain.
SECTORS: The sectors in which we invest and the individual securities also
impact performance. Telecommunications stood out as the worst performing
sector over the period, and as the Fund was significantly underweight
relative to the MSCI Europe Index, this benefited the Fund's performance. In
fact, at the end of the period, the Fund held only one stock in the
telecommunication sector. Food and beverages and also pharmaceuticals
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5 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
ENERGY CONTINUES TO BE AN IMPORTANT THEME AND
ACCOUNTS FOR NEARLY 18% OF THE FUND'S ALLOCATIONS.
performed poorly over the period, but did not adversely affect the Fund. Our
top three sector allocations at the end of the period were financials at
more than 29%, energy at nearly 18% and industrials at 11%. Industrials
stood out as the best performing sector over the period, and energy and
financials fared well, too. Our sizeable weighting in these areas
contributed to overall performance.
STOCKS: The selection and performance of individual stocks is typically the
strongest driver of overall performance of the Fund. Key positive
contributors over the period include German company Wincor Nixdorf,
manufacturer of ATM machines and other computer equipment, which has shown
growth of more than 25% over the period. Stocks detracting from performance
include Carnival, the Anglo-U.S. cruise company, which performed poorly
after a disappointing trade statement in March and Danish shipping stock AP
Moeller Maersk, which also lowered guidance and impacted the stock's price.
Both stocks were sold immediately after the disappointing statements.
Q: What changes did you make to the Fund during the six-month period?
A: During the course of six months we have sold down telecoms aggressively to
such an extent that we actually now only own one telecom stock. The reason
behind our strategy is that the operating metrics of many telecommunications
companies in Europe have continued to deteriorate in 2006 following severe
pricing pressure in the latter half of 2005. Vodafone Group, the U.K.
telecommunications giant, is the largest stock in the sector, and we sold
the majority of our stake in early November, prior to a profit warning that
saw the stock's price fall by more than 10% in one day. By being
aggressively underweight in both this stock and this sector versus the MSCI
Europe Index, the Fund benefited for much of the period.
The industrial sector has outperformed over the past year. We added to our
already overweight position in the sector at the start of 2006 by buying
Swiss engineering group ABB. After ABB rose 20%, we switched it into
ASSAABLOY, the Swedish lock company, which has a
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6 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
WE THINK LARGE CAP STOCKS ARE MORE ATTRACTIVE AND
A BETTER CHOICE FOR THE FUND, SO WE CONTINUE TO
FOCUS ON LARGER COMPANIES.
new CEO and is undergoing an impressive restructuring strategy. We were
particularly impressed by the CEO's personal commitment, demonstrated by his
$10 million purchase of stock in March.
Energy continues to be an important theme and accounts for nearly 18% of the
Fund's allocations. Over the period, we increased our weighting in oil
stocks, including U.K.'s oil giant BP. The strength of the oil price has
clearly been a feature of markets for the past 12 months, and we believe it
will remain higher for longer than some industry analysts expect (a view we
have held for some time). Similarly, the current valuation of many of the
major oil companies in Europe -- notably BP, Italian holding Eni and French
company Total -- is unusual given the high oil price and the subsequent
strength of their cash flows.
Financials is the MSCI Europe Index's largest sector and also the largest
holding in the Fund. Within this sector, we increased our weight in Italian
banks, adding Banco Popolare di Milano Societa Cooperativa, for example, to
our existing holdings. UniCredito Italiano and Banca Popolare di Verona e
Novara, which have benefited from increasing merger and acquisition
speculation, are other banks that have done well this period.
In other sectors, we sold our stake in German technology giant Siemens and
switched the proceeds into an existing holding, French pharmaceutical
company Sanofi-Aventis. Although the pharmaceutical sector -- part of the
larger health care sector -- has lagged over the six-month period,
Sanofi-Aventis has delivered strong results. The company's prospects look
even brighter due to a favorable patent decision in the U.S. regarding one
of Sanofi's key products and some positive regulatory developments in
Europe.
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7 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
Q: How is the Fund currently positioned and how do you intend to manage the
Fund in the months ahead?
A: Over the past year, we have been opportunistically positioning the portfolio
to favor growth stocks and large cap stocks. Growth stocks, however, have
continued to underperform value stocks, despite the fact that they are
trading at a historical discount to their value peers. We believe that
investors' preference will shift to growth soon, particularly as slowing
market earnings growth next year makes the growth stock sector look more
attractive. In addition, we feel that small company stocks are looking
increasingly expensive after three years of outperformance. We think large
cap stocks are more attractive and a better choice for the Fund, so we
continue to focus on larger companies.
We believe the outlook for European equities remains positive. The economic
background and corporate earnings are supportive, while we also believe that
reasonably priced stocks are still available.
We anticipate further growth in the Far Eastern markets, especially China,
and this will continue to keep commodities well supported -- a benefit to
many European-based companies. On the downside, oil prices are likely to
remain high and higher inflation is a potential risk. To that end, we think
the European Central Bank will increase interest rates by 0.75% (75 basis
points) by the end of 2006 to 3.25%. However, we do not see this affecting
European growth for the remainder of the year, as it is in line with
consensus expectations and can be absorbed by the wider economy.
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8 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource European Equity Fund
APRIL 30, 2006 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
COMMON STOCKS (99.2%)(c)
ISSUER SHARES VALUE(a)
AUSTRIA (0.5%)
COMMERCIAL BANKS
Erste Bank der Oesterreichischen
Sparkassen 9,735 $590,655
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BELGIUM (0.5%)
BEVERAGES
InBev 12,244 617,474
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BERMUDA (0.9%)
ENERGY EQUIPMENT & SERVICES
SeaDrill 58,600(b) 995,740
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DENMARK (1.5%)
INSURANCE
Topdanmark 8,514(b) 1,115,849
TrygVesta 10,090 621,102
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Total 1,736,951
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FINLAND (2.1%)
COMMUNICATIONS EQUIPMENT (0.5%)
Nokia 26,933 613,218
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ELECTRIC UTILITIES (0.9%)
Fortum 43,200 1,090,939
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OIL, GAS & CONSUMABLE FUELS (0.7%)
Neste Oil 22,705 792,185
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FRANCE (20.0%)
AUTOMOBILES (0.8%)
Renault 7,617 883,944
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CHEMICALS (0.5%)
Air Liquide 2,661 575,654
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COMMERCIAL BANKS (2.3%)
BNP Paribas 19,813 1,871,910
BNP Paribas-New 2,105(b) 192,107
Societe Generale 3,824 584,137
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Total 2,648,154
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COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FRANCE (CONT.)
COMMUNICATIONS EQUIPMENT (0.5%)
Alcatel 44,419(b) $640,424
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CONSTRUCTION & ENGINEERING (1.1%)
VINCI 13,438 1,334,867
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CONSTRUCTION MATERIALS (0.5%)
Imerys 6,658 571,931
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ELECTRICAL EQUIPMENT (1.2%)
ALSTOM 7,620(b) 690,132
Schneider Electric 6,011 680,509
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Total 1,370,641
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ENERGY EQUIPMENT & SERVICES (0.5%)
Technip 8,652 546,227
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HEALTH CARE EQUIPMENT & SUPPLIES (1.3%)
Essilor Intl 15,441 1,548,443
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HOTELS, RESTAURANTS & LEISURE (1.0%)
Accor 18,199 1,145,286
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INSURANCE (2.5%)
Assurances Generales de France 4,770 602,891
AXA 67,048 2,460,268
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Total 3,063,159
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MACHINERY (1.0%)
Vallourec 863 1,121,246
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OFFICE ELECTRONICS (0.7%)
Neopost 7,158 809,459
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OIL, GAS & CONSUMABLE FUELS (2.8%)
Total 12,124 3,352,273
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PHARMACEUTICALS (2.3%)
Sanofi-Aventis 28,347 2,672,829
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TEXTILES, APPAREL & LUXURY GOODS (1.0%)
LVMH Moet Hennessy Louis Vuitton 10,678 1,124,007
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See accompanying notes to investments in securities.
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9 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
GERMANY (11.6%)
AIR FREIGHT & LOGISTICS (0.7%)
Deutsche Postbank 11,018 $842,225
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AUTO COMPONENTS (0.8%)
Continental 8,267 984,090
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CHEMICALS (0.6%)
K+S 8,196 740,232
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COMPUTERS & PERIPHERALS (1.4%)
Wincor Nixdorf 11,534 1,658,584
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ELECTRIC UTILITIES (1.3%)
E.ON 12,338 1,502,311
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HEALTH CARE PROVIDERS & SERVICES (0.8%)
Fresenius Medical Care & Co 8,166 979,689
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INSURANCE (0.9%)
Allianz 6,220 1,041,152
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MACHINERY (1.2%)
MAN 9,044 685,512
WashTec 33,976(b) 675,003
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Total 1,360,515
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SOFTWARE (1.7%)
SAP 8,977 1,961,245
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THRIFTS & MORTGAGE FINANCE (1.7%)
Hypo Real Estate Holding 28,724 2,008,002
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TRANSPORTATION INFRASTRUCTURE (0.5%)
Fraport 7,260 549,191
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GREECE (1.4%)
COMMERCIAL BANKS (0.6%)
EFG Eurobank Ergasias 17,497 696,993
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OIL, GAS & CONSUMABLE FUELS (0.8%)
Motor Oil Hellas
Corinth Refineries 30,392 885,572
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IRELAND (0.6%)
CONSTRUCTION MATERIALS
CRH 19,822 728,851
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COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
ITALY (7.7%)
COMMERCIAL BANKS (3.4%)
Banca Popolare di Milano 49,242 $622,381
Banca Popolare di Verona e Novara 34,201 962,479
Sanpaolo IMI 63,081 1,184,803
UniCredito Italiano 169,320 1,275,074
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Total 4,044,737
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ENERGY EQUIPMENT & SERVICES (0.9%)
Saipem 42,757 1,068,966
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FOOD & STAPLES RETAILING (0.5%)
Parmalat 187,347(b) 629,201
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OIL, GAS & CONSUMABLE FUELS (2.3%)
Eni 86,701 2,646,624
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TEXTILES, APPAREL & LUXURY GOODS (0.6%)
Luxottica Group 21,878 650,735
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NETHERLANDS (3.8%)
DIVERSIFIED FINANCIAL SERVICES (1.1%)
ING Groep 31,262 1,272,137
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FOOD PRODUCTS (0.9%)
Royal Numico 23,308(b) 1,056,073
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MEDIA (0.9%)
Reed Elsevier 72,565 1,075,518
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OIL, GAS & CONSUMABLE FUELS (0.9%)
Royal Dutch Shell Series B 30,729 1,098,833
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NORWAY (1.2%)
ENERGY EQUIPMENT & SERVICES (0.7%)
TGS NOPEC Geophysical 13,550(b) 912,161
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FOOD PRODUCTS (0.5%)
Pan Fish 523,400(b) 532,770
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SOUTH AFRICA (1.1%)
METALS & MINING
Anglo American 30,229 1,287,112
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SPAIN (3.9%)
COMMERCIAL BANKS (2.5%)
Banco Bilbao
Vizcaya Argentaria 129,928 2,869,734
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See accompanying notes to investments in securities.
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10 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SPAIN (CONT.)
MEDIA (0.5%)
Gestevision Telecinco 23,395 $597,587
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SPECIALTY RETAIL (0.9%)
Inditex 26,820 1,091,042
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SWEDEN (3.4%)
BUILDING PRODUCTS (1.9%)
ASSA ABLOY Cl B 117,000 2,270,097
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COMMUNICATIONS EQUIPMENT (0.6%)
Telefonaktiebolaget
LM Ericsson Cl B 205,080 731,591
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TOBACCO (0.9%)
Swedish Match 66,800 1,005,038
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SWITZERLAND (13.0%)
CAPITAL MARKETS (6.0%)
Credit Suisse Group 15,947(b) 1,001,670
Julius Baer Holding 21,908 2,100,356
UBS 32,959 3,906,606
---------
Total 7,008,632
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FOOD PRODUCTS (1.4%)
Nestle 5,541 1,689,957
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HEALTH CARE EQUIPMENT & SUPPLIES (1.0%)
Nobel Biocare Holding 4,513 1,115,332
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METALS & MINING (0.7%)
Xstrata 22,636 818,931
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PHARMACEUTICALS (3.9%)
Novartis 30,272 1,736,698
Roche Holding 18,271 2,809,449
---------
Total 4,546,147
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UNITED KINGDOM (26.0%)
AEROSPACE & DEFENSE (0.7%)
Rolls-Royce Group 91,918(b) 798,673
Rolls-Royce Group Series B 4,945,188 9,288
---------
Total 807,961
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COMMERCIAL BANKS (5.3%)
Barclays 47,671 595,457
HSBC Holdings 103,135 1,781,932
Royal Bank of Scotland Group 22,379 730,873
Standard Chartered 114,717 3,045,755
---------
Total 6,154,017
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COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
UNITED KINGDOM (CONT.)
CONSTRUCTION MATERIALS (1.3%)
Hanson 115,211 $1,538,889
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ELECTRIC UTILITIES (1.3%)
British Energy Group 62,509(b) 754,582
Scottish Power 72,606 742,085
---------
Total 1,496,667
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FOOD & STAPLES RETAILING (0.9%)
Tesco 184,061 1,072,354
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INSURANCE (1.6%)
Friends Provident 164,094 588,726
Legal & General Group 495,842 1,252,272
---------
Total 1,840,998
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METALS & MINING (2.6%)
BHP Billiton 51,195 1,053,967
Corus Group 454,427 700,207
Lonmin 26,555 1,321,949
---------
Total 3,076,123
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MULTILINE RETAIL (0.9%)
Marks & Spencer Group 97,326 1,039,110
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OIL, GAS & CONSUMABLE FUELS (7.2%)
BG Group 277,233 3,725,788
BP 385,001 4,749,364
---------
Total 8,475,152
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PHARMACEUTICALS (1.5%)
GlaxoSmithKline 60,109 1,705,512
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SPECIALTY RETAIL (0.3%)
Carphone Warehouse Group 53,767 329,183
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TRADING COMPANIES & DISTRIBUTORS (0.5%)
Wolseley 23,325 583,980
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TRANSPORTATION INFRASTRUCTURE (1.1%)
BAA 85,552 1,322,134
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WIRELESS TELECOMMUNICATION SERVICES (0.8%)
Vodafone Group 391,309 924,050
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TOTAL COMMON STOCKS
(Cost: $85,266,598) $116,169,443
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TOTAL INVESTMENTS IN SECURITIES
(Cost: $85,266,598)(d) $116,169,443
================================================================================
See accompanying notes to investments in securities.
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11 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) At April 30, 2006, the cost of securities for federal income tax purposes
was approximately $85,267,000 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $31,000,000
Unrealized depreciation (98,000)
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Net unrealized appreciation $30,902,000
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The Global Industry Classification Standard (GICS) was developed by and is the
exclusive property of Morgan Stanley Capital International Inc. and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and third
quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations of
the Public Reference Room may be obtained by calling 1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in its
annual and semiannual shareholder reports and in its filings on Form N-Q,
can be found at www.riversource.com/funds.
- --------------------------------------------------------------------------------
12 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
RiverSource European Equity Fund
APRIL 30, 2006 (UNAUDITED)
ASSETS
Investments in securities, at value (Note 1)
(identified cost $85,266,598) $116,169,443
Cash in bank on demand deposit 67,028
Foreign currency holdings (identified cost $150,928) (Note 1) 152,577
Capital shares receivable 11,580
Dividends and accrued interest receivable 361,006
Receivable for investment securities sold 3,047,531
Unrealized appreciation on foreign currency contracts held, at value (Note 5) 313
- ------------------------------------------------------------------------------------------
Total assets 119,809,478
- ------------------------------------------------------------------------------------------
LIABILITIES
Capital shares payable 26,283
Payable for investment securities purchased 2,638,111
Accrued investment management services fee 2,567
Accrued distribution fee 1,509
Accrued transfer agency fee 222
Accrued administrative services fee 257
Other accrued expenses 47,034
- ------------------------------------------------------------------------------------------
Total liabilities 2,715,983
- ------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $117,093,495
==========================================================================================
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 227,583
Additional paid-in capital 163,152,019
Excess of distributions over net investment income (356,712)
Accumulated net realized gain (loss) (Note 7) (76,844,688)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 5) 30,915,293
- ------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $117,093,495
==========================================================================================
Net assets applicable to outstanding shares: Class A $ 82,665,621
Class B $ 32,916,337
Class C $ 1,490,251
Class I $ 14,772
Class Y $ 6,514
Net asset value per share of outstanding capital stock:
Class A shares 16,013,864 $ 5.16
Class B shares 6,448,057 $ 5.10
Class C shares 292,287 $ 5.10
Class I shares 2,865 $ 5.16
Class Y shares 1,260 $ 5.17
- ------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
13 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS
RiverSource European Equity Fund
SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
INVESTMENT INCOME
Income:
Dividends $ 1,287,966
Interest 14,951
Fee income from securities lending 20,437
Less foreign taxes withheld (129,257)
- ------------------------------------------------------------------------------------------
Total income 1,194,097
- ------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 381,972
Distribution fee
Class A 97,023
Class B 154,296
Class C 6,968
Transfer agency fee 143,089
Incremental transfer agency fee
Class A 9,850
Class B 7,126
Class C 304
Service fee -- Class Y 5
Administrative services fees and expenses 44,103
Compensation of board members 4,692
Custodian fees 27,240
Printing and postage 26,905
Registration fees 9,215
Audit fees 10,500
Other 1,004
- ------------------------------------------------------------------------------------------
Total expenses 924,292
Earnings credits on cash balances (Note 2) (6,614)
- ------------------------------------------------------------------------------------------
Total net expenses 917,678
- ------------------------------------------------------------------------------------------
Investment income (loss) -- net 276,419
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 11,901,549
Foreign currency transactions 60,557
- ------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 11,962,106
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 12,823,886
- ------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 24,785,992
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $25,062,411
==========================================================================================
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
14 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
RiverSource European Equity Fund
APRIL 30, 2006 OCT. 31, 2005
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 276,419 $ 1,123,569
Net realized gain (loss) on investments 11,962,106 15,375,872
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 12,823,886 (428,444)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 25,062,411 16,070,997
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (1,183,925) (785,368)
Class B (203,405) (30,911)
Class C (11,012) (1,346)
Class I (266) (156)
Class Y (282) (176)
- ------------------------------------------------------------------------------------------------------
Total distributions (1,398,890) (817,957)
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 3,543,062 10,043,976
Class B shares 1,112,344 3,322,185
Class C shares 103,589 155,611
Reinvestment of distributions at net asset value
Class A shares 1,163,396 774,769
Class B shares 200,300 30,598
Class C shares 10,643 1,320
Class Y shares 236 152
Payments for redemptions
Class A shares (17,067,608) (30,372,396)
Class B shares (Note 2) (5,785,202) (13,527,099)
Class C shares (Note 2) (311,854) (429,874)
Class Y shares (11,157) (2,875)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (17,042,251) (30,003,633)
- ------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 6,621,270 (14,750,593)
- ------------------------------------------------------------------------------------------------------
Net assets at beginning of period 110,472,225 125,222,818
- ------------------------------------------------------------------------------------------------------
Net assets at end of period $ 117,093,495 $ 110,472,225
======================================================================================================
Undistributed (excess of distributions over) net investment income $ (356,712) $ 765,759
- ------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
15 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
RiverSource European Equity Fund
(Unaudited as to April 30, 2006)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource International Series, Inc. (formerly AXP
International Series, Inc.) and is registered under the Investment Company Act
of 1940 (as amended) as a diversified, open-end management investment company.
RiverSource International Series, Inc. has 10 billion authorized shares of
capital stock that can be allocated among the separate series as designated by
the Board. The Fund invests primarily in equity securities of European companies
that offer growth potential.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge (CDSC)
and automatically convert to Class A shares during the ninth year of
ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to certain
institutional investors. Class I shares have no sales charge and are made
available through a separate prospectus supplement provided to investors
eligible to purchase the shares. At April 30, 2006, Ameriprise Financial, Inc.
(Ameriprise Financial) owned 100% of Class I shares, which represents 0.01% of
the Fund's net assets.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fees and service fee (class specific
expenses) differ among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on assets,
liabilities and contingent assets and liabilities) that could differ from actual
results.
- --------------------------------------------------------------------------------
16 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Foreign securities are valued based on quotations from the principal market in
which such securities are normally traded. Pursuant to procedures adopted by the
Board of Directors of the funds, Ameriprise Financial utilizes Fair Value
Pricing (FVP). FVP determinations are made in good faith in accordance with
these procedures. If a development or event is so significant that there is a
reasonably high degree of certainty that the effect of the development or event
has actually caused the closing price to no longer reflect the actual value, the
closing prices, as determined at the close of the applicable foreign market, may
be adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include material
movements in the U.S. securities markets prior to the opening of foreign markets
on the following trading day. FVP results in an estimated price that reasonably
reflects the current market conditions in order to value the portfolio holdings
such that shareholder transactions receive a fair net asset value. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
- --------------------------------------------------------------------------------
17 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes. At April 30, 2006, foreign currency holdings consisted of
multiple denominations.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Fund is subject to the credit risk that the
other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of their
duties to the Fund. In addition, certain of the Fund's contracts with its
service providers contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown since the amount of any future
claims that may be made against the Fund cannot be determined and the Fund has
no historical basis for predicting the likelihood of any such claims.
- --------------------------------------------------------------------------------
18 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue Code
that applies to regulated investment companies and to distribute substantially
all of its taxable income to shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end of
the calendar year, when available, is reinvested in additional shares of the
Fund at net asset value or payable in cash. Capital gains, when available, are
distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments, LLC
(the Investment Manager) determines which securities will be purchased, held or
sold. The management fee is a percentage of the Fund's average daily net assets
that declines from 0.80% to 0.57% annually as the Fund's assets increase. Prior
to March 1, 2006, the management fee percentage of the Fund's average daily net
assets declined from 0.80% to 0.675% annually as the Fund's assets increased.
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 European 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 $57,604 for the six months ended April 30, 2006.
Under an Administrative Services Agreement, the Fund pays Ameriprise Financial a
fee for administration and accounting services at a percentage of the Fund's
average daily net assets that declines from 0.08% to 0.05% annually as the
Fund's assets increase. A minor portion of additional administrative service
expenses paid by the Fund are consultants' fees and fund office expenses. Under
this agreement, the Fund also pays taxes, audit and certain legal fees,
registration fees for shares, compensation of board members, corporate filing
fees and any other expenses properly payable by the Fund and approved by the
Board.
- --------------------------------------------------------------------------------
19 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested board members may
defer receipt of their compensation. Deferred amounts are treated as though
equivalent dollar amounts had been invested in shares of the Fund or other
RiverSource funds. The Fund's liability for these amounts is adjusted for market
value changes and remains in the Fund until distributed in accordance with the
Plan.
The Investment Manager has a Subadvisory Agreement with Threadneedle
International Limited, an indirect wholly-owned subsidiary of Ameriprise
Financial, to subadvise the assets of the Fund.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation (the
Transfer Agent) maintains shareholder accounts and records. The Fund pays the
Transfer Agent an annual fee per shareholder account for this service as
follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account of
$1. This amount is included in the transfer agency fee on the statement of
operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable to
Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$35,918 for Class A, $14,933 for Class B and $106 for Class C for the six months
ended April 30, 2006.
During the six months ended April 30, 2006, the Fund's custodian and transfer
agency fees were reduced by $6,614 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to Ameriprise Trust
Company, an affiliate of Ameriprise Financial.
- --------------------------------------------------------------------------------
20 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $44,395,221 and $60,880,855, respectively, for the six
months ended April 30, 2006. Realized gains and losses are determined on an
identified cost basis.
Income from securities lending amounted to $20,437 for the six months ended
April 30, 2006. The risks to the Fund of securities lending are that the
borrower may not provide additional collateral when required or return the
securities when due.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
SIX MONTHS ENDED APRIL 30, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------
Sold 765,384 242,310 22,536 -- --
Issued for reinvested distributions 268,682 46,690 2,487 -- 55
Redeemed (3,736,132) (1,270,897) (68,489) -- (2,463)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) (2,702,066) (981,897) (43,466) -- (2,408)
- -------------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- -------------------------------------------------------------------------------------------------
Sold 2,474,848 839,663 39,370 -- --
Issued for reinvested distributions 196,144 7,806 337 -- 38
Redeemed (7,514,745) (3,372,352) (107,457) -- (728)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) (4,843,753) (2,524,883) (67,750) -- (690)
- -------------------------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS
At April 30, 2006, the Fund has a forward foreign currency exchange contract
that obligates it to deliver currency at a specified future date. The unrealized
appreciation and/or depreciation on this contract is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contract are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ----------------------------------------------------------------------------------------
May 3, 2006 69,064 55,000 $313 $--
U.S. Dollar European Monetary Unit
- ----------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT-
6. BANK BORROWINGS
The Fund has a revolving credit agreement with a syndicate of banks headed by
JPMorgan Chase Bank, N.A. (JPMCB), whereby the Fund may borrow for the temporary
funding of shareholder redemptions or for other temporary or emergency purposes.
The Fund must maintain asset coverage for borrowings of at least 300%. The
agreement, which enables the Fund to participate with other RiverSource funds,
permits borrowings up to $500 million, collectively. Interest is charged to each
Fund based on its borrowings at a rate equal to either the higher of the Federal
Funds Effective Rate plus 0.40% or the JPMCB Prime Commercial Lending Rate.
Borrowings are payable within 60 days after such loan is executed. The Fund also
pays a commitment fee equal to its pro rata share of the amount of the credit
facility at a rate of 0.07% per annum. The Fund had no borrowings outstanding
during the six months ended April 30, 2006.
7. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$88,587,807 at Oct. 31, 2005, that if not offset by capital gains will expire as
follows:
2009 2010 2011
$67,052,074 $16,514,518 $5,021,215
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
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.
- --------------------------------------------------------------------------------
22 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and various
Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to pay
disgorgement of $10 million and civil money penalties of $7 million. AEFC also
agreed to make presentations at least annually to its board of directors and the
relevant mutual funds' board that include an overview of policies and procedures
to prevent market timing, material changes to these policies and procedures and
whether disclosures related to market timing are consistent with the SEC order
and federal securities laws. AEFC also agreed to retain an independent
distribution consultant to assist in developing a plan for distribution of all
disgorgement and civil penalties ordered by the SEC in accordance with various
undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. In
addition, AEFC agreed to complete and submit to the MDOC a compliance review of
its procedures regarding market timing within one year of the MDOC Order,
including a summary of actions taken to ensure compliance with applicable laws
and regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal or arbitration proceedings, including routine
litigation, class actions, and governmental actions, concerning matters arising
in connection with the conduct of their business activities. Ameriprise
Financial believes that the Funds are not currently the subject of, and that
neither Ameriprise Financial nor any of its affiliates are the subject of, any
pending legal or arbitration proceedings that are likely to have a material
adverse effect on the Funds or the ability of Ameriprise Financial or its
affiliates to perform under their contracts with the Funds. Ameriprise Financial
is required to make 10-Q, 10-K and, as necessary, 8-K filings with the
Securities and Exchange Commission on legal and regulatory matters that relate
to Ameriprise Financial and its affiliates. Copies of these filings may be
obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds.
- --------------------------------------------------------------------------------
23 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
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(f) 2005 2004 2003 2002
Net asset value, beginning of period $4.19 $3.71 $3.25 $2.83 $3.30
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .05 .02 .04 .03
Net gains (losses) (both realized and unrealized) 1.02 .46 .48 .40 (.50)
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.04 .51 .50 .44 (.47)
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.07) (.03) (.04) (.02) --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.16 $4.19 $3.71 $3.25 $2.83
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $83 $78 $87 $88 $100
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.46%(c) 1.48% 1.49% 1.54% 1.54%
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .73%(c) 1.13% .50% 1.07% .68%
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 40% 56% 73% 186% 110%
- -----------------------------------------------------------------------------------------------------
Total return(d) 25.05%(e) 13.92% 15.29% 15.89% (14.18%)
- -----------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
24 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $4.12 $3.65 $3.20 $2.78 $3.27
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01) .02 (.01) .01 --
Net gains (losses) (both realized and unrealized) 1.02 .45 .47 .41 (.49)
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.01 .47 .46 .42 (.49)
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) -- (.01) -- --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.10 $4.12 $3.65 $3.20 $2.78
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $33 $31 $36 $39 $45
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 2.23%(c) 2.25% 2.26% 2.32% 2.31%
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (.04%)(c) .39% (.25%) .31% (.08%)
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 40% 56% 73% 186% 110%
- -----------------------------------------------------------------------------------------------------
Total return(d) 24.62%(e) 12.97% 14.39% 15.11% (14.98%)
- -----------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
25 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $4.12 $3.65 $3.20 $2.78 $3.27
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01) .02 (.01) .01 --
Net gains (losses) (both realized and unrealized) 1.02 .45 .47 .41 (.49)
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.01 .47 .46 .42 (.49)
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) -- (.01) -- --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.10 $4.12 $3.65 $3.20 $2.78
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $1 $1 $2 $2
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 2.22%(c) 2.25% 2.26% 2.32% 2.32%
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (.05%)(c) .36% (.26%) .31% (.10%)
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 40% 56% 73% 186% 110%
- -----------------------------------------------------------------------------------------------------
Total return(d) 24.76%(e) 12.97% 14.30% 15.17% (14.98%)
- -----------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
26 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(g) 2005 2004(b)
Net asset value, beginning of period $4.20 $3.72 $3.49
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .07 --
Net gains (losses) (both realized and unrealized) 1.01 .46 .23
- ---------------------------------------------------------------------------------------
Total from investment operations 1.05 .53 .23
- ---------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.05) --
- ---------------------------------------------------------------------------------------
Net asset value, end of period $5.16 $4.20 $3.72
- ---------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ -- $ -- $ --
- ---------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .92%(d) .93% .96%(d)
- ---------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets 1.30%(d) 1.67% .07%(d)
- ---------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 40% 56% 73%
- ---------------------------------------------------------------------------------------
Total return(e) 25.50%(f) 14.46% 6.59%(f)
- ---------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is July 15, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
27 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
CLASS Y
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $4.20 $3.71 $3.26 $2.84 $3.31
- -----------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .06 .03 .04 .03
Net gains (losses) (both realized and unrealized) 1.03 .47 .46 .41 (.50)
- -----------------------------------------------------------------------------------------------------
Total from investment operations 1.05 .53 .49 .45 (.47)
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.08) (.04) (.04) (.03) --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $5.17 $4.20 $3.71 $3.26 $2.84
- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ -- $ -- $ -- $ -- $ --
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.27%(c) 1.29% 1.29% 1.36% 1.35%
- -----------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets .61%(c) 1.36% .33% 1.21% .76%
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 40% 56% 73% 186% 110%
- -----------------------------------------------------------------------------------------------------
Total return(d) 25.28%(e) 14.37% 15.20% 16.12% (14.10%)
- -----------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
28 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the six months ended April 30, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values and
actual expenses. You may use the information in this line, together with the
amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading titled "Expenses paid during the period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
- --------------------------------------------------------------------------------
29 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
NOV. 1, 2005 APRIL 30, 2006 THE PERIOD(a) EXPENSE RATIO
Class A
Actual(b) $1,000 $1,250.50 $8.06 1.46%
Hypothetical (5% return before expenses) $1,000 $1,017.36 $7.22 1.46%
Class B
Actual(b) $1,000 $1,246.20 $12.28 2.23%
Hypothetical (5% return before expenses) $1,000 $1,013.58 $11.01 2.23%
Class C
Actual(b) $1,000 $1,247.60 $12.23 2.22%
Hypothetical (5% return before expenses) $1,000 $1,013.63 $10.96 2.22%
Class I
Actual(b) $1,000 $1,255.00 $5.09 .92%
Hypothetical (5% return before expenses) $1,000 $1,020.01 $4.56 .92%
Class Y
Actual(b) $1,000 $1,252.80 $7.02 1.27%
Hypothetical (5% return before expenses) $1,000 $1,018.29 $6.29 1.27%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period, multiplied
by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2006: +25.05%
for Class A, +24.62% for Class B, +24.76% for Class C, +25.50% for Class I
and +25.28% for Class Y.
- --------------------------------------------------------------------------------
30 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
During the period covered by this report, RiverSource Investments, LLC
("RiverSource Investments" or the "investment manager"), a wholly-owned
subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as the
investment manager to RiverSource funds under an Investment Management Services
Agreement ("IMS Agreement").
The Board of Directors/Trustees (the "Board") annually determines whether to
continue the IMS Agreement and subadvisory agreements, as applicable, by
evaluating the quality and level of services received and the costs associated
with those services. The Board did not make the specific determination this year
as each fund's IMS Agreement was approved by the vote of a majority of the
outstanding voting securities of the funds at a shareholder meeting held on Feb.
15, 2006. Also at this meeting, the subadvisory agreement between Threadneedle
International Limited and the investment manger, on behalf of the Fund, was
approved by the vote of a majority of the outstanding voting securities for the
Fund.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of Additional
Information (SAI). You may obtain a copy of the SAI without charge by calling
RiverSource Funds at (888) 791-3380; contacting your financial institution;
visiting www.riversource.com/funds; or searching the website of the Securities
and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how
the Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30 is available without charge by visiting
www.riversource.com/funds; or searching the website of the SEC at www.sec.gov.
- --------------------------------------------------------------------------------
31 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
RESULTS OF MEETING OF SHAREHOLDERS
RIVERSOURCE EUROPEAN EQUITY FUND
REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006
(UNAUDITED)
A brief description of each proposal voted upon at the meeting and the votes
cast for, against or withheld, as well as the number of abstentions and broker
non-votes as to each proposal is set forth below. A vote is based on total
dollar interest in a fund.
ELECTION OF BOARD MEMBERS
AFFIRMATIVE WITHHOLD
- -----------------------------------------------------------------------------
Kathleen Blatz 76,600,846.40 1,966,712.25
- -----------------------------------------------------------------------------
Arne H. Carlson 76,272,300.68 2,295,257.97
- -----------------------------------------------------------------------------
Patricia M. Flynn 76,624,321.66 1,943,236.99
- -----------------------------------------------------------------------------
Anne P. Jones 76,589,336.94 1,978,221.71
- -----------------------------------------------------------------------------
Jeffrey Laikind 76,534,606.23 2,032,952.42
- -----------------------------------------------------------------------------
Stephen R. Lewis, Jr. 76,666,167.61 1,901,391.04
- -----------------------------------------------------------------------------
Catherine James Paglia 76,656,862.88 1,910,695.77
- -----------------------------------------------------------------------------
Vikki L. Pryor 76,428,276.28 2,139,282.37
- -----------------------------------------------------------------------------
Alan K. Simpson 76,289,035.42 2,278,523.23
- -----------------------------------------------------------------------------
Alison Taunton-Rigby 76,590,185.47 1,977,373.18
- -----------------------------------------------------------------------------
William F. Truscott 76,585,466.64 1,982,092.01
- -----------------------------------------------------------------------------
AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE MINIMUM
ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
- -----------------------------------------------------------------------------
75,241,317.95 1,957,922.06 1,368,318.64 0.00
- -----------------------------------------------------------------------------
APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE
INVESTMENTS, LLC
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
- -----------------------------------------------------------------------------
75,597,015.26 1,680,207.39 1,290,336.00 0.00
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
APPROVE A SUBADVISORY AGREEMENT BETWEEN RIVERSOURCE INVESTMENTS AND THREADNEEDLE
INTERNATIONAL LIMITED
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
- -----------------------------------------------------------------------------
75,553,388.07 1,797,363.04 1,216,807.54 0.00
- -----------------------------------------------------------------------------
APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
LENDING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
- -----------------------------------------------------------------------------
74,940,851.98 2,008,949.64 1,617,757.03 0.00
- -----------------------------------------------------------------------------
BORROWING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
- -----------------------------------------------------------------------------
75,238,811.35 1,879,422.69 1,449,324.61 0.00
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33 - RIVERSOURCE EUROPEAN EQUITY FUND - 2006 SEMIANNUAL REPORT
RIVERSOURCE(SM) EUROPEAN EQUITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
riversource.com/funds
[RIVERSOURCE(SM) INVESTMENTS LOGO]
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource Funds are managed by RiverSource Investments, LLC and distributed by
Ameriprise Financial Services, Inc., Member NASD.
Both companies are part of Ameriprise Financial, Inc.
S-6016 G (6/06)
Semiannual Report
[RiverSource Investments Logo]
RIVERSOURCE(SM)
INTERNATIONAL OPPORTUNITY FUND
- ----------------------------------------------------------------------------
SEMIANNUAL REPORT FOR THE
PERIOD ENDED APRIL 30, 2006
> RIVERSOURCE INTERNATIONAL
OPPORTUNITY FUND SEEKS TO PROVIDE
SHAREHOLDERS WITH LONG-TERM
CAPITAL GROWTH.
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Fund Snapshot 2
Performance Summary 3
Questions & Answers with Portfolio Management 5
Investments in Securities 10
Financial Statements 16
Notes to Financial Statements 19
Fund Expenses Example 32
Approval of Investment Management Services Agreement 34
Proxy Voting 34
Results of Meeting of Shareholders 35
[Dalbar Logo]
RiverSource Funds' shareholder reports have been awarded the Communications
Seal from Dalbar Inc., an independent financial services research firm. The
Seal recognizes communications demonstrating a level of excellence in the
industry.
- --------------------------------------------------------------------------------
1 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
FUND SNAPSHOT
AT APRIL 30, 2006
PORTFOLIO MANAGERS <
PORTFOLIO MANAGERS SINCE YEARS IN INDUSTRY
Alex Lyle 10/03 25
Dominic Rossi 10/03 19
FUND OBJECTIVE <
For investors seeking long-term capital growth.
Inception dates by class
A: 11/15/84 B: 3/20/95 C: 6/26/00 I: 3/4/04 Y: 3/20/95
Ticker symbols by class
A: INIFX B: IWWGX C: -- I: ATNIX Y: IDIYX
Total net assets $627.1 million
Number of holdings 160
STYLE MATRIX <
[STYLE/SIZE box]
Shading within the style matrix indicates areas in which the Fund generally
invests.
TOP TEN HOLDINGS <
Percentage of portfolio assets
UBS (Switzerland) 2.5%
AXA (France) 1.9
Roche Holding (Switzerland) 1.9
BP (United Kingdom) 1.8
BG Group (United Kingdom) 1.8
Standard Chartered (United Kingdom) 1.8
Total (France) 1.6
Mitsubishi UFJ Financial Group (Japan) 1.6
Eni (Italy) 1.6
Allianz (Germany) 1.5
For further detail about these holdings, please refer to the section
entitled "Investments in Securities."
Investment products involve risks including possible loss of principal and
fluctuation in value.
International investing involves increased risk and volatility, not
typically associated with domestic investing, due to potential political and
economic instability, limited liquidity, volatile prices, lack of
accounting, auditing, and financial reporting standards, changes in currency
exchange rates, and differences in how trades are cleared and settled. Risks
are particularly significant in emerging markets due to the dramatic pace of
economic, social, and political changes.
Fund holdings are as of the date given, are subject to change at any time
and are not recommendations to buy or sell any security.
- --------------------------------------------------------------------------------
2 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
PERFORMANCE COMPARISON
For the six-month period ended April 30, 2006
[graph]
RiverSource International Opportunity Fund
Class A (excluding sales charge) +24.13%
Morgan Stanley Capital International (MSCI)
EAFE(R) Index(1) (unmanaged) +23.10%
Lipper International Large-Cap Core Funds Index(2) +23.63%
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of
your investment will fluctuate so that your shares, when redeemed, may be
worth more or less than their original cost. Current performance may be
lower or higher than the performance information shown. You may obtain
performance information current to the most recent month-end by contacting
your financial institution or visiting www.riversource.com/funds.
(1) The Morgan Stanley Capital International (MSCI) EAFE Index, an unmanaged
index, is compiled from a composite of securities markets of Europe,
Australia and the Far East. The index is widely recognized by investors
in foreign markets as the measurement index for portfolios of non-North
American securities. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage
commissions or other fees.
(2) The Lipper International Large-Cap Core Funds Index includes the 10
largest international large-cap core funds tracked by Lipper Inc. The
index's returns include net reinvested dividends. The Fund's performance
is currently measured against this index for purposes of determining the
performance incentive adjustment.
The 5.75% sales charge applicable to Class A shares of the Fund is not
reflected in the bar chart. If reflected, returns would be lower than those
shown. The performance of other classes may vary from that shown because of
differences in expenses.
The indices do not reflect the effects of sales charges, expenses (excluding
Lipper) and taxes.
- --------------------------------------------------------------------------------
3 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS <
CLASS A CLASS B CLASS C CLASS I CLASS Y
(INCEPTION DATES) (11/15/84) (3/20/95) (6/26/00) (3/4/04) (3/20/95)
AFTER AFTER
NAV(1) POP(2) NAV(1) CDSC(3) NAV(1) CDSC(4) NAV(5) NAV(5)
AT APRIL 30, 2006
6 months* +24.13% +17.00% +23.72% +18.72% +23.57% +22.57% +24.39% +24.29%
1 year +36.81% +28.94% +35.76% +30.76% +35.67% +34.67% +37.53% +36.91%
3 years +25.57% +23.12% +24.58% +23.72% +24.53% +24.53% N/A +25.84%
5 years +5.00% +3.77% +4.19% +3.84% +4.18% +4.18% N/A +5.22%
10 years +3.56% +2.95% +2.76% +2.76% N/A N/A N/A +3.73%
Since inception +9.03% +8.73% +4.60% +4.60% -1.84% -1.84% +19.70% +5.59%
AT MARCH 31, 2006
6 months* +15.79% +9.12% +15.31% +10.31% +15.40% +14.40% +16.13% +15.91%
1 year +27.78% +20.43% +26.73% +21.73% +26.91% +25.91% +28.57% +27.86%
3 years +27.18% +24.70% +26.15% +25.31% +26.14% +26.14% N/A +27.43%
5 years +5.98% +4.73% +5.13% +4.80% +5.14% +5.14% N/A +6.15%
10 years +3.54% +2.93% +2.74% +2.74% N/A N/A N/A +3.71%
Since inception +8.86% +8.56% +4.25% +4.25% -2.55% -2.55% +18.14% +5.23%
(1) Excluding sales charge.
(2) Returns at public offering price (POP) reflect a sales charge of 5.75%.
(3) Returns at maximum contingent deferred sales charge (CDSC). CDSC applies
as follows:
first year 5%; second and third year 4%; fourth year 3%; fifth year 2%;
sixth year 1%; no sales charge thereafter.
(4) 1% CDSC applies to redemptions made within the first year of purchase.
(5) Sales charge is not applicable to these shares. Shares available to
institutional investors only.
* Not annualized.
- --------------------------------------------------------------------------------
4 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
WITH PORTFOLIO MANAGEMENT
Below, RiverSource International Opportunity Fund portfolio managers Alex
Lyle and Dominic Rossi of Threadneedle International Limited (Threadneedle)
discuss the Fund's results and positioning for the six months ended April
30, 2006. Threadneedle, an indirect wholly-owned subsidiary of Ameriprise
Financial, Inc., acts as the subadviser to the Fund.
Q: How did the RiverSource International Opportunity Fund perform for the
six months ended April 30, 2006?
A: RiverSource International Opportunity Fund gained 24.13% for the six
months ended April 30, 2006. The Fund outperformed its benchmark index,
the Morgan Stanley Capital International (MSCI) EAFE Index (MSCI Index),
which returned 23.10% for the period. The Fund also outperformed the
Lipper International Large-Cap Core Funds Index, representing the Fund's
peer group, which gained 23.63% for the same time frame.
Q: What factors most significantly affected the Fund's performance?
A: Strong stock selection, favorable asset allocation and sector allocation
were the underpinning for the Fund's performance over the six-month
fiscal period. Stock selection added material value over the course of
the reporting period.
COUNTRY COMPOSITION <
Percentage of portfolio assets at April 30, 2006
[Pie chart]
Japan 24.3%
United Kingdom 15.7%
France 11.5%
Switzerland 8.1%
Germany 7.4%
Italy 5.1%
Cash & Short-Term
Securities* 3.1%
South Africa 2.6%
South Korea 2.6%
Hong Kong 2.4%
Australia 2.1%
Netherlands 2.1%
Spain 2.1%
Mexico 1.4%
Canada 1.2%
Finland 1.2%
Taiwan 1.0%
Other** 6.1%
* Of the 3.1%, 3.0% is due to security lending activity and 0.1% is the
Fund's cash equivalent position.
** Includes Austria, Belgium, Brazil, China, Denmark, Greece, Hungary,
Ireland, Singapore, Sweden and Turkey.
ASSET ALLOCATION & SECTOR COMPOSITION*** <
Percentage of portfolio assets at April 30, 2006
[Pie chart]
STOCKS
Financials 31.7%
Industrials 11.3%
Energy 11.1%
Consumer Discretionary 10.6%
Materials 10.1%
Health Care 7.5%
Information Technology 7.3%
Consumer Staples 4.5%
Utilities 2.8%
CASH EQUIVALENTS
Short-Term Securities 3.1%
*** Sectors can be comprised of several industries. Please refer to the
section entitled "Investments in Securities" for a complete listing. No
single industry exceeds 25% of portfolio assets.
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.
- --------------------------------------------------------------------------------
5 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
Europe is the Fund's largest regional allocation, with 58.7% of the
Fund's assets invested there at the end of the period. Several of the
individual stock wins came from a wide range of sectors in the European
market. Among them were Rolls-Royce Group, a U.K. company in the
aerospace and defense sector, Standard Chartered, a U.K. listed bank
that generates a significant proportion of its earnings in emerging
markets in Asia, U.K. mobile telecom operator O2, which received an
agreed takeover bid and German cash machine manufacturer Wincor Nixdorf.
Some noteworthy companies within the emerging markets included retailer
Wal-Mart de Mexico, the Mexican counterpart of the U.S. retailing giant
Wal-Mart. Other notable performers were Kookmin Bank and Shinhan
Financial Group. Both of these South Korean commercial banks benefited
from the strength of the consumer in Korea, a theme that we believe will
continue in the months to come. Also in Korea, Samsung Electronics, a
long-time holding in the Fund, helped performance. PetroChina, the
Chinese energy company that benefited from firm energy prices and strong
GDP data out of China, also is worthy of mention.
Among the stocks that detracted from performance were U.K. companies
Carnival, a cruise ship line, and Tesco, a retailer. Carnival was hurt
because of high oil prices and Tesco suffered as investors rotated out
of higher quality defensive companies. Also, Swiss dental implant
company Nobel Biocare Holding had mixed performance over the period.
News late in the period regarding one of the company's products, caused
the stock price to drop. We believe that the market's reaction was
overdone and have maintained our position.
The price of oil was a key theme for the portfolio. During the second
part of the reporting period, the Fund maintained a larger position in
energy stocks than did the MSCI Index. In that time frame, the Fund's
positions in oil companies have served well. They include Chinese
holding PetroChina and U.K. oil company BG Group.
However, the Fund's overweight in energy relative to the MSCI Index was
not especially helpful in the earlier part of the reporting period.
Investors in energy stocks took profits, which in turn, caused share
prices to move lower. Italian holding Eni was among the detractors late
last year, as was Neste Oil, which suffered negative news in December
2005 as it announced that upgrade costs at one
- --------------------------------------------------------------------------------
6 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
of its key refineries would have a greater than expected impact on
short-term profits. Although Neste Oil had disappointing results over
the short term, we think that the refinery upgrade, now completed,
leaves the company well-placed to benefit from the growth in refining of
lower quality crudes, which will be positive for long-term earnings.
Overall, we remain committed to our energy bets, as we believe that we
are in a long-term bull market in the underlying commodities. Strong
commodity prices were also evident in mining stocks, such as Cia Vale do
Rio Doce (Brazil), Anglo American (U.K.) and BHP Billiton (Australia),
all of which helped boost performance over the period.
Nearly 32% of the Fund's assets are invested in Asia. Within this
allocation, Japan -- the largest country position within the Fund with
more than 24% of the Fund's assets as of April 30, 2006 -- had a strong
impact on performance over the period. Japan has been another key theme
for the Fund throughout this reporting period. For several years,
Japan's government and businesses have strived to put the country's
economy and markets on a solid, sustainable path of recovery, and for
years their success has been limited. Throughout 2005, we were
encouraged by some strides made by Japanese companies to improve
profitability. Then, in September 2005, a general election in Japan
brought a landslide victory for the prime minister, which gave him a
mandate to continue badly needed reforms in government and business,
including financial companies. This further validated our positive
opinion on the Japanese market as well as our large position there.
Q: What changes did you make to the Fund during the period?
A: We have been opportunistically shifting the portfolio toward
growth-oriented stocks for some time. As previously reported, we
anticipated that growth stocks would benefit as the global recovery
moved into its next phase. This transition took longer than we had first
expected. However, during the six-month fiscal period, growth-oriented
companies have pulled ahead and shown some solid performance results.
The Japanese recovery is still in play, and we have felt that Japan's
economy and markets will continue to grow stronger. We increased our
position in Japan in the second half of the period. We remain positive
on the Japanese market and are happy to maintain this bullish stance.
Financials, and especially brokers, were particularly strong midway
through the
- --------------------------------------------------------------------------------
7 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
> WE ANTICIPATE THAT GROWTH-ORIENTED COMPANIES WILL
CONTINUE TO BENEFIT INVESTORS.
period. We trimmed our positions in major Japanese banks and channeled
the proceeds into brokers such as Nomura Holdings, which proved
profitable. Elsewhere, we reduced some of the more defensive positions,
such as utilities, and moved into retailers and housing stocks instead.
Japan's domestic economy is still in a recovery cycle, and with
government reforms in place, we have seen broad economic indicators
improve over the past year. As improvements continue in Japan, we expect
consumer confidence to pick up, with positive implications for retailers
and house builders.
Outside of Japan, we increased our holdings in financials, consumer
discretionary, materials and industrials sectors. We reduced our
holdings in energy, information technology, and health care. Although we
reduced our overall weighting in health care, we added to our position
in French pharmaceuticals firm Sanofi-Aventis, on positive news
regarding the U.S. patent on a key Sanofi-Aventis product.
On the individual stock level we added to our position in Xstrata, a
Swiss mineral resources company, in anticipation that global demand for
commodities will continue to be strong. We purchased Marks & Spencer
Group, a U.K. retailer, early in the period as we gained confidence in
the recovery strategy being implemented by their new management team.
Subsequent news on sales and margins confirmed our decision. We sold
positions including Bangkok Bank, which we saw as increasingly volatile
due to rising interest rates and political uncertainty in Thailand. We
also reduced our holding in German engineering firm Siemens after
cautious comments from management. After benefiting from some strong
performance, we also reduced our position in French company Vallourec,
the world's second-largest manufacturer of seamless steel tubes used in
oil and gas drilling and took some profits to reinvest elsewhere.
- --------------------------------------------------------------------------------
8 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
QUESTIONS & ANSWERS
> WITH COMMODITIES, SUCH AS OIL AND IRON ORE IN STRONG
DEMAND, WE INTEND TO CONTINUE THE FUND'S LARGE
POSITIONS IN THE ENERGY AND MINING SECTORS.
Q: How is the Fund currently positioned and how do you intend to manage the
Fund in the coming months?
A: Overall, we plan to maintain the Fund's focus on growth. We anticipate
that growth-oriented companies will continue to benefit investors.
Supply and demand will continue to influence markets. With commodities,
such as oil and iron ore in strong demand, we intend to continue the
Fund's large positions in the energy and mining sectors. We still think
there are supply shortages and continuing strong demand from the U.S.
and Chinese economies, which will continue to support high prices
globally.
Demand is also closely linked to various regions' economic recovery
cycles. In the western markets, we have largely avoided consumer-related
sectors because consumption growth is pedestrian, or commonplace.
However, this position is contrasted in Japan and other Asian markets,
where consumption is part of the recovery trend. We have therefore
initiated greater-than-MSCI Index positions in consumer-facing sectors
in these markets.
Looking ahead, we feel that international equity markets are
attractively valued and we remain constructive on the prospects facing
the markets. Many companies have high levels of cash, which will likely
continue to drive shareholder-friendly activities such as stock
buybacks, as well as mergers and acquisitions. Within the first half of
the Fund's fiscal year, we saw that happen with O2, one of our UK
holdings. O2 saw its share price rise by 22% following an agreed
takeover bid from Telefonica of Spain. Indeed, the positive effect was
compounded by not holding Telefonica, whose shares fell on the news.
- --------------------------------------------------------------------------------
9 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
INVESTMENTS IN SECURITIES
RiverSource International Opportunity Fund
APRIL 30, 2006 (UNAUDITED)
(Percentages represent value of investments compared to net assets)
COMMON STOCKS (98.3%)(c)
ISSUER SHARES VALUE(a)
AUSTRALIA (2.2%)
CAPITAL MARKETS (0.5%)
Macquarie Bank 59,534 $3,229,278
- ------------------------------------------------------------------------------
METALS & MINING (1.7%)
BHP Billiton 222,436 4,951,250
Newcrest Mining 103,904 1,799,738
Rio Tinto 61,234 3,658,756
-------------
Total 10,409,744
- ------------------------------------------------------------------------------
AUSTRIA (0.6%)
COMMERCIAL BANKS
Erste Bank der
Oesterreichischen Sparkassen 49,981 3,032,514
Erste Bank der
Oesterreichischen Sparkassen 13,328(b) 799,408
-------------
Total 3,831,922
- ------------------------------------------------------------------------------
BELGIUM (0.4%)
BEVERAGES
InBev 45,076 2,273,217
- ------------------------------------------------------------------------------
BRAZIL (0.4%)
COMMERCIAL BANKS
UNIBANCO - Uniao de Bancos
Brasileiros ADR 33,824 2,683,934
- ------------------------------------------------------------------------------
CANADA (1.2%)
DIVERSIFIED FINANCIAL SERVICES (0.4%)
TSX Group 56,000 2,434,347
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (0.4%)
Petro-Canada 50,000 2,459,750
- ------------------------------------------------------------------------------
ROAD & RAIL (0.4%)
Canadian Pacific Railway 52,000 2,764,186
- ------------------------------------------------------------------------------
CHINA (0.7%)
OIL, GAS & CONSUMABLE FUELS
PetroChina Series H 4,072,000 4,490,655
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
DENMARK (0.3%)
INSURANCE
TrygVesta 35,160 $2,164,314
- ------------------------------------------------------------------------------
FINLAND (1.2%)
ELECTRIC UTILITIES (0.6%)
Fortum 154,400 3,899,098
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (0.6%)
Neste Oil 103,138 3,598,518
- ------------------------------------------------------------------------------
FRANCE (11.7%)
AUTOMOBILES (0.4%)
Renault 23,676 2,747,571
- ------------------------------------------------------------------------------
CHEMICALS (0.3%)
Air Liquide 8,902 1,925,770
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (1.0%)
BNP Paribas 37,326 3,526,518
BNP Paribas-New 4,186(b) 382,024
Societe Generale 17,233 2,632,436
-------------
Total 6,540,978
- ------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.5%)
VINCI 34,579 3,434,913
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.4%)
Imerys 29,009 2,491,912
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (1.4%)
ALSTOM 46,906(b) 4,248,207
Schneider Electric 38,539 4,363,024
-------------
Total 8,611,231
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (0.3%)
Technip 25,929 1,636,977
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.8%)
Essilor Intl 50,715 5,085,766
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
10 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
FRANCE (CONT.)
INSURANCE (2.8%)
Assurances Generales
de France 36,655 $4,632,909
AXA 337,424(b) 12,381,477
-------------
Total 17,014,386
- ------------------------------------------------------------------------------
MACHINERY (0.3%)
Vallourec 1,377 1,789,056
- ------------------------------------------------------------------------------
OFFICE ELECTRONICS (0.5%)
Neopost 29,313 3,314,846
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (1.6%)
Total 35,991 9,951,470
- ------------------------------------------------------------------------------
PHARMACEUTICALS (1.4%)
Sanofi-Aventis 92,320 8,704,820
- ------------------------------------------------------------------------------
GERMANY (7.4%)
AIR FREIGHT & LOGISTICS (0.6%)
Deutsche Postbank 45,727 3,495,410
- ------------------------------------------------------------------------------
AUTO COMPONENTS (0.6%)
Continental 29,292 3,486,870
- ------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS (0.6%)
Wincor Nixdorf 26,586 3,823,056
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (0.6%)
E.ON 32,429(e) 3,948,650
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (0.6%)
Fresenius Medical Care & Co 30,743 3,688,292
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES (0.3%)
Siemens 19,105 1,807,428
- ------------------------------------------------------------------------------
INSURANCE (1.4%)
Allianz 55,300(e) 9,256,544
- ------------------------------------------------------------------------------
MACHINERY (0.7%)
MAN 55,296 4,191,300
- ------------------------------------------------------------------------------
SOFTWARE (0.7%)
SAP 19,998 4,369,052
- ------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE (1.0%)
Hypo Real Estate Holding 93,034 6,503,708
- ------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE (0.3%)
Fraport 26,005 1,967,178
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
GREECE (0.7%)
COMMERCIAL BANKS
EFG Eurobank Ergasias 113,912 $4,537,686
- ------------------------------------------------------------------------------
HONG KONG (2.4%)
DISTRIBUTORS (0.4%)
Li & Fung 1,116,000 2,648,609
- ------------------------------------------------------------------------------
REAL ESTATE (1.4%)
Cheung Kong Holdings 190,000 2,140,683
China Overseas Land & Investment 2,928,000 1,869,442
New World Development 1,642,200 2,944,264
Sun Hung Kai Properties 175,000 1,999,897
-------------
Total 8,954,286
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.6%)
Esprit Holdings 441,500 3,524,984
- ------------------------------------------------------------------------------
HUNGARY (0.4%)
PHARMACEUTICALS
Gedeon Richter ADR 11,688(d,g) 2,514,853
- ------------------------------------------------------------------------------
IRELAND (0.6%)
CONSTRUCTION MATERIALS
CRH 101,405 3,728,642
- ------------------------------------------------------------------------------
ITALY (5.2%)
COMMERCIAL BANKS (2.0%)
Banco Popolare di Milano Societa Cooperativa 226,770 2,866,198
Sanpaolo IMI 158,761 2,981,888
UniCredito Italiano 879,741 6,624,940
-------------
Total 12,473,026
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES (1.1%)
Saipem 273,276 6,832,159
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (0.5%)
Parmalat 924,712(b) 3,105,624
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (1.6%)
Eni 325,150 9,925,489
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
11 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
JAPAN (24.8%)
AUTO COMPONENTS (0.3%)
Toyota Inds 44,600 $1,990,057
- ------------------------------------------------------------------------------
AUTOMOBILES (2.4%)
Honda Motor 80,700 5,734,414
Toyota Motor 153,200 8,961,897
-------------
Total 14,696,311
- ------------------------------------------------------------------------------
BUILDING PRODUCTS (0.9%)
Asahi Glass 263,000 3,714,572
Daikin Inds 58,100 2,025,973
-------------
Total 5,740,545
- ------------------------------------------------------------------------------
CAPITAL MARKETS (1.4%)
Mitsubishi UFJ Securities 91,000 1,433,939
Mizuho Investors Securities 453,000 1,444,348
Nomura Holdings 149,600 3,383,575
Tokai Tokyo Securities 327,000 2,283,399
-------------
Total 8,545,261
- ------------------------------------------------------------------------------
CHEMICALS (1.7%)
Showa Denko 738,000 3,267,036
Sumitomo Chemical 443,000 3,883,303
UBE Inds 1,017,000 3,394,466
-------------
Total 10,544,805
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (3.5%)
Bank of Yokohama 253,000 1,984,444
Mitsubishi UFJ Financial Group 632 9,936,582
Mizuho Financial Group 627 5,347,536
Shinsei Bank 113,000 791,050
Sumitomo Mitsui Financial Group 322 3,535,354
-------------
Total 21,594,966
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES (0.5%)
Toppan Printing 235,000 3,139,526
- ------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING (0.3%)
Okumura 366,000 2,031,726
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (0.8%)
Japan Cash Machine 90,200 1,711,304
Matsushita Electric Works 293,000 3,556,663
-------------
Total 5,267,967
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS (0.9%)
Arisawa Mfg 134,400 3,323,109
TDK 24,100 2,017,330
-------------
Total 5,340,439
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
JAPAN (CONT.)
FOOD & STAPLES RETAILING (0.3%)
Seven-I Holdings 53,700 $2,080,079
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES (0.3%)
Nichii Gakkan 72,600 1,747,246
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES (1.5%)
Daito Trust Construction 58,800 3,057,497
Sekisui Chemical 355,000 3,068,248
Sharp 195,000 3,423,847
-------------
Total 9,549,592
- ------------------------------------------------------------------------------
INSURANCE (0.7%)
T&D Holdings 57,450 4,405,257
- ------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.4%)
Rakuten 2,946 2,380,607
- ------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES (0.4%)
eAccess 4,021 2,776,026
- ------------------------------------------------------------------------------
MACHINERY (1.0%)
AMADA 290,000 3,173,825
SMC 9,900 1,504,348
Takuma 152,000 1,288,362
-------------
Total 5,966,535
- ------------------------------------------------------------------------------
METALS & MINING (1.3%)
Mitsui Mining & Smelting 515,000 3,582,609
Nippon Steel 1,157,000 4,268,247
-------------
Total 7,850,856
- ------------------------------------------------------------------------------
MULTILINE RETAIL (0.5%)
Marui 61,700 1,192,271
Mitsukoshi 339,000 1,971,172
-------------
Total 3,163,443
- ------------------------------------------------------------------------------
OFFICE ELECTRONICS (1.5%)
Canon 74,800 5,722,512
Ricoh 182,000 3,612,824
-------------
Total 9,335,336
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (1.1%)
Nippon Mining Holdings 355,000 3,283,399
Nippon Oil 448,000 3,545,437
-------------
Total 6,828,836
- ------------------------------------------------------------------------------
PHARMACEUTICALS (0.6%)
Takeda Pharmaceutical 66,500 4,065,349
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
12 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
JAPAN (CONT.)
REAL ESTATE (0.9%)
Mitsui Fudosan 99,000 $2,217,391
TOC 537,450 3,210,066
-------------
Total 5,427,457
- ------------------------------------------------------------------------------
SOFTWARE (0.5%)
Nintendo 19,500 2,911,726
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.4%)
Komeri 82,700 2,789,354
- ------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS (0.3%)
ONWARD Kashiyama 119,000 2,008,942
- ------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE (0.4%)
Mitsubishi Logistics 182,000 2,775,160
- ------------------------------------------------------------------------------
MEXICO (1.4%)
FOOD & STAPLES RETAILING (0.8%)
Wal-Mart de Mexico Series V 1,921,612 5,479,651
- ------------------------------------------------------------------------------
MEDIA (0.6%)
Grupo Televisa ADR 169,964 3,603,237
- ------------------------------------------------------------------------------
NETHERLANDS (2.2%)
DIVERSIFIED FINANCIAL SERVICES (1.0%)
ING Groep 153,132 6,231,364
- ------------------------------------------------------------------------------
FOOD PRODUCTS (0.5%)
Royal Numico 68,570(b) 3,106,871
- ------------------------------------------------------------------------------
MEDIA (0.3%)
Reed Elsevier 129,978(e) 1,926,462
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (0.4%)
Royal Dutch Shell Series A 65,579 2,248,366
- ------------------------------------------------------------------------------
SINGAPORE (0.8%)
INDUSTRIAL CONGLOMERATES (0.5%)
Keppel 308,000 2,981,400
- ------------------------------------------------------------------------------
REAL ESTATE (0.3%)
City Developments 282,000 1,801,974
- ------------------------------------------------------------------------------
SOUTH AFRICA (2.6%)
COMMERCIAL BANKS (0.5%)
ABSA Group 169,254 3,352,040
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SOUTH AFRICA (CONT.)
METALS & MINING (2.1%)
Anglo American 180,943 $7,704,322
Impala Platinum Holdings 27,464 5,223,819
-------------
Total 12,928,141
- ------------------------------------------------------------------------------
SOUTH KOREA (2.6%)
COMMERCIAL BANKS (1.3%)
Kookmin Bank 37,880 3,394,697
Shinhan Financial Group 91,660 4,568,905
-------------
Total 7,963,602
- ------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.3%)
Samsung Electronics 12,550 8,571,641
- ------------------------------------------------------------------------------
SPAIN (2.1%)
COMMERCIAL BANKS (1.4%)
Banco Bilbao Vizcaya
Argentaria 402,794 8,896,556
- ------------------------------------------------------------------------------
SPECIALTY RETAIL (0.7%)
Inditex 103,497 4,210,273
- ------------------------------------------------------------------------------
SWEDEN (0.7%)
BUILDING PRODUCTS
ASSA ABLOY Cl B 231,800(e) 4,497,508
- ------------------------------------------------------------------------------
SWITZERLAND (8.3%)
CAPITAL MARKETS (3.4%)
Julius Baer Holding 64,405 6,174,613
UBS 131,866 15,629,980
-------------
Total 21,804,593
- ------------------------------------------------------------------------------
CHEMICALS (0.6%)
Syngenta 25,412(b) 3,544,812
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES (0.5%)
Nobel Biocare Holding 12,601 3,114,180
- ------------------------------------------------------------------------------
METALS & MINING (0.8%)
Xstrata 136,140 4,925,305
- ------------------------------------------------------------------------------
PHARMACEUTICALS (3.0%)
Novartis 109,387 6,275,508
Roche Holding 79,933 12,290,940
-------------
Total 18,566,448
- ------------------------------------------------------------------------------
TAIWAN (1.0%)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Taiwan Semiconductor Mfg 2,969,084 6,338,389
- ------------------------------------------------------------------------------
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
13 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
TURKEY (0.5%)
COMMERCIAL BANKS
Akbank ADR 185,033(d) $3,081,540
- ------------------------------------------------------------------------------
UNITED KINGDOM (16.0%)
AEROSPACE & DEFENSE (1.0%)
Rolls-Royce Group 713,993(b) 6,203,869
Rolls-Royce Group Series B 38,412,823 72,147
-------------
Total 6,276,016
- ------------------------------------------------------------------------------
COMMERCIAL BANKS (3.1%)
Alliance & Leicester 147,208 3,014,511
Barclays 408,646 5,104,386
Standard Chartered 419,785 11,145,357
-------------
Total 19,264,254
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS (0.6%)
Hanson 281,020 3,753,622
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES (1.6%)
British Energy Group 228,083(b) 2,753,320
Drax Group 289,381(b) 4,168,721
Scottish Power 287,315 2,936,565
-------------
Total 9,858,606
- ------------------------------------------------------------------------------
FOOD & STAPLES RETAILING (2.0%)
Tesco 1,304,510 7,600,183
Wm Morrison Supermarkets 1,485,688 5,045,795
-------------
Total 12,645,978
- ------------------------------------------------------------------------------
INSURANCE (1.5%)
Friends Provident 623,077 2,235,436
Legal & General Group 2,053,986 5,187,439
Royal & SunAlliance Insurance Group 905,609 2,278,901
-------------
Total 9,701,776
- ------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL (0.4%)
GUS 125,746 2,357,181
- ------------------------------------------------------------------------------
METALS & MINING (0.3%)
Corus Group 1,333,460 2,054,672
- ------------------------------------------------------------------------------
MULTILINE RETAIL (0.8%)
Marks & Spencer Group 451,312 4,818,474
- ------------------------------------------------------------------------------
OIL, GAS & CONSUMABLE FUELS (3.6%)
BG Group 838,238 11,265,243
BP 917,529 11,318,616
-------------
Total 22,583,859
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
UNITED KINGDOM (CONT.)
SPECIALTY RETAIL (0.2%)
Carphone Warehouse Group 248,745 $1,522,917
- ------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS (0.4%)
Wolseley 101,992 2,553,538
- ------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE (0.5%)
BAA 184,102 2,845,142
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost: $470,142,840) $616,635,297
- ------------------------------------------------------------------------------
OTHER (--%)(c)
ISSUER SHARES VALUE(a)
SINGAPORE
City Development
Warrants 55,400(b,g) $261,122
- ------------------------------------------------------------------------------
SWITZERLAND
Syngenta
Rights 28,043(b) 44,997
- ------------------------------------------------------------------------------
TOTAL OTHER
(Cost: $--) $306,119
- ------------------------------------------------------------------------------
SHORT-TERM SECURITIES (3.1%)(f)
ISSUER EFFECTIVE AMOUNT VALUE(a)
YIELD PAYABLE AT
MATURITY
COMMERCIAL PAPER
Rabobank USA Financial
05-01-06 4.84% $4,700,000 $4,698,104
Thames Asset Global Securitization #1
05-08-06 4.80 10,000,000(h) 9,986,695
Windmill Funding
05-01-06 4.76 5,000,000(h) 4,998,017
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM SECURITIES
(Cost: $19,685,439) $19,682,816
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost: $489,828,279)(i) $636,624,232
==============================================================================
See accompanying notes to investments in securities.
- --------------------------------------------------------------------------------
14 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
NOTES TO INVESTMENTS IN SECURITIES
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This
security has been determined to be liquid under guidelines established
by the Fund's Board of Directors. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At April 30, 2006, the value of these securities
amounted to $5,596,393 or 0.9% of net assets.
(e) At April 30, 2006, security was partially or fully on loan. See Note 6
to the financial statements.
(f) Cash collateral received from security lending activity is invested in
short-term securities and represents 3.0% of net assets. See Note 6 to
the financial statements. 0.1% of net assets is the Fund's cash
equivalent position.
(g) Identifies issues considered to be illiquid as to their marketability
(see Note 1 to the financial statements). These securities may be
valued at fair value according to methods selected in good faith by
the Fund's Board of Directors. Information concerning such security
holdings at April 30, 2006, is as follows:
SECURITY ACQUISITION COST
DATES
-----------------------------------------------------------------------------------------
City Development
Warrants 05-04-04 $ --
Gedeon Richter ADR 04-18-06 thru 04-20-06 2,473,094
(h) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under Section 4(2) of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or
other "accredited investors." This security has been determined to be
liquid under guidelines established by the Fund's Board of Directors.
These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30,
2006, the value of these securities amounted to $14,984,712 or 2.4% of
net assets.
(i) At April 30, 2006, the cost of securities for federal income tax
purposes was approximately $489,828,000 and the approximate aggregate
gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $149,473,000
Unrealized depreciation (2,677,000)
------------------------------------------------------------------------
Net unrealized appreciation $146,796,000
------------------------------------------------------------------------
The Global Industry Classification Standard (GICS) was developed by and is
the exclusive property of Morgan Stanley Capital International Inc. and
Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
HOW TO FIND INFORMATION ABOUT THE FUND'S PORTFOLIO HOLDINGS
(i) The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission (Commission) for the first and
third quarters of each fiscal year on Form N-Q;
(ii) The Fund's Forms N-Q are available on the Commission's website at
http://www.sec.gov;
(iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's
Public Reference Room in Washington, DC (information on the operations
of the Public Reference Room may be obtained by calling
1-800-SEC-0330); and
(iv) The Fund's complete schedule of portfolio holdings, as disclosed in
its annual and semiannual shareholder reports and in its filings on
Form N-Q, can be found at www.riversource.com/funds.
- --------------------------------------------------------------------------------
15 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
RiverSource International Opportunity Fund
APRIL 30, 2006 (UNAUDITED)
ASSETS
Investments in securities, at value (Note 1)*
(identified cost $489,828,279) $ 636,624,232
Foreign currency holdings (identified cost $1,307,781) (Note 1) 1,360,290
Capital shares receivable 75,672
Dividends and accrued interest receivable 2,913,502
Receivable for investment securities sold 7,742,518
- ------------------------------------------------------------------------------------------------------------------------
Total assets 648,716,214
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Disbursements in excess of cash on demand deposit 95,580
Capital shares payable 29,704
Payable for investment securities purchased 2,439,415
Unrealized depreciation on foreign currency contracts held, at value (Note 5) 38,142
Payable upon return of securities loaned (Note 6) 18,839,100
Accrued investment management services fee 13,414
Accrued distribution fee 5,896
Accrued service fee 2
Accrued transfer agency fee 2,029
Accrued administrative services fee 1,358
Other accrued expenses 117,925
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities 21,582,565
- ------------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $ 627,133,649
========================================================================================================================
REPRESENTED BY
Capital stock -- $.01 par value (Note 1) $ 669,396
Additional paid-in capital 843,462,457
Excess of distributions over net investment income (1,826,053)
Accumulated net realized gain (loss) (Note 8) (362,136,740)
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (Note 5) 146,964,589
- ------------------------------------------------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding capital stock $ 627,133,649
========================================================================================================================
Net assets applicable to outstanding shares: Class A $ 468,621,400
Class B $ 94,478,988
Class C $ 3,325,048
Class I $ 60,157,982
Class Y $ 550,231
Net asset value per share of outstanding capital stock: Class A shares 49,863,430 $ 9.40
Class B shares 10,305,142 $ 9.17
Class C shares 365,861 $ 9.09
Class I shares 6,347,677 $ 9.48
Class Y shares 57,499 $ 9.57
<FN>
- ------------------------------------------------------------------------------------------------------------------------
* Including securities on loan, at value (Note 6) $ 17,876,997
- ------------------------------------------------------------------------------------------------------------------------
</FN>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
16 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
STATEMENT OF OPERATIONS
RiverSource International Opportunity Fund
SIX MONTHS ENDED APRIL 30, 2006 (UNAUDITED)
INVESTMENT INCOME
Income:
Dividends $ 6,054,458
Interest 121,629
Fee income from securities lending (Note 6) 117,415
Less foreign taxes withheld (583,817)
- -------------------------------------------------------------------------------------------
Total income 5,709,685
- -------------------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 2,297,831
Distribution fee
Class A 535,509
Class B 431,925
Class C 14,876
Transfer agency fee 577,906
Incremental transfer agency fee
Class A 51,717
Class B 18,929
Class C 559
Service fee -- Class Y 215
Administrative services fees and expenses 235,611
Compensation of board members 5,742
Custodian fees 110,370
Printing and postage 94,130
Registration fees 25,640
Audit fees 20,000
Other 8,616
- -------------------------------------------------------------------------------------------
Total expenses 4,429,576
Earnings credits on cash balances (Note 2) (15,822)
- -------------------------------------------------------------------------------------------
Total net expenses 4,413,754
- -------------------------------------------------------------------------------------------
Investment income (loss) -- net 1,295,931
- -------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions (Note 3) 57,246,225
Foreign currency transactions 180,659
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 57,426,884
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 68,021,451
- -------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 125,448,335
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $126,744,266
===========================================================================================
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
17 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
STATEMENTS OF CHANGES IN NET ASSETS
RiverSource International Opportunity Fund
APRIL 30, 2006 OCT. 31, 2005
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED)
OPERATIONS AND DISTRIBUTIONS
Investment income (loss) -- net $ 1,295,931 $ 3,721,682
Net realized gain (loss) on investments 57,426,884 57,618,192
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 68,021,451 21,541,786
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 126,744,266 82,881,660
- --------------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (4,837,436) (1,605,104)
Class B (321,933) (828)
Class C (17,478) (242,750)
Class I (964,636) (169,979)
- --------------------------------------------------------------------------------------------------------------
Total distributions (6,141,483) (2,018,661)
- --------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 4)
Proceeds from sales
Class A shares (Note 2) 25,361,250 97,626,381
Class B shares 7,796,962 27,681,623
Class C shares 626,638 1,321,486
Class I shares 12,434,598 36,226,770
Class Y shares 118,064 4,755,770
Reinvestment of distributions at net asset value
Class A shares 4,744,110 1,573,971
Class B shares 316,796 --
Class C shares 17,009 811
Class I shares 964,430 242,656
Class Y shares -- 12,363
Payments for redemptions
Class A shares (58,391,679) (96,437,947)
Class B shares (Note 2) (13,338,168) (33,026,638)
Class C shares (Note 2) (669,248) (713,809)
Class I shares (15,446,047) (13,046,455)
Class Y shares (29,421) (40,647,366)
- --------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share transactions (35,494,706) (14,430,384)
- --------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 85,108,077 66,432,615
Net assets at beginning of period 542,025,572 475,592,957
- --------------------------------------------------------------------------------------------------------------
Net assets at end of period $627,133,649 $542,025,572
==============================================================================================================
Undistributed (excess of distributions over) net investment income $ (1,826,053) $ 3,019,499
- --------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
18 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS
RiverSource International Opportunity Fund
(Unaudited as to April 30, 2006)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of RiverSource International Series, Inc. (formerly
AXP International Series, Inc.) and is registered under the Investment
Company Act of 1940 (as amended) as a diversified, open-end management
investment company. RiverSource International Series, Inc. has 10 billion
authorized shares of capital stock that can be allocated among the separate
series as designated by the Board. The Fund invests primarily in equity
securities of foreign issuers that offer strong growth potential.
The Fund offers Class A, Class B, Class C and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge
(CDSC) and automatically convert to Class A shares during the ninth
year of ownership.
o Class C shares may be subject to a CDSC.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
The Fund offers an additional class of shares, Class I, exclusively to
certain institutional investors. Class I shares have no sales charge and are
made available through a separate prospectus supplement provided to
investors eligible to purchase the shares. At April 30, 2006, Ameriprise
Financial, Inc. (Ameriprise Financial) and the affiliated funds-of-funds
owned 100% of Class I shares, which represents 9.59% of the Fund's net
assets.
All classes of shares have identical voting, dividend and liquidation
rights. The distribution fee, transfer agency fees and service fee (class
specific expenses) differ among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
The Fund's significant accounting policies are summarized below:
USE OF ESTIMATES
Preparing financial statements that conform to U.S. generally accepted
accounting principles requires management to make estimates (e.g., on
assets, liabilities and contingent assets and liabilities) that could differ
from actual results.
- --------------------------------------------------------------------------------
19 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
VALUATION OF SECURITIES
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
that reflects fair value as quoted by dealers in these securities or by an
independent pricing service. Foreign securities are valued based on
quotations from the principal market in which such securities are normally
traded. Pursuant to procedures adopted by the Board of Directors of the
funds, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP
determinations are made in good faith in accordance with these procedures.
If a development or event is so significant that there is a reasonably high
degree of certainty that the effect of the development or event has actually
caused the closing price to no longer reflect the actual value, the closing
prices, as determined at the close of the applicable foreign market, may be
adjusted to reflect the fair value of the affected foreign securities as of
the close of the New York Stock Exchange. Significant events include
material movements in the U.S. securities markets prior to the opening of
foreign markets on the following trading day. FVP results in an estimated
price that reasonably reflects the current market conditions in order to
value the portfolio holdings such that shareholder transactions receive a
fair net asset value. Short-term securities maturing in more than 60 days
from the valuation date are valued at the market price or approximate market
value based on current interest rates; those maturing in 60 days or less are
valued at amortized cost.
ILLIQUID SECURITIES
At April 30, 2006, investments in securities included issues that are
illiquid which the Fund currently limits to 10% of net assets, at market
value, at the time of purchase. The aggregate value of such securities at
April 30, 2006 was $2,775,975 representing 0.44% of net assets. These
securities are valued at fair value according to methods selected in good
faith by the Board. According to board guidelines, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above. Assets are liquid if they can be sold or
disposed of in the ordinary course of business within seven days at
approximately the value at which the asset is valued by the Fund.
OPTION TRANSACTIONS
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options
traded on any U.S. or foreign exchange or in the over-the-counter market
where completing the obligation depends upon the credit standing of the
other party. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured
put options. The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases. The
risk in writing a put option is that the Fund may incur a loss if the market
price of the security decreases and the option is exercised. The risk in
buying an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of being unable to enter
into a closing transaction if a liquid secondary market does not exist.
- --------------------------------------------------------------------------------
20 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund
will realize a gain or loss when the option transaction expires or closes.
When an option is exercised, the proceeds on sales for a written call
option, the purchase cost for a written put option or the cost of a security
for a purchased put or call option is adjusted by the amount of premium
received or paid.
FUTURES TRANSACTIONS
To gain exposure to or protect itself from market changes the Fund may buy
and sell financial futures contracts traded on any U.S. or foreign exchange.
The Fund also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options
include the possibility of an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
FOREIGN CURRENCY TRANSLATIONS AND FOREIGN CURRENCY CONTRACTS
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars. Foreign currency amounts
related to the purchase or sale of securities and income and expenses are
translated at the exchange rate on the transaction date. The effect of
changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the
statement of operations, net realized gains or losses from foreign currency
transactions, if any, may arise from sales of foreign currency, closed
forward contracts, exchange gains or losses realized between the trade date
and settlement date on securities transactions, and other translation gains
or losses on dividends, interest income and foreign withholding taxes. At
April 30, 2006, foreign currency holdings consisted of multiple
denominations.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate
fluctuation. The net U.S. dollar value of foreign currency underlying all
contractual commitments held by the Fund and the resulting unrealized
appreciation or depreciation are determined using foreign currency exchange
rates from an independent pricing service. The Fund is subject to the credit
risk that the other party will not complete its contract obligations.
GUARANTEES AND INDEMNIFICATIONS
Under the Fund's organizational documents, its officers and directors are
indemnified against certain liabilities arising out of the performance of
their duties to the Fund. In addition, certain of the Fund's contracts with
its service providers contain general indemnification clauses. The Fund's
maximum exposure under these arrangements is unknown since the amount of any
future claims that may be made against the Fund cannot be determined and the
Fund has no historical basis for predicting the likelihood of any such
claims.
- --------------------------------------------------------------------------------
21 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
FEDERAL TAXES
The Fund's policy is to comply with Subchapter M of the Internal Revenue
Code that applies to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. No provision for
income or excise taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due
to "wash sale" transactions. The character of distributions made during the
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
DIVIDENDS TO SHAREHOLDERS
An annual dividend from net investment income, declared and paid at the end
of the calendar year, when available, is reinvested in additional shares of
the Fund at net asset value or payable in cash. Capital gains, when
available, are distributed along with the income dividend.
OTHER
Security transactions are accounted for on the date securities are purchased
or sold. Dividend income is recognized on the ex-dividend date or upon
receipt of ex-dividend notification in the case of certain foreign
securities. Interest income, including amortization of premium, market
discount and original issue discount using the effective interest method, is
accrued daily.
2. EXPENSES AND SALES CHARGES
Under an Investment Management Services Agreement, RiverSource Investments,
LLC (the Investment Manager) determines which securities will be purchased,
held or sold. The management fee is a percentage of the Fund's average daily
net assets that declines from 0.80% to 0.57% annually as the Fund's assets
increase. Prior to March 1, 2006, the management fee percentage of the
Fund's average daily net assets declined from 0.80% to 0.675% annually as
the Fund's assets increased. The fee may be adjusted upward or downward by a
performance incentive adjustment based on a comparison of the performance of
Class A shares of the Fund to the Lipper International Large-Cap Core Funds
Index. In certain circumstances, the Board may approve a change in the
index. The maximum adjustment is 0.12% per year. If the performance
difference is less than 0.50%, the adjustment will be zero. The adjustment
increased the fee by $40,868 for the six months ended April 30, 2006.
Under an Administrative Services Agreement, the Fund pays Ameriprise
Financial a fee for administration and accounting services at a percentage
of the Fund's average daily net assets that declines from 0.08% to 0.05%
annually as the Fund's assets increase. A minor portion of additional
administrative service expenses paid by the Fund are consultants' fees and
fund office expenses. Under this agreement, the Fund also pays taxes, audit
and certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees and any other expenses properly payable by
the Fund and approved by the Board.
- --------------------------------------------------------------------------------
22 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
Under a Deferred Compensation Plan (the Plan), non-interested board members
may defer receipt of their compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the Fund or
other RiverSource funds. The Fund's liability for these amounts is adjusted
for the market value changes and remains in the Fund until distributed in
accordance with the Plan.
The Investment Manager has a Subadvisory Agreement with Threadneedle
International Limited, an indirect wholly-owned subsidiary of Ameriprise
Financial, to subadvise the assets of the Fund.
Under a separate Transfer Agency Agreement, RiverSource Service Corporation
(the Transfer Agent) maintains shareholder accounts and records. The Fund
pays the Transfer Agent an annual fee per shareholder account for this
service as follows:
o Class A $19.50
o Class B $20.50
o Class C $20.00
o Class Y $17.50
The incremental transfer agency fee is the amount charged to the specific
classes for the additional expense above the fee for Class Y.
Class I pays a transfer agency fee at an annual rate per shareholder account
of $1. This amount is included in the transfer agency fee on the statement
of operations.
The Transfer Agent charges an annual closed account fee of $5 per inactive
account, charged on a pro rata basis for 12 months from the date the account
becomes inactive. These fees are included in the transfer agency fees on the
statement of operations.
The Fund has agreements with Ameriprise Financial Services, Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an
annual rate up to 0.25% of the Fund's average daily net assets attributable
to Class A shares and up to 1.00% for Class B and Class C shares.
Under a Shareholder Service Agreement, the Fund pays the Distributor a fee
for service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$265,955 for Class A, $48,022 for Class B and $239 for Class C for the six
months ended April 30, 2006.
The Investment Manager and its affiliates have agreed to waive certain fees
and expenses until Oct. 31, 2006, such that net expenses, before giving
effect to any performance incentive adjustment will not exceed 1.55% for
Class A, 2.31% for Class B, 2.31% for Class C, 1.07% for Class I and 1.38%
for Class Y.
During the six months ended April 30, 2006, the Fund's custodian and
transfer agency fees were reduced by $15,822 as a result of earnings credits
from overnight cash balances. The Fund also pays custodian fees to
Ameriprise Trust Company, an affiliate of Ameriprise Financial.
- --------------------------------------------------------------------------------
23 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $250,541,907 and $292,764,470,
respectively, for the six months ended April 30, 2006. Realized gains and
losses are determined on an identified cost basis.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
SIX MONTHS ENDED APRIL 30, 2006
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ------------------------------------------------------------------------------------------------------------
Sold 2,973,383 940,449 75,594 1,462,471 13,285
Issued for reinvested distributions 584,971 39,949 2,164 118,190 --
Redeemed (6,898,146) (1,604,800) (80,546) (1,685,675) (3,360)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) (3,339,792) (624,402) (2,788) (105,014) 9,925
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED OCT. 31, 2005
CLASS A CLASS B CLASS C CLASS I CLASS Y
- ------------------------------------------------------------------------------------------------------------
Sold 13,585,078 3,966,385 190,245 5,004,663 670,682
Issued for reinvested distributions 222,312 -- 118 34,033 1,737
Redeemed (13,328,114) (4,629,214) (102,608) (1,826,068) (5,254,573)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) 479,276 (662,829) 87,755 3,212,628 (4,582,154)
- ------------------------------------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS
At April 30, 2006, the Fund has forward foreign currency exchange contracts
that obligate it to deliver currencies at specified future dates. The
unrealized appreciation and/or depreciation on these contracts is included
in the accompanying financial statements. See "Summary of significant
accounting policies." The terms of the open contracts are as follows:
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED
EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION
- ---------------------------------------------------------------------------------------------------------
May 2, 2006 675,000 1,204,065 $-- $26,797
British Pound U.S. Dollar
May 2, 2006 300,000 373,200 -- 5,220
European Monetary Unit U.S. Dollar
May 3, 2006 350,000 279,508 -- 2,705
Swiss Franc U.S. Dollar
May 3, 2006 600,000 753,420 -- 3,420
European Monetary Unit U.S. Dollar
- ---------------------------------------------------------------------------------------------------------
Total $-- $38,142
- ---------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
24 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
6. LENDING OF PORTFOLIO SECURITIES
At April 30, 2006, securities valued at $17,876,997 were on loan to brokers.
For collateral the Fund received $18,839,100 in cash. Cash collateral
received is invested in short-term securities, which are included in the
short-term section of the "Investments in securities." Income from
securities lending amounted to $117.415 for the six months ended April 30,
2006. The risks to the Fund of securities lending are that the borrower may
not provide additional collateral when required or return the securities
when due.
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 Fund must maintain asset coverage for borrowings of
at least 300%. The agreement, which enables the Fund to participate with
other RiverSource funds, permits borrowings up to $500 million,
collectively. Interest is charged to each Fund based on its borrowings at a
rate equal to either the higher of the Federal Funds Effective Rate plus
0.40% or the JPMCB Prime Commercial Lending Rate. Borrowings are payable
within 60 days after such loan is executed. The Fund also pays a commitment
fee equal to its pro rata share of the amount of the credit facility at a
rate of 0.07% per annum. The Fund had no borrowings outstanding during the
six months ended April 30, 2006.
8. CAPITAL LOSS CARRY-OVER
For federal income tax purposes, the Fund had a capital loss carry-over of
$419,302,462 at Oct. 31, 2005, that if not offset by capital gains will
expire as follows:
2009 2010 2011
$321,807,492 $59,231,998 $38,262,972
It is unlikely the Board will authorize a distribution of any net realized
capital gains until the available capital loss carry-over has been offset or
expires.
9. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS
In December 2005, without admitting or denying the allegations, American
Express Financial Corporation (AEFC, which is now known as Ameriprise
Financial, Inc. (Ameriprise Financial)), the parent company of RiverSource
Investments, LLC (RiverSource Investments), entered into settlement
agreements with the Securities and Exchange Commission (SEC) and Minnesota
Department of Commerce (MDOC) related to market timing activities. In
connection with these matters, the SEC and MDOC issued orders (the Orders)
alleging that AEFC violated certain provisions of the federal and Minnesota
securities laws by failing to adequately disclose market timing activities
by allowing certain identified market timers to continue to market time
contrary to disclosures in mutual fund and variable annuity product
prospectuses. The Orders also alleged that AEFC failed to implement
procedures to detect and prevent market timing in 401(k) plans for employees
of AEFC and related companies and failed to adequately disclose that there
were no such procedures. Pursuant to the MDOC Order, the MDOC also alleged
that AEFC allowed inappropriate market timing to occur by failing to have
written policies and procedures and failing to properly supervise its
employees.
- --------------------------------------------------------------------------------
25 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
As a result of the Orders, AEFC was censured and ordered to cease and desist
from committing or causing any violations of certain provisions of the
Investment Advisers Act of 1940, the Investment Company Act of 1940, and
various Minnesota laws. Pursuant to the terms of the Orders, AEFC agreed to
pay disgorgement of $10 million and civil money penalties of $7 million.
AEFC also agreed to make presentations at least annually to its board of
directors and the relevant mutual funds' board that include an overview of
policies and procedures to prevent market timing, material changes to these
policies and procedures and whether disclosures related to market timing are
consistent with the SEC order and federal securities laws. AEFC also agreed
to retain an independent distribution consultant to assist in developing a
plan for distribution of all disgorgement and civil penalties ordered by the
SEC in accordance with various undertakings detailed at
http://www.sec.gov/litigation/admin/ia-2451.pdf. In addition, AEFC agreed to
complete and submit to the MDOC a compliance review of its procedures
regarding market timing within one year of the MDOC Order, including a
summary of actions taken to ensure compliance with applicable laws and
regulations and certification by a senior officer regarding compliance and
supervisory procedures.
Ameriprise Financial and its affiliates have cooperated with the SEC and the
MDOC in these legal proceedings, and have made regular reports to the
RiverSource Funds' Boards of Directors/Trustees.
Ameriprise Financial and certain of its affiliates have historically been
involved in a number of legal or arbitration proceedings, including routine
litigation, class actions, and governmental actions, concerning matters
arising in connection with the conduct of their business activities.
Ameriprise Financial believes that the Funds are not currently the subject
of, and that neither Ameriprise Financial nor any of its affiliates are the
subject of, any pending legal or arbitration proceedings that are likely to
have a material adverse effect on the Funds or the ability of Ameriprise
Financial or its affiliates to perform under their contracts with the Funds.
Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K
filings with the Securities and Exchange Commission on legal and regulatory
matters that relate to Ameriprise Financial and its affiliates. Copies of
these filings may be obtained by accessing the SEC website at www.sec.gov.
There can be no assurance that these matters, or the adverse publicity
associated with them, will not result in increased fund redemptions, reduced
sale of fund shares or other adverse consequences to the Funds.
- --------------------------------------------------------------------------------
26 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
10. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
the Fund's results.
CLASS A
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(g) 2005 2004 2003 2002
Net asset value, beginning of period $7.66 $6.58 $5.88 $4.97 $5.96
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .02 .05 .03 .03 .03
Net gains (losses) (both realized and unrealized) 1.81 1.06 .71 .90 (.94)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.83 1.11 .74 .93 (.91)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.09) (.03) (.04) (.02) (.08)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.40 $7.66 $6.58 $5.88 $4.97
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $469 $408 $347 $276 $292
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.47%(c) 1.52%(d) 1.54% 1.65% 1.54%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .51%(c) .75% .45% .59% .39%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 43% 93% 98% 147% 103%
- --------------------------------------------------------------------------------------------------------------------------------
Total return(e) 24.13%(f) 16.90% 12.54% 18.79% (15.55%)
- --------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class A would have been 1.53% for the year ended Oct. 31, 2005.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
27 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
CLASS B
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(g) 2005 2004 2003 2002
Net asset value, beginning of period $7.44 $6.42 $5.75 $4.88 $5.83
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01) -- (.02) .02 (.02)
Net gains (losses) (both realized and unrealized) 1.77 1.02 .69 .85 (.92)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.76 1.02 .67 .87 (.94)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.03) -- -- -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.17 $7.44 $6.42 $5.75 $4.88
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $94 $81 $74 $76 $96
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 2.24%(c) 2.29%(d) 2.31%(d) 2.43% 2.31%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets (.26%)(c) .01% (.29%) (.16%) (.34%)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 43% 93% 98% 147% 103%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(e) 23.72%(f) 15.89% 11.65% 17.83% (16.16%)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratios of expenses
for Class B would have been 2.30% and 2.32% for the years ended Oct. 31,
2005 and 2004, respectively.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
28 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
CLASS C
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(g) 2005 2004 2003 2002
Net asset value, beginning of period $7.40 $6.38 $5.72 $4.85 $5.84
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.01) -- (.02) .02 (.02)
Net gains (losses) (both realized and unrealized) 1.75 1.02 .68 .85 (.92)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.74 1.02 .66 .87 (.94)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.05) -- -- -- (.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.09 $7.40 $6.38 $5.72 $4.85
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $3 $3 $2 $1 $1
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 2.23%(c) 2.28%(d) 2.30% 2.43% 2.31%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets (.25%)(c) .02% (.26%) (.17%) (.35%)
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 43% 93% 98% 147% 103%
- ---------------------------------------------------------------------------------------------------------------------------------
Total return(e) 23.57%(f) 16.03% 11.62% 17.94% (16.27%)
- ---------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) The Investment Manager and its affiliates waived/reimbursed the Fund for
certain expenses. Had they not done so, the annual ratio of expenses for
Class C would have been 2.30% for the year ended Oct. 31, 2005.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
29 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
CLASS I
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(g) 2005 2004(b)
Net asset value, beginning of period $7.75 $6.65 $6.60
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .04 .09 .04
Net gains (losses) (both realized and unrealized) 1.83 1.07 .01
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.87 1.16 .05
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income (.14) (.06) --
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48 $7.75 $6.65
- -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $60 $50 $22
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(c) .97%(d) .91% .87%(d)
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets 1.06%(d) 1.36% 1.12%(d)
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 43% 93% 98%
- -------------------------------------------------------------------------------------------------------------------
Total return(e) 24.39%(f) 17.58% .76%(f)
- -------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Inception date is March 4, 2004.
(c) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(d) Adjusted to an annual basis.
(e) Total return does not reflect payment of a sales charge.
(f) Not annualized.
(g) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
30 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
CLASS Y
PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Oct. 31, 2006(f) 2005 2004 2003 2002
Net asset value, beginning of period $7.70 $6.62 $5.91 $4.99 $5.99
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .03 .05 .04 .03 .04
Net gains (losses) (both realized and unrealized) 1.84 1.07 .71 .92 (.95)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.87 1.12 .75 .95 (.91)
- ------------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (.04) (.04) (.03) (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.57 $7.70 $6.62 $5.91 $4.99
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1 $-- $31 $30 $69
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average daily net assets(b) 1.28%(c) 1.33% 1.36% 1.45% 1.37%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average daily net assets .81%(c) 1.04% .61% 1.07% .61%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (excluding short-term securities) 43% 93% 98% 147% 103%
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(d) 24.29%(e) 16.92% 12.79% 19.14% (15.43%)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) For a share outstanding throughout the period. Rounded to the nearest cent.
(b) Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
(c) Adjusted to an annual basis.
(d) Total return does not reflect payment of a sales charge.
(e) Not annualized.
(f) Six months ended April 30, 2006 (Unaudited).
- --------------------------------------------------------------------------------
31 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
FUND EXPENSES EXAMPLE
(UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments; and (2) ongoing
costs, including management fees; distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of
the period and held for the six months ended April 30, 2006.
ACTUAL EXPENSES
The first line of the table provides information about actual account values
and actual expenses. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading titled "Expenses paid during the
period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio
and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you
paid for the period. You may use this information to compare the ongoing
costs of investing in the Fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of the table is useful in
comparing ongoing costs only, and will not help you determine the relative
total costs of owning different funds. In addition, if these transactional
costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
32 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED
NOV. 1, 2005 APRIL 30, 2006 THE PERIOD(a) EXPENSE RATIO
- ------------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,241.30 $8.08 1.47%
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.31 $7.27 1.47%
- ------------------------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,237.20 $12.29 2.24%
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,013.54 $11.06 2.24%
- ------------------------------------------------------------------------------------------------------------
Class C
- ------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,235.70 $12.22 2.23%
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,013.58 $11.01 2.23%
- ------------------------------------------------------------------------------------------------------------
Class I
- ------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,243.90 $5.34 .97%
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.76 $4.80 .97%
- ------------------------------------------------------------------------------------------------------------
Class Y
- ------------------------------------------------------------------------------------------------------------
Actual(b) $1,000 $1,242.90 $7.04 1.28%
- ------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.24 $6.33 1.28%
- ------------------------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated
above, multiplied by the average account value over the period,
multiplied by 179/365 (to reflect the one-half year period).
(b) Based on the actual return for the six months ended April 30, 2006:
+24.13% for Class A, +23.72% for Class B, +23.57% for Class C, +24.39%
for Class I and +24.29% for Class Y.
- --------------------------------------------------------------------------------
33 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
During the period covered by this report, RiverSource Investments, LLC
("RiverSource Investments" or the "investment manager"), a wholly-owned
subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), served as
the investment manager to RiverSource funds under an Investment Management
Services Agreement ("IMS Agreement").
The Board of Directors/Trustees (the "Board") annually determines whether to
continue the IMS Agreement and subadvisory agreements, as applicable, by
evaluating the quality and level of services received and the costs
associated with those services. The Board did not make the specific
determination this year as each fund's IMS Agreement was approved by the
vote of a majority of the outstanding voting securities of the funds at a
shareholder meeting held on Feb. 15, 2006. Also at this meeting, the
subadvisory agreement between Threadneedle International Limited and the
investment manger, on behalf of the Fund, was approved by the vote of a
majority of the outstanding voting securities for the Fund.
PROXY VOTING
The policy of the Board is to vote all proxies of the companies in which the
Fund holds investments. The procedures are stated in the Statement of
Additional Information (SAI). You may obtain a copy of the SAI without
charge by calling RiverSource Funds at (888) 791-3380; contacting your
financial institution; visiting www.riversource.com/funds; or searching the
website of the Securities and Exchange Commission (SEC) at
http://www.sec.gov. Information regarding how the Fund voted proxies
relating to portfolio securities during the most recent 12-month period
ended June 30 is available without charge by visiting
www.riversource.com/funds; or searching the website of the SEC at
www.sec.gov.
- --------------------------------------------------------------------------------
34 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
RESULTS OF MEETING OF SHAREHOLDERS
RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND
REGULAR MEETING OF SHAREHOLDERS HELD ON FEB. 15, 2006
(UNAUDITED)
A brief description of each proposal voted upon at the meeting and the votes
cast for, against or withheld, as well as the number of abstentions and
broker non-votes as to each proposal is set forth below. A vote is based on
total dollar interest in a fund.
ELECTION OF BOARD MEMBERS
AFFIRMATIVE WITHHOLD
Kathleen Blatz 413,375,575.50 12,999,497.32
Arne H. Carlson 412,277,789.82 14,097,283.00
Patricia M. Flynn 413,653,007.53 12,722,065.29
Anne P. Jones 412,725,175.72 13,649,897.10
Jeffrey Laikind 413,022,820.11 13,352,252.71
Stephen R. Lewis, Jr. 413,596,643.77 12,778,429.05
Catherine James Paglia 413,554,749.93 12,820,322.89
Vikki L. Pryor 413,869,039.45 12,506,033.37
Alan K. Simpson 411,571,244.93 14,803,827.89
Alison Taunton-Rigby 413,562,164.47 12,812,908.35
William F. Truscott 413,203,838.95 13,171,233.87
AMEND THE ARTICLES OF INCORPORATION TO PERMIT THE BOARD TO ESTABLISH THE
MINIMUM ACCOUNT VALUE AND TO CHANGE THE NAME OF THE CORPORATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
402,572,500.70 15,233,632.84 8,452,966.13 115,973.15
APPROVE AN INVESTMENT MANAGEMENT SERVICES AGREEMENT WITH RIVERSOURCE
INVESTMENTS, LLC
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
406,476,638.54 10,942,736.94 8,839,724.19 115,973.15
- --------------------------------------------------------------------------------
35 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
APPROVE A SUBADVISORY AGREEMENT BETWEEN RIVERSOURCE INVESTMENTS AND
THREADNEEDLE INTERNATIONAL LIMITED
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
407,429,989.91 9,962,863.65 8,866,246.11 115,973.15
APPROVE CHANGES IN FUNDAMENTAL INVESTMENT POLICIES
DIVERSIFICATION
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
406,589,945.80 11,238,036.55 8,431,117.32 115,973.15
TEN PERCENT LIMITATION IN SINGLE ISSUER
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
403,864,179.25 13,167,978.25 9,226,942.17 115,973.15
LENDING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
402,522,668.77 14,633,096.95 9,103,333.95 115,973.15
BORROWING
AFFIRMATIVE AGAINST ABSTAIN BROKER NON-VOTES
403,161,673.05 14,250,271.05 8,847,155.57 115,973.15
- --------------------------------------------------------------------------------
36 - RIVERSOURCE INTERNATIONAL OPPORTUNITY FUND - 2006 SEMIANNUAL REPORT
RIVERSOURCE(SM) INTERNATIONAL OPPORTUNITY FUND
734 Ameriprise Financial Center
Minneapolis, MN 55474
riversource.com/funds
[RiverSource Investments Logo]
This report must be accompanied or preceded by the Fund's current prospectus.
RiverSource Funds are managed by RiverSource Investments, LLC
and distributed by Ameriprise Financial Services, Inc., Member NASD.
Both companies are part of Ameriprise Financial, Inc.
S-6340 X (6/06)
Item 2. Code of Ethics. Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert. Not applicable for semi-annual
reports.
Item 4. Principal Accountant Fees and Services. Not applicable for
semi-annual reports.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. The complete schedule of investments is included in Item 1 of this
Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. Not applicable.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing
date of this Form N-CSR, the registrant's Principal Financial
Officer and Principal Executive Officer have concluded that those
disclosure controls and procedures provide reasonable assurance
that the material information required to be disclosed by the
registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over
financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable for semi-annual reports.
(a)(2) Separate certification for the Registrant's principal
executive officer and principal financial officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer
and principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) RIVERSOURCE INTERNATIONAL SERIES, INC.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date June 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Paula R. Meyer
------------------
Paula R. Meyer
President and Principal Executive Officer
Date June 28, 2006
By /s/ Jeffrey P. Fox
------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date June 28, 2006