-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OL80JwlMN9ckr/ILkO8Rx+kAlqTMcg1r+BD2E05xf4ow5xE286K7K3uqwCBKbjjr yJMGvwUZrLeJjRFiooxksQ== 0000820027-05-001023.txt : 20051101 0000820027-05-001023.hdr.sgml : 20051101 20051101092614 ACCESSION NUMBER: 0000820027-05-001023 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050831 FILED AS OF DATE: 20051101 DATE AS OF CHANGE: 20051101 EFFECTIVENESS DATE: 20051101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXP VARIABLE PORTFOLIO MONEY MARKET SERIES INC CENTRAL INDEX KEY: 0000353315 IRS NUMBER: 411409530 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03190 FILM NUMBER: 051168085 BUSINESS ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER STREET 2: 50606 AXP FINANCIAL CENTER CITY: MINNEAPOLIS STATE: MN ZIP: 55474 BUSINESS PHONE: 6126718626 MAIL ADDRESS: STREET 1: 50606 AXP FINANCIAL CENTER CITY: MINNEAPOLIS STATE: MN ZIP: 55474 FORMER COMPANY: FORMER CONFORMED NAME: IDS LIFE MONEYSHARE FUND INC DATE OF NAME CHANGE: 19920703 N-CSR 1 vpmoney-ncsr.txt AXP VARIABLE PORTFOLIO - MONEY MARKET SERIES, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-3190 ------------ AXP Variable Portfolio - Money Market Series, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 50606 AXP Financial Center, Minneapolis, Minnesota 55474 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810, Minneapolis, MN 55402-3268 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (612) 330-9283 ----------------- Date of fiscal year end: 8/31 -------------- Date of reporting period: 8/31 -------------- Annual Report [LOGO] RiverSource Investments RiverSource(SM) Variable Portfolio Funds Annual Report For the Period Ended Aug. 31, 2005 References to "Fund" throughout this annual report refer to the following individual funds, singularly or collectively as the context requires: RiverSource(SM) Variable Portfolio - Balanced Fund RiverSource(SM) Variable Portfolio - Cash Management Fund RiverSource(SM) Variable Portfolio - Core Bond Fund RiverSource(SM) Variable Portfolio - Diversified Bond Fund RiverSource(SM) Variable Portfolio - Diversified Equity Income Fund RiverSource(SM) Variable Portfolio - Emerging Markets Fund RiverSource(SM) Variable Portfolio - Global Bond Fund RiverSource(SM) Variable Portfolio - Global Inflation Protected Securities Fund RiverSource(SM) Variable Portfolio - Growth Fund RiverSource(SM) Variable Portfolio - High Yield Bond Fund RiverSource(SM) Variable Portfolio - Income Opportunities Fund RiverSource(SM) Variable Portfolio - International Opportunity Fund RiverSource(SM) Variable Portfolio - Large Cap Equity Fund RiverSource(SM) Variable Portfolio - Large Cap Value Fund RiverSource(SM) Variable Portfolio - Mid Cap Growth Fund RiverSource(SM) Variable Portfolio - Mid Cap Value Fund RiverSource(SM) Variable Portfolio - New Dimensions Fund(R) RiverSource(SM) Variable Portfolio - S&P 500 Index Fund RiverSource(SM) Variable Portfolio - Select Value Fund RiverSource(SM) Variable Portfolio - Short Duration U.S. Government Fund RiverSource(SM) Variable Portfolio - Small Cap Advantage Fund RiverSource(SM) Variable Portfolio - Small Cap Value Fund RiverSource(SM) Variable Portfolio - Strategy Aggressive Fund As of Oct. 1, 2005, the RiverSource brand replaced "American Express" and "AXP" in the name of the American Express(R) Variable Portfolio Funds. In addition to the brand name change, the following funds changed their names: AXP Variable Portfolio - Equity Select Fund changed its name to RiverSource Variable Portfolio - Mid Cap Growth Fund, AXP Variable Portfolio - Managed Fund changed its name to RiverSource Variable Portfolio - Balanced Fund, AXP Variable Portfolio - Partners Select Value Fund changed its name to RiverSource Variable Portfolio - Select Value Fund, AXP Variable Portfolio - Partners Small Cap Value Fund changed its name to RiverSource Variable Portfolio - Small Cap Value Fund, AXP Variable Portfolio - Threadneedle Emerging Markets Fund changed its name to RiverSource Variable Portfolio - Emerging Markets Fund and AXP Variable Portfolio - Threadneedle International Fund changed its name to RiverSource Variable Portfolio - International Opportunity Fund. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the subaccounts) that invests in the Fund. This annual report may contain information on funds not available under your variable annuity contract or life insurance policy. Please refer to your variable annuity contract or life insurance policy prospectus for information regarding the investment options available to you. The RiverSource(SM) Variable Portfolio Funds provide several alternatives to consider for investment through your variable annuity contract or life insurance policy. Table of Contents 2005 ANNUAL REPORT The purpose of this annual report is to tell investors how the Fund performed. RiverSource VP - Balanced Fund Portfolio Management Q&A 3 The Ten Largest Holdings 5 The Fund's Long-term Performance 7 RiverSource VP - Cash Management Fund Portfolio Management Q&A 8 RiverSource VP - Core Bond Fund Portfolio Management Q&A 9 The Ten Largest Holdings 10 The Fund's Long-term Performance 11 RiverSource VP - Diversified Bond Fund Portfolio Management Q&A 12 The Ten Largest Holdings 13 The Fund's Long-term Performance 15 RiverSource VP - Diversified Equity Income Fund Portfolio Management Q&A 16 The Ten Largest Holdings 17 The Fund's Long-term Performance 18 RiverSource VP - Emerging Markets Fund Portfolio Management Q&A 19 The Ten Largest Holdings 20 The Fund's Long-term Performance 21 RiverSource VP - Global Bond Fund Portfolio Management Q&A 22 The Ten Largest Holdings 23 The Fund's Long-term Performance 24 RiverSource VP - Global Inflation Protected Securities Fund Portfolio Management Q&A 25 The Fund's Long-term Performance 27 RiverSource VP - Growth Fund Portfolio Management Q&A 28 The Ten Largest Holdings 29 The Fund's Long-term Performance 30 RiverSource VP - High Yield Bond Fund Portfolio Management Q&A 31 The Ten Largest Holdings 32 The Fund's Long-term Performance 33 RiverSource VP - Income Opportunities Fund Portfolio Management Q&A 34 The Ten Largest Holdings 35 The Fund's Long-term Performance 36 RiverSource VP - International Opportunity Fund Portfolio Management Q&A 37 The Ten Largest Holdings 38 The Fund's Long-term Performance 39 RiverSource VP - Large Cap Equity Fund Portfolio Management Q&A 40 The Ten Largest Holdings 41 The Fund's Long-term Performance 42 RiverSource VP - Large Cap Value Fund Portfolio Management Q&A 43 The Ten Largest Holdings 44 The Fund's Long-term Performance 45 RiverSource VP - Mid Cap Growth Fund Portfolio Management Q&A 46 The Ten Largest Holdings 47 The Fund's Long-term Performance 48 RiverSource VP - Mid Cap Value Fund Portfolio Management Q&A 49 The Ten Largest Holdings 50 RiverSource VP - New Dimensions Fund(R) Portfolio Management Q&A 51 The Ten Largest Holdings 52 The Fund's Long-term Performance 53 RiverSource VP - S&P 500 Index Fund Portfolio Management Q&A 54 The Ten Largest Holdings 55 The Fund's Long-term Performance 56 RiverSource VP - Select Value Fund Portfolio Management Q&A 57 The Ten Largest Holdings 58 The Fund's Long-term Performance 59 RiverSource VP - Short Duration U.S. Government Fund Portfolio Management Q&A 60 The Fund's Long-term Performance 62 RiverSource VP - Small Cap Advantage Fund Portfolio Management Q&A 63 The Ten Largest Holdings 64 The Fund's Long-term Performance 66 RiverSource VP - Small Cap Value Fund Portfolio Management Q&A 67 The Ten Largest Holdings 69 The Fund's Long-term Performance 70 RiverSource VP - Strategy Aggressive Fund Portfolio Management Q&A 71 The Ten Largest Holdings 72 The Fund's Long-term Performance 73 Board Members and Officers 74 Proxy Voting 75 Approval of Investment Management Services Agreement 76 Report of Independent Registered Public Accounting Firm 78 Financial Statements 79 Notes to Financial Statements 101 Investments in Securities 136 Fund Expenses Examples 227 - -------------------------------------------------------------------------------- 2 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Balanced Fund (formerly AXP VP - Managed Fund) Below, the portfolio management team for RiverSource VP - Balanced Fund discusses the Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Balanced Fund perform for the fiscal year? A: RiverSource VP - Balanced Fund, which invests in a mix of stocks and bonds, rose 9.68% for the 12 months ended Aug. 31, 2005. The Fund underperformed its peer group, represented by the Lipper Balanced Funds Index, which returned 11.25%. The Russell 1000(R) Value Index rose 16.86%, while the S&P 500 Index, returned 12.56%. The Lehman Brothers Aggregate Bond Index (Lehman Index) rose 4.15% for the period. The Fund underperformed the Blended Index, which returned 11.72% for the annual period. The Blended Index consists of 60% Russell 1000(R) Value Index and 40% Lehman Brothers Aggregate Bond Index. The Fund captured more than 77% of the return potential of the equity market for the period, as measured by the S&P 500 Index, with a portfolio that was approximately two-thirds equities and one-third fixed income securities. Q: What factors had a significant effect on equity performance? A: Stock selection overall detracted from the Fund's performance relative to the S&P 500 Index, while sector allocation had a rather neutral effect. Also, given the substantial gains in the S&P 500 Index during the 12-month period, the Fund's relatively conservative positioning was at a disadvantage. On the positive side, stock selection in telecommunications services and information technology helped the Fund's annual performance. So, too, did the Fund's large position in the strongly performing information technology sector and its modest exposure to the weaker industrials sector. From an individual stock perspective, maintaining a moderate position in pharmaceutical giant Pfizer was one of the Fund's greatest contributors. Pfizer continued to struggle along with most large pharmaceutical companies during the period. Sizable positions in integrated oil company ConocoPhillips, cell phone maker Nokia, energy equipment and services company Transocean, and Cendant, a provider of travel and residential real estate services, also helped. Unfortunately, these positives were not enough to offset the negative effects of poor stock selection in financials, consumer staples and consumer discretionary. Moderate allocations to the strongly performing utilities and energy sectors further detracted from results for the fiscal year. Individual detractors from performance included the portfolio's modest positions in the strongly performing stocks of energy giant Exxon Mobil, General Electric, and beverage and tobacco industry leader Altria Group. Q: What factors significantly affected the fixed income portion of the Fund during the period? A: On the positive side, the Fund maintained a shorter duration stance than the Lehman Index throughout the period, as we believed interest rates were headed higher as the economy gained traction and the Federal Reserve Board (the Fed) continued to tighten monetary policy in response. The Fund's duration was 3.8 years as of Aug. 31, 2005. In addition, for the first half of the fiscal year, we favored a "barbell" approach, whereby we emphasized longer maturity bonds and cash over short- to intermediate-term maturities. As the yield curve flattened through the second half of the period, with short-term rates rising more than long-term rates, the portfolio benefited from this "barbell" strategy. [BAR CHART] PERFORMANCE C0MPARISON For the year ended Aug. 31, 2005 +9.68% +9.68% +11.72% +12.56% +4.15% +11.25% +9.68% = RiverSource VP - Balanced Fund +16.86% = Russell 1000(R) Value Index (unmanaged) +11.72% = Blended Index (unmanaged) +12.56% = S&P 500 Index (unmanaged) +4.15% = Lehman Brothers Aggregate Bond Index (unmanaged) +11.25% = Lipper Balanced Funds Index (See "The Fund's Long-term Performance" for Index descriptions) The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. - -------------------------------------------------------------------------------- 3 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund The Fund's performance was further boosted by a general tilt in favor of high quality commercial mortgage-backed securities (CMBS) and asset-backed securities over U.S. Treasuries. The portfolio also had a sizable exposure to investment grade corporate bonds for most of the fiscal year, though we varied the allocation in response to changing valuations both within the sector and compared to other sectors. Strong issue selection within investment grade corporate bonds also helped the Fund's results. A modest allocation to high yield bonds further boosted the Fund's performance, as this fixed income sector performed well during the period and is not part of the Lehman Index. Finally, the Fund's return was also helped by a modest position in non-U.S. dollar bonds, or bonds denominated in foreign currency. We successfully found good entry and exit points within the non-U.S. dollar bond market that enabled us to add value when the U.S. dollar weakened in the latter months of 2004. The dollar fully regained its ground in the first seven months of 2005, and then weakened again in August. Remember, as the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. Detracting somewhat from Fund returns was its positioning within the mortgage sector. The Fund maintained a defensive profile within the mortgage sector of premium coupon securities, which yield more than current market rates, and bonds that we believed would hold their values as rates migrated higher. However, the path to higher rates was quite gradual during the annual period. While this supported mortgage valuations during the period, our defensive positioning did not provide a significant performance advantage. Q: What changes did you make to the equity segment during the period? A: In general, we have been placing greater emphasis on more stable, higher quality, larger-cap companies through most of the fiscal year, seeking those companies that have more predictable profitability and defensive fundamentals at this point in both the economic cycle and the Fed's tightening cycle. We also sought to reduce risk by lowering the average valuation of holdings in the portfolio. We increased the Fund's technology, energy and utilities allocations during the 12-month period. Information technology stocks overall appeared inexpensive to their inherent value, and we took the opportunity to add to the sector. Energy stocks benefited from soaring oil prices and, toward the end of the fiscal year, from the supply/demand imbalance created by the devastating effects of Hurricane Katrina. Utilities stocks offered, in our view, an attractive level of stability -- especially as the trend toward dividends, both in terms of investor preference and in the number of companies either initiating or increasing dividend payments, continued through the period. We reduced the Fund's allocations to financials, health care and materials. The financials sector has become increasingly challenging for investors and historically has not performed well in a rising interest rate environment. Health care stocks overall and hospitals and health maintenance organizations (HMOs) in particular have performed well, and so we took the opportunity to sell select positions and take profits. As of Aug. 31, 2005, the Fund had over-index allocations to the information technology, consumer staples and industrials sectors relative to the S&P 500 Index. The Fund had smaller positions than the S&P 500 Index in the financials, utilities and health care sectors. Q: What changes did you make to the fixed income segment during the period? A: We kept the Fund's duration shorter than the Lehman Index throughout the period, but we made minor tactical adjustments to portfolio duration based on changing market conditions. As the yield curve flattened dramatically, with long-term rates falling while short-term rates rose, we removed some of the Fund's yield curve flattening bias beginning in the spring of 2005 and we reduced the portfolio's sensitivity to changes in interest rates. We did this by seeking exposure to securities with maturities more evenly distributed across the yield curve. In our view, the yield curve flattening had largely run its course, and the portfolio's flattening bias had worked well, but was no longer an attractive risk-reward bet. - -------------------------------------------------------------------------------- 4 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund The Fund's sector positioning remained generally unchanged. Through the year, we did adjust the Fund's exposure to high yield securities in response to shifts in the difference between the yields of these securities and U.S. Treasuries. We ended the fiscal year with the Fund near its lowest allocation to high yield bonds held during the 12 months. Generally, though, we continued to favor more conservative alternatives, such as AAA-rated CMBS, asset-backed securities and certain mortgage products, which, in our view, offer attractive yield as well as the kind of defensive characteristics we want in the current market environment. In all, the Fund's portfolio turnover was high but added value to the portfolio. A significant portion of the Fund's 131% turnover rate this past fiscal year was the result of "roll" transactions in liquid derivatives and U.S. Treasury notes. In the derivative securities, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. For U.S. Treasury notes, existing holdings are sold and newly minted securities with better liquidity are purchased. These transactions affect the Fund's turnover rate but do not change the risk exposure or result in material transaction costs. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +9.68% 3 years +10.15% 5 years -0.81% 10 years +7.26% Since inception (4/30/86) +9.04% at Sept. 30, 2005 1 year +9.24% 3 years +12.89% 5 years +0.06% 10 years +7.08% Since inception (4/30/86) +9.01% ASSET ALLOCATION & SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Stocks 61.4% Financials 17.8% Energy 8.9% Consumer Discretionary 5.8% Information Technology 5.4% Consumer Staples 5.3% Industrials 5.3% Telecommunication Services 4.0% Health Care 3.8% Utilities 2.7% Materials 2.4% Bonds 35.5% Mortgage-Backed 13.0% Corporate Bonds* 7.9% U.S. Government Obligations & Agencies 8.4% Commercial Mortgage-Backed 3.9% Asset-Backed 1.6% Foreign Government 0.7% Cash Equivalents Short-Term Securities** 3.1% * Includes 3.1% Financials, 1.9% Telecommunication, 1.1% Utilities, 0.7% Consumer Discretionary, 0.5% Industrials, 0.2% Health Care, 0.2% Energy, 0.1% Consumer Staples and 0.1% Materials. ** Of the 3.1%, 1.2% is due to security lending activity and 1.9% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Exxon Mobil 2.7% $66,987,367 Citigroup 2.1 51,857,164 Bank of America 2.0 51,311,166 U.S. Treasury 6.25% 2023 1.6 40,381,127 ConocoPhillips 1.6 39,801,120 Altria Group 1.4 33,914,578 American Intl Group 1.3 33,471,679 Chevron 1.2 30,233,053 JP Morgan Chase & Co 1.2 28,881,431 Wells Fargo & Co 0.9 22,676,527 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 16.0% 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 VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Q: How do you intend to manage the equity portion of the Fund in the coming months? A: We believe the months ahead may well be a period of elevated risk for equity investors, as we are currently in the fourth year of economic expansion. Though we believe the economy will continue to grow, we think its growth rate will noticeably decelerate, especially given what we anticipate will be the Fed's ongoing tightening cycle. In the context of this economic outlook and what we consider to be high equity valuations, we feel it appropriate to be careful. We are maintaining our key portfolio themes. We continue to emphasize higher quality stocks over lower quality stocks that have high amounts of leverage or exhibit volatile earnings. We have tried to keep the average price/earnings ratio of our holdings below that of the Fund's equity benchmark, the S&P 500. We have focused on larger stocks because they tend to be more stable companies, especially in a decelerating economy. We have also sought to keep the portfolio's volatility close to or lower than that of the Fund's equity benchmark, thus positioning the Fund to perform better in a flat or down market. Q: How do you intend to manage the fixed income portion of the Fund in the coming months? A: We intend to maintain the Fund's duration shorter than that of the Lehman Index for the near term. Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy overall. We expect energy shortages to be temporary and oil prices to recede as refining and production capacities come back on line. We expect the Fed to focus on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding efforts now underway. As a result, we expect the Fed to continue to raise the targeted federal funds rate through the balance of 2005. We believe fixed income yields will move materially higher in the months ahead. As for yield curve positioning, we maintain only a modest flattening bias at this point. From a sector perspective, we intend to cautiously increase the Fund's allocation to investment grade corporate bonds, though, importantly, we continue to be very selective in adding names to the portfolio. We intend to maintain the Fund's sizable position in CMBS and asset-backed securities, as high quality yield enhancers. In mortgages, we plan to remain defensively positioned, emphasizing premium coupons, 15-year mortgages and attractive structural attributes. We intend to maintain the Fund's modest position in high yield bonds. Finally, we intend to maintain the Fund's moderate exposure to non-U.S. dollar bonds. The U.S. dollar's pressured path may experience fits and starts with short-lived periods of currency strength. However, we believe the U.S. dollar will likely remain at relatively weak levels going forward, as we expect the currency's structural problems to continue. We will continue to monitor job creation and inflation numbers, as they remain key indicators for the economy in the coming months -- especially so in the aftermath of Hurricane Katrina. As always, we maintain a disciplined focus on individual security selection, with a goal of having larger positions than the Lehman Index in bonds that offer the greatest potential for outperforming the Lehman Index. - -------------------------------------------------------------------------------- 6 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - BALANCED FUND RiverSource VP - Blanced Fund $10,000 $11,100 $14,162 $14,409 $17,720 $20,984 $16,920 $15,074 $16,491 $18,369 $20,147 Russell 1000(R) Value Index $10,000 $11,754 $16,402 $17,040 $22,165 $23,085 $22,826 $19,829 $22,135 $26,014 $30,399 Blended Index $10,000 $11,217 $14,326 $15,266 $18,071 $19,066 $19,880 $18,960 $20,613 $23,285 $26,028 S&P 500 Index $10,000 $11,873 $16,699 $18,055 $25,240 $29,359 $22,198 $18,205 $20,402 $22,740 $25,596 Lehman Brothers Aggregate Bond Index $10,000 $10,411 $11,452 $12,663 $12,764 $13,729 $15,424 $16,675 $17,402 $18,469 $19,236 Lipper Balanced Funds Index $10,000 $11,042 $13,774 $14,392 $17,259 $19,337 $17,831 $16,278 $17,914 $19,544 $21,742 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Balanced Fund (from 9/1/95 to 8/31/05) as compared to the performance of five widely cited performance indices, the Russell 1000(R) Value Index, the Blended Index, the S&P 500 Index, the Lehman Brothers Aggregate Bond Index and the Lipper Balanced Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 1000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000(R) Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Blended Index consists of 60% Russell 1000 Value Index and 40% Lehman Brothers Aggregate Bond Index. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The indexes reflect reinvestment of all distributions and changes in market prices, but exclude brokerage commissions or other fees. The Lipper Balanced Funds Index includes the 30 largest balanced funds tracked by Lipper Inc. The index's returns include net reinvested dividends. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from S&P 500 Index to the Russell 1000(R) Value Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000(R) Value Index will be included. - -------------------------------------------------------------------------------- 7 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Cash Management Fund (formerly AXP VP - Cash Management Fund) Below is the discussion of RiverSource VP - Cash Management Fund's results and positioning for the fiscal year ended Aug. 31, 2005. Q: How did RiverSource VP - Cash Management Fund perform for the 12 months ended Aug. 31, 2005? A: RiverSource VP - Cash Management Fund returned 1.92% for the fiscal year. The Fund's seven-day simple yield was 2.99% and its seven-day compound yield was 3.03% at Aug. 31, 2005.* The Fund serves as a conservative, shorter-term investment choice for individuals seeking current income. Q: What factors significantly affected the Fund's performance? A: The Federal Reserve Board (the Fed) raised interest rates eight times during the fiscal year, each time at a measured 25 basis point (0.25%) pace. At the end of the fiscal year, the targeted federal funds rate stood at 3.50%. As the Fed raised rates, money market yields also moved higher. During the period, the market experienced some uncertainty surrounding the future path of the federal funds rate. As changing expectations of Fed actions were priced into or out of the market, we adjusted the Fund's duration accordingly to maximize yield. We managed the Fund's portfolio using a somewhat bulleted strategy, whereby a particular segment of the money market yield curve was emphasized. We focused on purchasing securities with one-to-three month maturities and generally avoided purchasing securities that offered a fixed yield for more than three months. In all, we kept the Fund's weighted average maturity in the 35-to-40 day range. As of Aug. 31, 2005, the Fund's weighted average maturity was 35 days. Q: What changes did you make to the Fund during the period? A: We increased the Fund's allocation to floating rate securities. Since these securities reset to higher or lower interest rates as market rates rise or fall, we believed floating rate securities offered good value in a rising interest rate environment vs. fixed products and should enable us to continue to take advantage of anticipated rate increases. We also increased the Fund's exposure to asset-backed commercial paper, a type of high quality, short-term fixed income security, during the fiscal year, as these securities offered attractive relative value and higher yields than most other money market asset classes. As always, we attempt to maximize the Fund's yield without taking unnecessary risks. We continue to invest in high quality securities. Q: How do you plan to manage the Fund in the coming months? A: Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy overall. We expect energy shortages to be temporary and oil prices to recede as refining and production capacities come back on line. We expect the Fed to focus on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding efforts now underway. As a result, we expect the Fed to continue to raise the targeted federal funds rate through the balance of 2005 and, consequently, we believe money market yields will continue to move higher in the months ahead. We intend to maintain positions that should benefit the Fund in this environment. We will continue to closely monitor economic data, Fed policy, and any shifts in the money market yield curve, striving to strategically adjust our portfolio positioning accordingly. [BAR CHART] FUND PERFORMANCE For the year ended Aug. 31, 2005 +1.92% +1.92% = RiverSource VP - Cash Management Fund * Past performance does not guarantee future results. An investment in the Fund is neither insured nor guaranteed by the FDIC (Federal Deposit Insurance Corporation) or any other government agency. Yields will fluctuate. Although the Fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the Fund. The seven-day current yield more closely reflects the current earnings of the Fund than the total return. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 Commercial Paper 69.6% Floating Rate Notes 25.2% Certificates of Deposit 5.2% AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +1.92% 3 years +1.03% 5 years +1.92% 10 years +3.51% Since inception (10/13/81) +5.56% at Sept. 30, 2005 1 year +2.09% 3 years +1.08% 5 years +1.87% 10 years +3.50% Since inception (10/13/81) +5.55% - -------------------------------------------------------------------------------- 8 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Core Bond Fund (formerly AXP VP - Core Bond Fund) Below, the portfolio management team for RiverSource VP - Core Bond Fund discusses the Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Core Bond Fund perform for the fiscal year? A: RiverSource VP - Core Bond Fund gained 3.64% for the 12 months ended Aug. 31, 2005. The Fund underperformed both its benchmark, the Lehman Brothers Aggregate Bond Index (Lehman Index), which rose 4.15%, and the Lipper Intermediate Investment Grade Index, representing the Fund's peer group, which advanced 4.38%. Q: What market conditions were present during the annual period? A: Overall, the fixed income yield curve flattened significantly during the fiscal year, with long-term rates falling while short-term rates rose. This dramatic reshaping of the yield curve was driven by the Federal Reserve Board's (the Fed) decision to tighten monetary policy a total of eight times during the period. This put upward pressure on short-term bond yields, and moderate economic growth put downward pressure on intermediate/long-term bond yields. Strong global demand for U.S. financial assets -- notably from foreign central banks -- also contributed to keeping intermediate bond yields low. Investment grade corporate bonds performed well for the fiscal year, but stumbled significantly in March and April 2005. Mortgages performed well during the period because the environment was generally positive for mortgages, as volatility declined significantly and prepayments were fairly predictable. Somewhat offsetting these positives were important changes in the agencies, such as Fannie Mae and Freddie Mac, which began to shrink their portfolio of mortgage-backed securities in response to increased oversight from Congress. Also, the dramatic flattening of the yield curve lessened the incentive for banks and other financers to borrow via short rates and invest in longer maturities. Q: What factors most significantly affected Fund performance? A: Detracting somewhat from Fund returns were the holdings within the mortgage sector. The Fund maintained a defensive profile within this sector of higher coupon securities and bonds that we believed would hold their values as rates migrated higher. However, the path to higher rates was quite gradual during the fiscal period. This defensive positioning did not provide a significant performance advantage. On the positive side, the Fund maintained a shorter duration than the Lehman Index throughout the period, since we believed interest rates were headed higher as the economy gained traction and the Fed continued to tighten monetary policy as a result. The Fund's duration was 3.8 years as of Aug. 31, 2005. In addition, for the first half of the fiscal year, we emphasized longer maturity bonds and cash over short- to intermediate-term maturities. As the yield curve flattened through the second half of the period, with short-term rates rising more than long-term rates, the portfolio benefited from this strategy. The Fund benefited from its exposure to high quality commercial mortgage-backed securities, which are securities based on pools of commercial mortgages, and asset-backed securities. The Fund had a sizable exposure to investment grade corporate bonds for most of the fiscal year, and strong issue selection helped the Fund's results. The Fund's return was also helped by a modest position in non-U.S. dollar bonds. We successfully were able to add value when the U.S. dollar weakened in the latter months of 2004. Although the dollar fully regained its ground in the first seven months of 2005, it weakened again in August. As the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. Q: What changes did you make to the Fund and how is it currently positioned? A: We kept the Fund's duration shorter than the Lehman Index throughout the period, but we made minor adjustments to portfolio duration based on changing market conditions. As the yield curve flattened dramatically, we reduced the portfolio's sensitivity to changes in interest rates. We did this by seeking exposure to securities with maturities more evenly distributed across the yield curve. In our view, the yield curve flattening had largely run its course. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +3.64% +4.15% +4.38% +3.64% = RiverSource VP - Core Bond Fund +4.15% = Lehman Brothers Aggregate Bond Index (unmanaged) +4.38% = Lipper Intermediate Investment Grade Index (See "The Fund's Long-term Performance" for Index descriptions) There are risks associated with an investment in a bond fund, including the impact of interest rates, credit, and inflation. These and other risk considerations are discussed in the fund's prospectus. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. - -------------------------------------------------------------------------------- 9 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund The Fund's sector positioning remained generally unchanged. We continued to favor more conservative alternatives, such as AAA-rated commercial mortgage-backed securities, asset-backed securities and certain mortgage products, which, in our view, offer attractive yield as well as the kind of defensive characteristics we want in the current market environment. In all, the Fund's portfolio turnover was high but added value to the portfolio. A significant portion of the Fund's 339% turnover rate this past fiscal year was the result of "roll" transactions in liquid derivatives and U.S. Treasury notes. In the derivative securities, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. For U.S. Treasury notes, existing holdings are sold and newly minted securities with better liquidity are purchased. These transactions affect the Fund's turnover rate but do not change the risk exposure or result in material transaction costs. Q: How do you intend to manage the Fund in the coming months? A: We intend to maintain the Fund's duration shorter than that of the benchmark, the Lehman Index, for the near term. Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy overall. We expect energy shortages to be temporary and oil prices to recede as refining and production capacities come back on line. We expect the Fed to focus on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding efforts now underway. As a result, we expect the Fed to continue to raise the targeted federal funds rate through the balance of 2005. We believe fixed income yields will move higher in the months ahead. From a sector perspective, we intend to cautiously increase the Fund's allocation to investment grade corporate bonds, though, importantly, we continue to be very selective in adding names to the portfolio. We intend to maintain the Fund's position in commercial mortgage-backed securities and asset-backed securities because they offer higher yields. In mortgages, we plan to remain defensively positioned, emphasizing premium coupons, 15-year mortgages and attractive structural attributes. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Mortgage-Backed 30.3% U.S. Government Obligations & Agencies 26.3% Corporate Bonds* 16.0% Short-Term Securities 13.2% Commercial Mortgage-Backed 9.7% Commercial Mortgage-Backed 9.7% Asset-Backed 2.9% Foreign Government 1.6% * Includes 7.0% Financials, 4.3% Telecommunication, 1.9% Utilities, 1.1% Industrials, 0.8% Consumer Discretionary, 0.6% Health Care, 0.2% Consumer Staples and 0.1% Energy. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Verizon Pennsylvania 5.65% 2011 1.6% $1,003,843 Citigroup 4.63% 2010 1.1 705,867 Wells Fargo Bank NA 6.45% 2011 1.1 675,531 Sprint Capital 7.63% 2011 1.0 640,037 Bundesrepublik Deutschland 6.00% 2007 0.8 529,446 Bank of America 4.50% 2010 0.8 521,769 TELUS 8.00% 2011 0.7 459,465 Washington Mutual 3.89% 2045 0.7 442,690 Tyco Intl Group 6.75% 2011 0.6 379,924 HSBC Finance 5.00% 2015 0.6 361,875 Excludes U.S. Treasury and government agency holdings. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 9.0% of portfolio assets AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +3.64% Since inception (2/4/04) +3.38% at Sept. 30, 2005 1 year +2.35% Since inception (2/4/04) +2.60% - -------------------------------------------------------------------------------- 10 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Finally, we intend to maintain the Fund's moderate exposure to non-U.S. dollar bonds. The U.S. dollar's pressured path may experience fits and starts with short-lived periods of currency strength. However, we believe the U.S. dollar will likely remain at relatively weak levels going forward, as we expect the currency's structural problems to continue. We will continue to monitor job creation and inflation numbers, as they remain key indicators for the economy in the coming months -- especially so in the aftermath of Hurricane Katrina. As always, we maintain a disciplined focus on individual security selection, with a goal of having larger positions than the Lehman Index in bonds that offer the greatest potential for outperforming the Lehman Index. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - CORE BOND FUND RiverSource VP - Core Bond Fund $10,000 $10,082 $9,861 $10,168 $10,211 $10,311 $10,456 $10,539 Lehman Brothers Aggregate Bond Index $10,000 $10,108 $9,879 $10,224 $10,256 $10,353 $10,552 $10,648 Lipper Intermediate Investment Grade Index $10,000 $10,097 $9,877 $10,197 $10,240 $10,359 $10,534 $10,644 2/1/04 2/04 5/04 8/04 11/04 2/05 5/05 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Core Bond Fund (from 2/1/04 to 8/31/05) as compared to the performance of two widely cited performance indices, the Lehman Brothers Aggregate Bond Index and the Lipper Intermediate Investment Grade Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Intermediate Investment Grade Index includes the 30 largest investment grade funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 11 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Diversified Bond Fund (formerly AXP VP - Diversified Bond Fund) Below, the portfolio management team for RiverSource VP - Diversified Bond Fund discusses the Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Diversified Bond Fund perform for the fiscal year? A: RiverSource VP - Diversified Bond Fund gained 4.27% for the 12 months ended Aug. 31, 2005. The Fund outperformed its benchmark, the Lehman Brothers Aggregate Bond Index (Lehman Index), which rose 4.15%. However, the Fund underperformed the Lipper Intermediate Investment Grade Index, representing the Fund's peer group, which advanced 4.38%. Q: What market conditions were present during the annual period? A: Overall, the fixed income yield curve flattened significantly during the fiscal year, with long-term rates falling while short-term rates rose. This dramatic reshaping of the yield curve was driven by the Federal Reserve Board's (the Fed) decision to tighten monetary policy a total of eight times during the period. This put upward pressure on short-term bond yields, and moderate economic growth put downward pressure on intermediate/long-term bond yields. Strong global demand for U.S. financial assets -- notably from foreign central banks -- also contributed to keeping intermediate bond yields low. High yield and emerging market debt outperformed other fixed income assets during the period, as these sectors benefited from both solid fundamentals and a strong demand for the extra yield these sectors historically can provide. Investment grade corporate bonds also performed well for the fiscal year, but stumbled significantly in March and April. Mortgages performed well during the period, because the environment was generally positive for mortgages, as volatility declined significantly and prepayments were fairly predictable. Somewhat offsetting these positives were important changes in the agencies, such as Fannie Mae and Freddie Mac, which began to shrink their portfolio of mortgage-backed securities in response to increased oversight from Congress. Also, the dramatic flattening of the yield curve lessened the incentive for banks and other financers to borrow via short rates and invest in longer maturities. Q: What factors most significantly affected Fund performance? A: On the positive side, the Fund maintained a shorter duration than the Lehman Index throughout the period, since we believed interest rates were headed higher as the economy gained traction and the Fed continued to tighten monetary policy as a result. The Fund's duration was 3.8 years as of Aug. 31, 2005. In addition, for the first half of the fiscal year, we emphasized longer maturity bonds and cash over short- to intermediate-term maturities. As the yield curve flattened through the second half of the period, with short-term rates rising more than long-term rates, the portfolio benefited from this strategy. The Fund benefited from its exposure to high quality commercial mortgage-backed securities, which are securities based on pools of commercial mortgages, and asset-backed securities. The Fund had a sizable exposure to investment grade corporate bonds for most of the fiscal year, and strong issue selection helped the Fund's results. A modest allocation to high yield bonds further boosted the Fund's performance, as this sector as a whole performed well during the period. The Fund's return was also helped by a modest position in non-U.S. dollar bonds. We successfully were able to add value when the U.S. dollar weakened in the latter months of 2004. Although the dollar fully regained its ground in the first seven months of 2005, it weakened again in August. As the value of the U.S. dollar decreases, the dollar value of foreign investments typically increases and vice versa. Detracting somewhat from Fund returns were the Fund's holdings within the mortgage sector. The Fund maintained a defensive profile within this sector of higher coupon securities and bonds that we believed would hold their values as rates migrated higher. However, the path to higher rates was quite gradual during the fiscal period. This defensive positioning did not provide a significant performance advantage. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +4.27% +4.15% +4.38% +4.27% = RiverSource VP - Diversified Bond Fund +4.15% = Lehman Brothers Aggregate Bond Index (unmanaged) +4.38% = Lipper Intermediate Investment Grade Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 12 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Q: What changes did you make to the Fund and how is it currently positioned? A: We kept the Fund's duration shorter than the Lehman Index throughout the period, but we made minor adjustments to portfolio duration based on changing market conditions. As the yield curve flattened dramatically, we reduced the portfolio's sensitivity to changes in interest rates. We did this by seeking exposure to securities with maturities more evenly distributed across the yield curve. In our view, the yield curve flattening had largely run its course. The Fund's sector positioning remained generally unchanged. Through the year, we did adjust the Fund's exposure to high yield securities in response to shifts in the difference between the yields of these securities and U.S. Treasuries. We ended the fiscal year with the Fund near its lowest allocation to high yield bonds held during the 12 months. Generally, though, we continued to favor more conservative alternatives, such as AAA-rated commercial mortgage-backed securities, asset-backed securities and certain mortgage products, which, in our view, offer attractive yield as well as the kind of defensive characteristics we want in the current market environment. In all, the Fund's portfolio turnover was high but added value to the portfolio. A significant portion of the Fund's 293% turnover rate this past fiscal year was the result of "roll" transactions in liquid derivatives and U.S. Treasury notes. In the derivative securities, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. For U.S. Treasury notes, existing holdings are sold and newly minted securities with better liquidity are purchased. These transactions affect the Fund's turnover rate but do not change the risk exposure or result in material transaction costs. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +4.27% 3 years +4.87% 5 years +5.55% 10 years +5.41% Since inception (10/13/81) +9.34% at Sept. 30, 2005 1 year +2.84% 3 years +4.19% 5 years +5.27% 10 years +5.16% Since inception (10/13/81) +9.26% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Mortgage-Backed 33.0% U.S. Government Obligations & Agencies 24.8% Corporate Bonds* 19.0% Commercial Mortgage-Backed 9.9% Short-Term Securities** 7.8% Asset-Backed 3.8% Foreign Government 1.7% * Includes 6.8% Financials, 4.8% Telecommunication, 2.8% Utilities, 1.6% Consumer Discretionary, 1.3% Industrials, 0.6% Energy, 0.6% Health Care, 0.3% Materials, and 0.2% Consumer Staples. ** Of the 7.8%, 1.6% is due to security lending activity and 6.2% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Verzion Pennsylvania 5.65% 2011 1.6% $31,676,480 Citigroup 4.63% 2010 1.2 23,999,515 Sprint Capital 7.63% 2011 1.1 21,446,950 Wells Fargo Bank NA 6.45% 2011 1.0 19,357,231 Bundesrepublik Deutschland 6.00% 2007 0.9 17,299,561 TELUS 8.00% 2011 0.8 16,232,498 Tyco Intl Group 6.75% 2011 0.6 12,124,520 HSBC Finance 5.00% 2015 0.6 11,494,542 KFW Intl Finance 2.50% 2005 0.6 11,232,179 Cardinal Health 4.00% 2015 0.5 10,528,143 Excludes U.S. Treasury and government agency holdings. For further detail about these holdings, please refer to the section entitled "Investors in Securities." [PIE CHART] The 10 holdings listed here make up 8.9% of portfolio assets - -------------------------------------------------------------------------------- 13 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Q: How do you intend to manage the Fund in the coming months? A: We intend to maintain the Fund's duration shorter than that of the benchmark, the Lehman Index for the near term. Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy overall. We expect energy shortages to be temporary and oil prices to recede as refining and production capacities come back in line. We expect the Fed to focus on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding efforts now underway. As a result, we expect the Fed to continue to raise the targeted federal funds rate through the balance of 2005. We believe fixed income yields will move higher in the months ahead. From a sector perspective, we intend to cautiously increase the Fund's allocation to investment grade corporate bonds, though, importantly, we continue to be very selective in adding names to the portfolio. We intend to maintain our position in commercial mortgage-backed securities and asset-backed securities because they offer higher yields. In mortgages, we plan to remain defensively positioned, emphasizing premium coupons, 15-year mortgages and attractive structural attributes. We intend to maintain the Fund's modest position in high yield bonds and may increase it if the market offers opportunity. Finally, we intend to maintain the Fund's moderate exposure to non-U.S. dollar bonds. The U.S. dollar's pressured path may experience fits and starts with short-lived periods of currency strength. However, we believe the U.S. dollar will likely remain at relatively weak levels going forward, as we expect the currency's structural problems to continue. We will continue to monitor job creation and inflation numbers, as they remain key indicators for the economy in the coming months -- especially so in the aftermath of Hurricane Katrina. As always, we maintain a disciplined focus on individual security selection, with a goal of having larger positions than the Lehman Index in securities that offer the greatest potential for outperforming the Lehman Index. - -------------------------------------------------------------------------------- 14 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - DIVERSIFIED BOND FUND RiverSource VP - Diversified Bond Fund $10,000 $10,582 $11,877 $12,060 $12,350 $12,929 $14,231 $14,686 $15,347 $16,240 $16,934 Lehman Brothers Aggregate Bond Index $10,000 $10,411 $11,452 $12,663 $12,764 $13,729 $15,424 $16,675 $17,402 $18,469 $19,236 Lipper Intermediate Investment Grade Index $10,000 $10,394 $11,391 $12,473 $12,528 $13,352 $14,996 $15,873 $16,727 $17,754 $18,532 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Diversified Bond Fund (from 9/1/95 to 8/31/05) as compared to the performance of two widely cited performance indices, the Lehman Brothers Aggregate Bond Index and the Lipper Intermediate Investment Grade Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Intermediate Investment Grade Index includes the 30 largest investment grade funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 15 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Diversified Equity Income Fund (formerly AXP VP - Diversified Equity Income Fund) Below, portfolio managers Warren Spitz, Steve Schroll and Laton Spahr discuss the results and positioning for RiverSource VP - Diversified Equity Income Fund for the 12 months ended Aug. 31, 2005. Q: How did RiverSource VP - Diversified Equity Income Fund perform for the fiscal year? A: RiverSource VP - Diversified Equity Income Fund gained 25.59% for the 12 months ended Aug. 31, 2005. The Fund notably outperformed its benchmark, the Russell 1000(R) Value Index, which advanced 16.86% for the period. The Fund also outperformed the Lipper Equity Income Funds Index, representing its peer group, which rose 14.26% over the same time frame. Q: What factors most significantly affected the Fund's performance? A: Contributing most to the Fund's annual performance was its significant exposure to and stock selection within the energy sector. Within energy, Halliburton, McDermott International and Petroleo Brasileiro ADR (Petrobras) were outstanding individual stock performers. Further boosting the Fund's relative returns was a sizable allocation to producer durables, with Caterpillar the strongest individual stock performer within the sector. In other sectors, PacifiCare Health Systems in the health care sector and Altria in the consumer staples sector also performed well. The Fund further benefited from the fact that higher dividend-paying sectors outperformed lower dividend-paying sectors for the annual period overall. There were no major detractors from a sector allocation perspective during the fiscal year. However, financials firm Fannie Mae was the among the Fund's worst individual stock performers for the period. Also detracting from relative results were positions in paper and packaging leader International Paper and insurance firm XL Capital. We continued to hold Fund positions in each of these three stocks. Q: What changes did you make to the Fund? A: We increased the Fund's position in energy overall, with a focus on the exploration and production and oil services industries. We actually reduced the Fund's exposure to integrated oils. We also added to the Fund's information technology holdings, while still maintaining a modest exposure to this sector. Our emphasis within this sector was on semiconductor companies. For example, we established a position in industry bellwether Intel, as the stock had lagged during the period along with the technology sector overall, and we sought to take advantage of the opportunity to buy the stock at an attractive valuation. We reduced the Fund's position in materials, although we still retained a significant allocation to this sector. Within the health care sector, we sold the Fund's long-time holding in PacifiCare Health Systems, taking profits upon the announcement of its pending acquisition by United Healthcare. Q: How do you intend to manage the Fund in the coming months? A: We are reasonably confident the U.S. economy will continue to grow. Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy and thus will not be the catalyst for any shift in our management strategy. For the near term, we do believe the Federal Reserve Board (the Fed) will likely continue to raise short-term interest rates before year-end 2005 despite the relief and rebuilding efforts following Katrina. In addition, Katrina may have a beneficial effect on the industrials sector, where the Fund has had a significant allocation for some time now, as the hurricane highlighted the need for infrastructure improvements not only along the Gulf Coast but in many other parts of the nation as well. That said, though the pace of economic growth ahead and the direction of Fed action may be less than certain due to recent events, neither our positioning of the Fund nor our allocation strategy going forward are highly dependent on these macro factors. Within the equity market, we believe that increased levels of merger and acquisition activity seen of late will likely continue to be a factor in the coming months. Just as several Fund holdings benefited from such activity during the fiscal year just ended, we expect select portfolio positions to benefit from corporate restructuring in the months ahead. We further believe that style investing may become less critical going [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +25.59% +16.86% +14.26% +25.59% = RiverSource VP - Diversified Equity Income Fund +16.86% = Russell 1000(R) Value Index (unmanaged) +14.26% = Lipper Equity Income Funds Index (See "The Fund's Long-term Performance" for Index descriptions) Stocks of small- and mid-capitalization companies involve substantial risk. Historically, these stocks have experienced greater price volatility than stocks of larger companies, and they can be expected to do so in the future. - -------------------------------------------------------------------------------- 16 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund forward, with equity returns increasingly dependent on individual industry and company performance, including the ability of corporations to maintain profit margins in the face of increasing cost pressures in raw materials and, eventually, higher labor costs. Still, we will stay disciplined to our deep value style of investing. Finally, we remain optimistic about dividend-paying stocks. Current yield on dividend-paying stocks is still quite attractive relative to fixed income alternatives at present, and we anticipate this trend will continue. In addition, as rhetoric surrounding potential inflationary pressures grows, it is worth noting that unlike Treasury bonds, which pay a fixed rate of income and may not keep pace with inflation, stock dividends have historically outpaced the inflation rate. Interestingly, in the first half of 2005, dividends started growing faster than corporate profits. In the first quarter of 2005, corporate earnings grew by less than 14%, while dividends increased by almost 16%. In the second quarter, dividends jumped by nearly 13%, or almost double the estimated 7% rate of profit growth.* Dividends typically have grown faster than earnings only in economic downturns, like in 2001. However, this phenomenon is happening now midway into a business cycle -- a rare occurrence. Furthermore, evidence indicates that there is great potential for this trend to continue. Given these factors and the many other historical benefits of dividend-paying stocks, we expect that investors will be willing to pay more for companies demonstrating dividend growth as part of a total return strategy going forward. The pace of corporate dividend increases continued to accelerate both in frequency and in magnitude during the annual period, with a growing number of companies either initiating or increasing dividend payments. * Source: New York Times July 10, 2005. Article entitled "As Earnings Slow, Dividends Pick up the Slack" AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +25.59% 3 years +19.98% 5 years +8.23% Since inception (9/15/99) +7.60% at Sept. 30, 2005 1 year +24.23% 3 years +26.16% 5 years +8.68% Since inception (9/15/99) +7.84% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Industrials 24.6% Financials 23.7% Energy 18.5% Telecommunication Services 7.2% Materials 5.7% Consumer Discretionary 4.5% Short-Term Securities* 4.4% Health Care 4.1% Information Technology 3.5% Consumer Staples 3.3% Utilities 0.5% * Of the 4.4%, 1.8% is due to security lending activity and 2.6% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Caterpillar 3.6% $62,076,663 Citigroup 3.3 56,463,300 Halliburton 2.5 42,684,936 General Electric 2.1 37,055,294 XL Capital Cl A 2.1 36,800,249 Chevron 2.0 33,685,145 Bank of America 1.9 32,784,557 Altria Group 1.9 32,012,960 Baker Hughes 1.8 31,084,625 McDermott Intl 1.8 30,963,710 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 23.0% 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. - -------------------------------------------------------------------------------- 17 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - DIVERSIFIED EQUITY INCOME FUND RiverSource VP - Diversified Equity Income Fund $10,000 $10,421 $10,688 $8,961 $10,484 $12,322 $15,475 Russell 1000(R) Value Index $10,000 $10,793 $10,672 $9,271 $10,349 $12,162 $14,213 Lipper Equity Income Funds Index $10,000 $10,834 $10,585 $9,159 $9,953 $11,411 $13,039 10/1/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Diversified Equity Income Fund (from 10/1/99 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell 1000(R) Value Index and the Lipper Equity Income Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 1000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000(R) Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Equity Income Funds Index includes the 30 largest equity income funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 18 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Emerging Markets Fund (formerly AXP VP - Threadneedle Emerging Markets Fund) Below, RiverSource VP - Emerging Markets Fund portfolio managers Julian Thompson and Jules Mort of Threadneedle describe the Fund's results and positioning for the 12 months ended Aug. 31, 2005. Q: How did RiverSource VP - Emerging Markets Fund perform for the fiscal year ended Aug. 31, 2005? A: The Fund returned 39.60% for the 12-month period. The Fund's benchmark, the Morgan Stanley Capital International (MSCI) Emerging Markets Index (MSCI Index), returned 42.40% over the same period. The Fund's peer group, the Lipper Emerging Markets Funds Index, returned 41.96% for the year. Q: What factors most significantly affected performance? Asset allocation was the main driver of performance. Latin America was up more than 64%, Europe, the Middle East and Africa (EMEA) rose more than 51% and Asia was up more than 31% over the course of the 12-month reporting period. The Fund consistently held a greater exposure to Latin America than did the MSCI Index, and because Latin America clearly outperformed other regions, our larger position relative to the MSCI Index's position, was a very positive contributor to performance. Also throughout the year, we had more exposure to EMEA and significantly less exposure to Asia compared to the MSCI Index. At the country level, our largest position above that of the MSCI Index was Mexico, up 54% (in U.S. dollar terms) over the course of the year. We also maintained a consistently larger position than did the MSCI Index in Brazil, which was up 75.5%. Outside of the Latin American region, we were very positive on Russia throughout the period, which rose 44.7%. Although South Korea performed very well, up nearly 47%, the Fund had a smaller position there than did the MSCI Index, and having a smaller exposure in South Korea hurt performance. On the other hand, having lesser positions in China, Taiwan and Malaysia than did the MSCI Index benefited the Fund. China, Taiwan and Malaysia gained 28.6%, 10.7% and 13%, respectively and proved to be disappointing compared to other countries' developing markets over the year. Sector weighting impacted performance significantly. By having positions in the energy and utilities sectors that were less than the MSCI Index for much of the year, performance suffered. Energy and utilities were the best performing sectors, with energy up 63% and utilities up nearly 45% over the 12-month period. We missed much of that run up. Stock selection also contributed to performance. Among the note-worthy individual stocks were Banco Bradesco, a Brazilian bank, rising approximately 130% in a year. We added Banco Bradesco in the second half of the period and benefited from some of its substantial gains. American Movil is a wireless telephone company that operates throughout Latin America. We have enjoyed strong performance throughout the period with that stock rising approximately 90%. Cia Vale do Rio Doce, a Brazilian iron ore producer, is another long-term holding that has done very well this year, rising 70%. On the other hand, some stocks were a drag on performance. The worst performing stocks were in Taiwan's banking sector. Taishin Financial Holdings was one example. We had concerns about the asset quality of their unsecured loans, and consequently sold the stock. Commercial bank Chinatrust Financial Holding and insurance-related company Cathay Financial Holding delivered undistinguished performance. We have kept, but reduced, our positions in these two companies because we still hold conviction that they will improve. CheckPoint Software, an Israeli company, was a long-term holding in the Fund. The company had disappointing revenue growth and did not deliver on new product expectations. We sold our entire position in CheckPoint Software in the second half of the period. Q: What changes did you make to the Fund and how is it currently positioned? A: Increasing the Fund's energy weighting was perhaps the most significant change. We began the fiscal year with an energy position approximately 5% less than that of the MSCI Index. We ended the year with a position greater than the MSCI Index, by 1.5%. As discussed above, being "light" on energy early in the year was a drag on performance. Late in the reporting period, we changed our expectations regarding the outlook for oil prices, and became very [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +39.60% +42.40% +41.96% +39.60% = RiverSource VP - Emerging Markets Fund +42.40% = MSCI Emerging Markets Index (unmanaged) +41.96% = Lipper Emerging Markets Funds Index (See "The Fund's Long-term Performance" for Index descriptions) International investing involves increased risk and volatility, not typically associated with domestic investing, due to changes in currency exchange rates, foreign government regulations, differences in auditing and accounting standards, potential political and economic instability, limited liquidity, and volatile prices. The risks of international investing are particularly significant in emerging markets. - -------------------------------------------------------------------------------- 19 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Emerging Markets Fund positive on energy. We raised our exposure to both the energy sector and Asia by buying CNOOC, the Chinese oil company. You may recall that CNOOC tried to purchase California-based energy company Unocal and was not successful in that acquisition, but its stock sold off to what we considered to be a very attractive level and has subsequently recovered. We had been increasingly confident that the economic recovery underway was structural rather than cyclical. In other words, the low interest rates were expected to stay low and that the currency was not vulnerable in the near term. This gave us confidence to invest in the domestic economy in South Africa. ABSA Group accounts for approximately 30% of the South African mortgage market and was recently acquired by U.K. financial giant, Barclays. The acquisition was very supportive to ABSA Group's stock, which we are still able to hold. We took some profits in Latin America and reinvested them elsewhere. Although we continue to have strong conviction regarding investment in Latin America, certain markets there have become much more volatile, so we have sold or lessened some of our holdings. In Brazil, for example, various political scandals are coming to light, which will likely impact the presidential election in 2006. Also in Latin America, we reduced our exposure in Mexico. That country is also preparing for a presidential election next year which could heighten volatility in their market. Both Brazilian and Mexican markets have done exceptionally well this year. We saw signs of economic recovery beginning to show through in South Korea's domestic consumption sector and raised our exposure to the Korean financial sector. We have maintained a domestic focus in the Fund for much of the year. We concentrated on those sectors providing direct benefit to the country's population, such as consumer staples and financials, which rose 45% and 47.5%, respectively. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +39.60% 3 years +25.41% 5 years +7.65% Since inception (5/1/00) +5.91% at Sept. 30, 2005 1 year +44.33% 3 years +32.04% 5 years +12.19% Since inception (5/1/00) +7.42% COUNTRY COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] South Korea 15.8% Taiwan 11.0% Brazil 10.5% South Africa 10.0% Mexico 9.5% India 6.9% China 6.3% Russia 6.2% Cash & Short-Term Securities 3.5% Thailand 3.2% Hong Kong 3.0% Israel 3.0% Hungary 2.0% Turkey 1.6% Czechoslovakia Federal Republic 1.4% Egypt 1.4% United Kingdom 1.4% Argentina 1.0% Netherlands 1.0% Other* 1.3% * Includes Finland, Indonesia and Poland. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Samsung Electronics (South Korea) 6.4% $12,068,746 Petroleo Brasileiro ADR (Brazil) 3.8 7,296,623 LUKOIL ADR (Russia) 3.1 5,969,598 Cia Vale do Rio Doce ADR (Brazil) 3.1 5,960,970 America Movil ADR Series L (Mexico) 2.7 5,076,917 CNOOC (China) 2.6 4,972,868 Kookmin Bank (South Korea) 2.4 4,557,814 Taiwan Semiconductor Mfg (Taiwan) 2.1 3,995,922 Sasol (South Africa) 2.0 3,709,395 Grupo Televisa ADR (Mexico) 1.7 3,245,002 Note: Certain foreign investment risks include: changes in currency exchange rates, adverse political or economic order, and lack of similar regulatory requirements followed by U.S. companies. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 29.9% of portfolio assets - -------------------------------------------------------------------------------- 20 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Emerging Markets Fund Q: What is the Fund's tactical view and strategy for the months ahead? A: The Fund's strategy remains largely focused on domestic growth companies. We have reduced exposure to more cyclical areas, such as steel, and have little exposure to other basic industries, such as chemicals and paper. Rather, the Fund is focused on domestic sectors, such as consumer discretionary, consumer staples and pharmaceuticals. At the end of the reporting period, the Fund is overweight in the energy sector but underweight in materials, industrials and telecommunication services relative to the MSCI Index. The outlook for emerging markets remains strong. Although emerging markets tend to underperform during a US interest-rate tightening cycle, it has not been a normal cycle, so far. Moreover, there are signs that domestic interest rates have peaked in Latin America and will begin to fall from their current high levels. Meanwhile, high commodity prices are likely to continue to support oil-producing economies such as Mexico, Russia and Indonesia. Liquidity also remains strong in Asian markets. We are encouraged by a continued high level of liquidity in emerging markets despite the slightly stronger dollar since the beginning of the year. We are seeing very strong commodity prices, which are unusual with a strong dollar. These strong prices reflect the extent of demand in commodity-hungry China, while other emerging market countries like Brazil and Mexico that are net exporters of commodities, in particular minerals and crude oil, benefit from the demand. Stronger commodity prices and liquidity factors tend to be very beneficial. So we should continue to see greater appetite for emerging market equities than we have seen for the last three or four years. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - EMERGING MARKETS FUND RiverSource VP - Emerging Markets Fund $10,000 $9,397 $6,532 $6,888 $8,273 $9,732 $13,585 MSCI Emerging Markets Index $10,000 $9,542 $6,887 $7,058 $9,123 $10,994 $15,655 Lipper Emerging Markets Funds Index $10,000 $9,630 $6,948 $7,125 $9,044 $11,105 $15,765 5/1/00 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Emerging Markets Fund (from 5/1/00 to 8/31/05) as compared to the performance of two widely cited performance indices, the MSCI Emerging Markets Index and the Lipper Emerging Markets Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Morgan Stanley Capital International (MSCI) Emerging Markets Index, an unmanaged market capitalization-weighted index, is designed to measure equity market performance in the global emerging markets. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Emerging Markets Funds Index includes the 30 largest emerging markets funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 21 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Global Bond Fund (formerly AXP VP - Global Bond Fund) Below, portfolio manager Nic Pifer discusses RiverSource VP - Global Bond Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Global Bond Fund perform for the fiscal year? A: RiverSource VP - Global Bond Fund gained 6.75% for the 12 months ended Aug. 31, 2005. The Fund outperformed its benchmark, the Lehman Brothers Global Aggregate Index (Lehman Global Index), which advanced 6.10% for the period. However, the Fund underperformed the Lipper Global Income Funds Index, representing the Fund's peer group, which rose 6.98%, over the same time frame. Q: What factors most significantly affected performance? A: Solid annual performance of the Fund was due primarily to strength in most of the major global bond markets in which the Fund invests. Currency gains from a weaker U.S. dollar also helped, with most of the gains coming during the first four months of the fiscal year. Still, during the 12 months ended Aug. 31, 2005, the U.S. dollar declined 2.6% on a trade-weighted basis. Remember, a falling dollar increases the value of the Fund's foreign currency denominated securities when expressed in U.S. dollar terms. On a relative basis to the Lehman Global Index, the Fund outperformed due primarily to effective currency positioning and country allocation. The Fund maintained its significant exposure to the euro and several other European currencies as well as to the "dollar bloc" currencies of Canada, Australia and New Zealand. It maintained its modest exposure to the U.S. dollar and to the Japanese yen. Positioning in the yen had a rather neutral effect, but other positions helped, as the U.S. dollar weakened approximately 2.2% vs. the euro, 2.3% vs. the British pound, 11.0% vs. the Canadian dollar, 8.8% vs. the Australian dollar, and 7.3% vs. the New Zealand dollar during the annual period. Within countries, the Fund continued to hold only limited positions in Japanese bonds and U.S. bonds and more substantial exposure to core European bonds. This strategy worked well, as the European government bond market outperformed both the Japanese government bond market and U.S. Treasury market for the fiscal year in local currency terms. A greater exposure than the Lehman Global Index to "peripheral" European government bonds, such as those of Poland and Norway, also benefited the Fund, as these markets performed quite well during the 12 months. The Fund lagged its Lipper group, most likely due to its comparatively defensive positioning from a sector weighting perspective, generally maintaining a more conservative risk profile than many of its peers. More specifically, the Fund had only moderate exposure to non-government bond sectors, including investment grade corporate bonds, mortgage-backed securities and agencies. These sectors outperformed government bonds over the fiscal year on duration-adjusted basis. The Fund also had just a small exposure to emerging market bonds, which performed quite well over the period. Q: What changes did you make to the Fund and how is it currently positioned? A: We shortened the Fund's duration, a principal measure of interest rate risk, a bit over the annual period, mostly in the U.S. portion of the portfolio. We moved the Fund's duration from just under half a year shorter than that of the Lehman Global Index at the start of the fiscal year to about two-thirds of a year shorter than the Lehman Global Index by the end of August 2005. Through most of the period, the Fund was positioned in anticipation of a flattening yield curve on the U.S. bond market and no change in the shape of the yield curve in most other global bond markets. Indeed, the U.S. Treasury yield curve flattened dramatically over the fiscal year, meaning short-term rates rose more than long-term rates. As the period progressed, we removed some of the Fund's U.S. yield curve flattening bias, thereby reducing the portfolio's sensitivity to changes in interest rates. We made some adjustments in currency exposure, slightly reducing the Fund's significant allocation to the euro and modestly increasing its moderate exposure to the U.S. dollar. We also reduced the Fund's position in the Japanese yen a bit. Within sector weightings, we became increasingly conservative as the fiscal year progressed. We reduced the Fund's position in high-yield corporate bonds and added to the Fund's allocation of AAA-rated commercial mortgage- [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +6.75% +6.10% +6.98% +6.75% = RiverSource VP - Global Bond Fund +6.10% = Lehman Brothers Global Aggregate Index (unmanaged) +6.98% = Lipper Global Income Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 22 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund backed securities (CMBS). We view CMBS as high-quality substitutes for corporate bonds. CMBS offer attractive yield as well as the kind of defensive characteristics we want in the current market environment. From a country perspective, we continued to favor European bonds over U.S. and Japanese bonds. Q: How do you intend to manage the Fund in the coming months? A: We intend to maintain a somewhat defensive position in the Fund with respect to interest rate risk exposure. Specifically, we expect to keep the Fund's duration shorter than that of its benchmark index, the Lehman Global Index, given our view regarding the pace of U.S. economic growth and the tightening path of the Federal Open Market Committee (FOMC). To date, the bond markets have basically been ignoring these factors, leading even Federal Reserve Chairman Alan Greenspan to consider the behavior of the bond markets a "conundrum." Should U.S. interest rates reach a certain level or should the European bond market become too expensive, then we may take the opportunity to shift a percentage of asset allocation from European bonds to U.S. fixed income securities. Among the key questions now is what impact Hurricane Katrina's devastation of the Gulf Coast will have on the U.S. economy? While the Gulf Coast economies do not produce a significant amount of the U.S.'s Gross Domestic Product, they are critical to both trade and energy supply and, thus, may affect consumers throughout the nation. Another key question is whether energy prices can remain elevated, and if so, what impact that will have on consumer spending? We still expect the Federal Reserve Board to continue raising interest rates, but realize that the effect of Katrina combined with high energy prices creates a bit more uncertainty around the near term path of federal policy. Clearly, the relative strength of the U.S. economy affects AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +6.75% 3 years +8.95% 5 years +8.36% Since inception (5/1/96) +5.84% at Sept. 30, 2005 1 year +3.12% 3 years +7.79% 5 years +7.94% Since inception (5/1/96) +5.57% COUNTRY COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] United States 33.1% Germany 10.9% Japan 8.1% France 6.5% Italy 4.7% Spain 4.5% United Kingdom 4.4% Greece 4.1% Cash & Short-Term Securities 4.0% Netherlands 3.0% Canada 2.3% Finland 2.1% Belgium 1.9% Austria 1.1% New Zealand 1.1% Norway 1.1% Supra-National 1.0% Other* 3.2% * Includes Brazil, Czechoslovakia Federated Republic, Denmark, Luxembourg, Malaysia, Mexico, South Africa, South Korea and Sweden. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Govt of Japan 1.70% 2009 4.3% $24,071,211 Govt of Spain 5.15% 2009 2.7 15,550,681 Bundesrepublik Deutschland (Germany) 3.75% 2013 2.7 15,424,798 Govt of France 5.00% 2012 2.3 12,777,670 Bundesrepublik Deutschland (Germany) 6.50% 2027 2.2 12,726,644 Govt of France 4.00% 2013 2.1 12,156,079 Republic of Finland 5.00% 2007 2.1 11,743,640 United Kingdom Treasury 5.00% 2012 2.1 11,644,536 Govt of Netherlands 2.50% 2008 2.0 11,339,988 Buoni Poliennali Del Tesoro (Italy) 5.00% 2007 1.9 10,980,708 Note: Certain foreign investments risks include: changes in currency exchange rates, adverse political or economic order, and lack of similar regulatory requirements followed by U.S. companies. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 24.4% of portfolio assets - -------------------------------------------------------------------------------- 23 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund much of the rest of the world's economies. That said, given recent economic news from the Eurozone, it currently appears that the European Central Bank will most likely keep rates on hold at 2% into 2006. We believe the Bank of Japan is likely to keep rates on hold at 0% until late 2006. As for currency positioning, we believe the U.S. dollar may well remain at relatively weak levels going forward, as we expect the currency's structural problems to continue. However, its pressured path may experience fits and starts with short-lived periods of currency strength. Thus, our currency strategy is to seek to make tactical allocation adjustments as market conditions warrant. From a country perspective, we continue to favor European bonds. Within sectors, we intend to maintain modest position in investment grade corporate bonds and U.S. mortgage-backed securities and a more sizable exposure to AAA-rated commercial mortgage-backed securities for the near term. As always, we constantly re-evaluate the Fund's duration, sector, country, yield curve and currency positioning in an effort to seek an attractive trade-off between risk and potential return. Our sector teams remain focused on careful individual security selection, as we continue to seek opportunities to capitalize on attractively valued bonds. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - GLOBAL BOND FUND RiverSource VP - Global Bond Fund $10,000 $10,249 $10,908 $11,325 $11,608 $11,384 $12,197 $13,152 $14,409 $15,929 $17,004 Lehman Brothers Global Aggregate Index $10,000 $10,297 $10,755 $11,824 $12,049 $11,898 $12,784 $13,937 $15,127 $16,689 $17,707 Lipper Global Income Funds Index $10,000 $10,323 $11,099 $11,267 $11,665 $11,773 $12,613 $13,340 $14,688 $16,068 $17,190 5/1/96 8/96 8/97 8/98 8/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Global Bond Fund (from 5/1/96 to 8/31/05) as compared to the performance of two widely cited performance indices, the Lehman Brothers Global Aggregate Index and the Lipper Global Income Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Lehman Brothers Global Aggregate Index, an unmanaged market capitalization weighted benchmark, tracks the performance of investment grade fixed income securities denominated in 13 currencies. The index reflects the reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Global Income Funds Index includes the 30 largest global income funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 24 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Global Inflation Protected Securities Fund (formerly AXP VP - Inflation Protected Securities Fund) RiverSource VP - Global Inflation Protected Securities Fund began operations on Sept. 13, 2004. Effective Sept. 12, 2005, the Fund changed its name and strategy to investing in global inflation protected securities, which include those issued by foreign entities as well as the U.S. government. Below, portfolio managers Jamie Jackson and Nic Pifer, who joined Jamie in September 2005, discuss the Fund's results and positioning for the period from the Fund's inception through Aug. 31, 2005. Q: How did RiverSource VP - Global Inflation Protected Securities Fund perform from its inception through Aug. 31, 2005? A: RiverSource VP - Global Inflation Protected Securities Fund gained 5.22% from its inception on Sept. 13, 2004 through Aug. 31, 2005. The Lehman Brothers U.S. Treasury Inflation Notes Index (Lehman Index) rose 5.46% for the period from Sept. 30, 2004 through Aug. 31, 2005. The Lehman Brothers Global Inflation Linked Index rose 5.46% and the Blended Index rose 5.46%. Q: What market conditions were present during the fiscal year? A: Overall, the fixed income yield curve flattened significantly over the fiscal year, with long-term rates falling while short-term rates rose. The dramatic reshaping of the yield curve was driven by the Federal Reserve Board's (the Fed) decision to tighten monetary policy a total of eight times during the period, which put upward pressure on short-term bond yields, and by economic growth that was neither too hot nor too cold, which put downward pressure on intermediate/long-term bond yields. Strong global demand for U.S. financial assets -- notably from foreign central banks -- also contributed to keeping intermediate bond yields low. Indeed, the U.S. economy grew during the fiscal year, despite headwinds from volatility in broad-based inflation, including the much-headlined escalating oil prices. After peaking at $55 per barrel in the fall of 2004, oil prices fell through the end of the calendar year. Then, for the first eight months of 2005, crude oil prices increased by more than 54%, breaking the $60 per barrel marker toward the end of June and jumping past $70 per barrel in late August. Consumers have yet to moderate their spending behavior to any significant degree, accepting gasoline prices that now exceed $3 per gallon, a more than 80% increase from the start of 2005. Inflation, in turn, was relatively high. For the 12-month period ended Aug. 31, 2005, consumer prices rose 3.60%, according to the latest available government data. Economists and policymakers at the Fed stated at its meeting in early August 2005 that "longer-term inflation expectations remain well contained, but pressures on inflation have stayed elevated." The Fund's primary investment vehicle, Treasury Inflation Protected Securities (TIPS) modestly underperformed nominal Treasury securities, or non-inflation protected Treasury securities, during the annual period. With the fear of an economic slowdown, long-term inflation concerns eased, helping nominal U.S. Treasuries. However, inflation that occurred during the fiscal year added to TIPS' returns. The performance of TIPS is based on changes to inflation; therefore, this asset class benefited from strong inflation of approximately 2.5% for the fiscal year. Longer maturities outperformed shorter ones in both markets. Q: What factors most significantly affected the Fund's performance? A: The Fund benefited from its near exclusive focus on TIPS during the annual period, as this fixed income sector turned in strong results. The Fund also benefited from its modest position in 30-year U.S. Treasury bonds, established toward the end of 2004, as these long-term Treasuries rallied, with their yields declining 67 basis points (0.67%) during the fiscal year. To compare, yields on 30-year TIPS fell only 37 basis points (0.37%) during the same time frame. We subsequently sold the Fund's holdings in nominal U.S. Treasuries, as our target for these securities had been reached. The Fund also gained from its yield curve positioning, the way the Fund is positioned to respond to changes in interest rates, as we had correctly anticipated the flattening of the yield curve, where short-term interest rates rose more than long-term rates. Detracting somewhat from results was the Fund's defensive positioning in the form of a duration, a measure of the Fund's sensitivity to change in interest rates, that was approximately six months shorter than the Lehman Index benchmark. Although we had the Fund positioned for higher rates, the yields on TIPS actually declined by about 10 basis points (0.10%) on average. [BAR CHART] PERFORMANCE COMPARISON For the period ended Aug. 31, 2005 +5.22% +5.46% +5.46% +5.46% +5.22% = RiverSource VP - Global Inflation Protected Securities Fund (inception 9/13/04) +5.46% = Lehman Brothers U.S. Treasury Inflation Notes Index (unmanaged) (10/1/04 - 8/31/05) +5.46% = Lehman Brothers Global Inflation Linked Index (unmanaged) (10/1/04 - 8/31/05) +5.46% = Blended Index (unmanaged) (10/1/04 - 8/31/05) (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 25 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund Having a relatively neutral effect on the Fund's results was its position in non-U.S. dollar bonds, which are bonds denominated in foreign currencies. The Fund had benefited during the first half of the fiscal year from its 1% position in euro-denominated, two-year German government bonds, which advanced as the U.S. dollar weakened. We sold the Fund's position in these German bonds during the fourth calendar quarter, taking profits when they reached our price targets. A less than 2% position in non-U.S. dollar bonds established during the second calendar quarter of 2005 had a negative effect on the Fund's performance. The Fund's allocation was divided equally between U.K. government bonds and German bonds. A significant rally in the U.S. dollar during these months eroded the value of the Fund's non-U.S. dollar bonds in U.S. dollar terms. Remember, as the value of the U.S. dollar increases, the dollar value of foreign investments typically decreases and vice versa. The Lehman Index is composed entirely of TIPS, and thus, such non-U.S. dollar holdings hurt the Fund's performance relative to the Lehman Index. However, we maintained the Fund's position in these holdings, as we believe the U.S. dollar will likely slowly weaken going forward. Though the dollar's pressured path may experience fits and starts with short-lived periods of currency strength, we expect the currency's structural problems to continue. Q: What changes did you make to the Fund during the period? A: As indicated, we moved in and out of non-U.S. dollar bonds during the annual period, seeking to take advantage of relative strength or weakness in these markets. We also established the Fund's position in 30-year U.S. Treasury bonds, based on the attractive breakeven inflation rate we were finding at the long end of the yield curve. As mentioned, we subsequently sold the Fund's 30-year nominal U.S. Treasuries, when this same breakeven inflation rate declined. We removed some of the Fund's yield curve flattening bias, reducing the bulleted structure of the portfolio somewhat. (A bulleted portfolio is one in which the holdings are concentrated in a single maturity range.) In our assessment, the curve flattening had largely run its course, and the portfolio's flattening bias had worked well, but was no longer an attractive risk-reward trade. While we continued to concentrate the Fund's holdings in the intermediate-term portion of the yield curve, that is, securities in the five-, seven- and 10-year segments, we moderated our emphasis. As a defensive stance, we maintained the Fund's duration shorter than the Lehman Index throughout the annual period. Q: How do you intend to manage the Fund in the coming months? A: We believe the U.S. economy will continue to grow and interest rates will continue to move higher -- even with the devastation caused by Hurricane Katrina. In terms of inflation, we continue to believe one of the most important factors for the remainder of 2005 will be productivity gains. Until recently, business productivity accounted for most of the growth. In 2005, productivity is still expected to improve, but not nearly as much as it has in recent years. Another key factor in our view is pent-up headline inflation, which includes food and energy, which have been relatively benign in recent months, but given the recent increases in unit labor costs and crude oil prices hovering just below the $70 per barrel mark, we expect an uptick in reported inflation to filter through before long. The Fed is typically concerned with core inflation data, which excludes food and energy, when making its monetary policy decisions. However, we expect the Fed to focus in the coming months on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding effort now underway. As a result, we expect the Fed will continue to raise rates through the balance of 2005 and yields to move materially higher. At the same time, we expect that the Fed may complete its tightening cycle by the first quarter of 2006. Should this indeed be the case, then we may seek to opportunistically reduce the Fund's defensive duration positioning. We will continue to closely monitor inflation figures, interest rates, security prices, economic data and Fed policy shifts and adjust the portfolio's holdings and duration stance if necessary. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] U.S. Government Obligations & Agencies 97.8% Short-Term Securities 1.2% Foreign Government 1.0% TOTAL RETURNS at Aug. 31, 2005 Since inception (9/13/04)* +5.22% at Sept. 30, 2005 1 year +4.56% Since inception (9/13/04) +4.85% * Not annualized. - -------------------------------------------------------------------------------- 26 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - GLOBAL INFLATION PROTECTED SECURITIES FUND RiverSource VP - Global Inflation Protected Securities Fund $10,000 $10,115 $10,240 $10,487 $10,523 Lehman Brothers U.S. Treasury Inflation Notes Index $10,000 $10,096 $10,229 $10,505 $10,567 Lehman Brothers Global Inflation Linked Index $10,000 $10,076 $10,209 $10,485 $10,547 Blended Index $10,000 $10,076 $10,209 $10,485 $10,547 10/1/04 11/04 2/05 5/05 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Global Inflation Protected Securities Fund (from 10/1/04 to 8/31/05) as compared to the performance of three widely cited performance indices, the Lehman Brothers U.S. Treasury Inflation Notes Index, the Lehman Brothers Global Inflation Linked Index and the Blended Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Lehman Brothers Global Inflation Linked Index is an unmanaged index that measures the performance of the inflation protected securities issued in countries around the world, including the United States, the United Kingdom, Canada, Sweden, and France. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lehman Brothers U.S. Treasury Inflation Notes Index is an unmanaged index that measures the performance of the inflation protected obligations of U.S. Treasury. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Blended Index consists of 50% Lehman Brothers Global Inflation Linked Index and 50% Lehman Brothers U.S. Treasury Inflation Notes Index. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from Lehman Brothers U.S. Treasury Inflation Notes Index to the Lehman Brothers Global Inflation Linked Index, and to add the Blended Index as a secondary benchmark. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. - -------------------------------------------------------------------------------- 27 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Growth Fund (formerly AXP VP - Growth Fund) Q: How did RiverSource VP - Growth Fund perform for the fiscal year? A: RiverSource VP - Growth Fund returned 16.74% for the 12 months ended Aug. 31, 2005. The Fund outperformed the 12.14% return of its benchmark, the Russell 1000(R) Growth Index (Russell Index), as well as its peer group, as represented by the Lipper Large-Cap Growth Funds Index, which advanced 15.47% for the same period. Q: What factors most significantly affected the Fund's performance during the annual period? A: Both stock selection and sector allocation contributed to the Fund's outperformance over the fiscal year. Helping most was strong stock picking, with many stocks that helped performance and very few that detracted meaningfully. The Fund showed its strongest performance in telecommunications services, technology, energy and consumer staples and demonstrated its weakest performance in health care. Although health care was the weakest sector for the Fund, it was not notably harmful to the Fund. The sector cost the Fund only 69 basis points (0.69%) of performance over the 12-month span, and this loss was primarily in biotechnology company Biogen Idec and specialty pharmaceutical company Elan Corp. Both stocks had performed well during the early months of the fiscal year on optimism surrounding its shared multiple sclerosis treatment. Unfortunately, the drug produced some serious side effects and was discontinued in 2005, which dragged down both companies' stock prices. We also owned Merck. In 2005, the pharmaceutical giant pulled its arthritis drug Vioxx from the market due to increasing evidence of potentially fatal side effects for long-term users. Within the telecommunications services, we had conviction in the wireless services sub-sector, and this view was indeed rewarded. The sub-sector was flush with mergers and acquisitions, several of which benefited the Fund. For example, Sprint, a large position in the Fund, got closer to concluding its acquisition of Nextel Communications, another large position in the Fund. Both companies showed good fundamentals, and the market seemed to recognize their synergistic value. Another good example was Western Wireless Corporation, a regional wireless services company, which was acquired by ALLTEL. Both of these stocks helped boost Fund performance. Vodafone Group, a mobile telecommunications network company based in the United Kingdom, was yet another performance standout. Mergers and acquisitions also affected the cable space in the Fund and benefited performance. NTL and Telewest Global, cable communications companies in the U.K. and each a substantial position in the Fund, performed well during the fiscal year on the back of solid fundamentals and expectations of value creation from their pending merger. Within the technology sector, search engine Google was both a large position in the Fund and a significant contributor to performance during the annual period. Also in technology, both Motorola and Nokia were strong performers. On the other hand, information management company Oracle, software behemoth Microsoft, personal computer giant Apple and fiber optics leader Corning were negative performers within the sector. Q: What changes did you make to the Fund and how is it currently positioned? A: We increased the Fund's position in Sprint during the annual period. We believed that Sprint's decision to merge with Nextel Communications, as mentioned above, would create one of the fastest growing large-cap companies in the market and at an attractive valuation. In our opinion, the stock price was reflecting the combination of growth and valuation, and we took advantage of this situation. Other significant additions to the Fund during the fiscal year included Telewest Global, Google, media company Vivendi Universal, healthcare company HCA and leading human therapeutics biotechnology company Amgen. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +16.74% +12.14% +15.47% +16.74% = RiverSource VP - Growth Fund +12.14% = Russell 1000(R) Growth Index (unmanaged) +15.47% = Lipper Large-Cap Growth Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 28 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Growth Fund We also removed some holdings from the Fund's portfolio. We sold the Fund's position in Disney. The stock had performed well, but we became concerned about its valuation and the company's cyclicality. We also eliminated the Fund's holding in AT&T Wireless, as the company was acquired, and the stock price went down. Other stocks that the Fund either sold completely or reduced its positions in included Biogen Idec, Vodafone Group and Merck. From a sector perspective, the most sizable reduction in the Fund was in the industrials sector. This sector historically does best in the early stage of economic recovery. Now that the U.S. recovery has progressed, stock prices in industrials are generally more expensive and not as compelling. The Fund maintained its more sizable exposure relative to the Russell Index to energy-related stocks, as we have been bullish on energy for some time. The record high prices of oil have supported this position, and to date there are no significant signs of this scenario changing. At the same time, when opportunities arose, we took profits in select energy stocks and intend to continue to do so. Finally, we increased the Fund's position in telecommunications services because, as mentioned earlier, of our positive view on wireless communications. In all, the opportunistic changes we made in response to company-specific or market developments resulted in an annual portfolio turnover rate of 154%. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +16.74% 3 years +10.05% 5 years -13.10% Since inception (9/15/99) -6.10% at Sept. 30, 2005 1 year +17.01% 3 years +14.13% 5 years -11.14% Since inception (9/15/99) -5.85% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Telecommunication Services 21.7% Health Care 19.2% Information Technology 16.7% Consumer Discretionary 12.6% Consumer Staples 8.8% Energy 5.3% Financials 4.9% Short-Term Securities 4.4% Materials 3.7% Industrials 2.5% Other 0.2% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Sprint Nextel 12.5% $49,280,924 NTL 7.2 28,126,237 Telewest Global 3.3 12,845,431 Gillette 2.4 9,489,685 Pfizer 2.0 8,016,809 Google Cl A 1.9 7,663,656 Dell 1.8 7,186,216 MCI 1.7 6,797,164 Intel 1.7 6,577,916 Vivendi Universal ADR 1.6 6,220,398 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 36.1% 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. - -------------------------------------------------------------------------------- 29 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Growth Fund Q: How do you intend to manage the Fund in the coming months? A: Maintaining our consistent investment approach, we intend to continue to identify companies with strong growth stories where valuation is attractive. Given that we see earnings growth decelerating in the economy, we also continue to favor stocks with compelling growth stories that are more company-specific than tied to the economic outlook, particularly when those companies have some kind of identifiable catalyst that may denote future appreciation. In the near term, we are focused on finding select companies that continue to demonstrate healthy growth without reliance on economic conditions within the healthcare, telecommunications services (particularly wireless services) and consumer staples sectors. We may reduce the Fund's weighting in consumer discretionary, as this sector is facing some headwinds from oil prices and interest rates. We think that growth stocks are becoming attractive versus value stocks, and the market preference is moving to growth. We also think that the preference pendulum is swinging to large company stocks rather than small company stocks. We welcome this shift and look for opportunities to add to the Fund's large-company names. Overall, we believe the Fund is comprised of strong companies with good growth and reasonable valuations and feel good about the way the Fund has performed. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - GROWTH FUND RiverSource VP - Growth Fund $10,000 $13,859 $6,670 $5,154 $5,633 $5,894 $6,881 Russell 1000(R) Growth Index $10,000 $13,632 $7,454 $5,801 $6,618 $6,973 $7,820 Lipper Large-Cap Growth Funds Index $10,000 $13,394 $7,473 $5,856 $6,502 $6,688 $7,723 10/1/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Growth Fund (from 10/1/99 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell 1000(R) Growth Index and the Lipper Large-Cap Growth Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 1000(R) Growth Index, an unmanaged index, measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Large-Cap Growth Funds Index includes the 30 largest large cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 30 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - High Yield Bond Fund (formerly AXP VP - High Yield Bond Fund) Below, the portfolio management team discusses RiverSource VP - High Yield Bond Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - High Yield Bond Fund perform for the fiscal year? A: RiverSource VP - High Yield Bond Fund advanced 9.31% for the 12 months ended Aug. 31, 2005. The Fund outperformed its benchmark, the JP Morgan Global High Yield Index (JP Morgan Index), which increased 9.20% during the period. The Fund's peer group, the Lipper High Current Yield Bond Funds Index, gained 9.04% during the same time frame. Q: What factors most significantly affected performance for the period? A: Much of the Fund's strong performance came from the last few months of 2004. There were four consecutive months of positive performance from September through December 2004. We were rewarded by owning larger positions in the lower rated segments of the market. We had a large exposure to the single B-rated sector of the market and market weight in CCC-rated securities. In 2005, the market experienced a strong sell off from March through May. After a big employment number came out early in the period, rates moved up sharply, which, in turn, triggered fear among investors over rates rising too rapidly. At the same time, we were in a somewhat weaker stock environment, which tends to have a negative effect on the high yield sector of the bond market. Both of these issues weighed on the market and contributed to cash outflows out of high yield funds for several weeks. On top of all that, the high yield market was dealt another blow with the endless speculation that General Motors and Ford would be downgraded from investment grade to junk status. This put pressure on the overall market and contributed to increasing yields of high yield bonds relative to safer U.S. Treasuries, which reduced the value, in particular, in the auto-related credits. By mid-May, GM and Ford had already been downgraded and much of the anxiety over the auto industry seemed to be priced into the market. GM and Ford bonds finally began to stabilize, which helped the overall market to rally during the last two weeks of May. The market continued to rebound through the end of July, gaining back much of the loss from the earlier sell-off. Q: Which bonds were the best and worst performers for the Fund during the 12-month period? A: From an industry standpoint the Fund benefited the most from its holdings in the wireless telecommunications, utility, health care and cable TV sectors. The Fund's large position in Qwest Communications was a positive contributor during the period as well as Cablevision Systems, an East Coast cable television provider. In addition, hospital company Vanguard Health and pipeline company El Paso Natural Gas contributed to performance during the period. The Fund had very few negative performing securities during the fiscal period. Two credits that did post modest negative returns for the Fund included Portrait Centers of America and Trimas Corporation, an industrial conglomerate. The Fund sold Portrait Center securities due to our lack of conviction in the company's fundamental outlook and continues to own Trimas as we believe the bonds will recover in value over time. A key for us during the fiscal year was good security selection. We avoided several dramatic declines in the marketplace during the last 12 months because of our thorough credit research. Our internal rating system assigns risk ratings to every bond in the portfolio based on our proactive research. We feel that rating agencies tend to be more backward looking and a little more reactionary when changing credit ratings, and therefore, may not always be the best indicator of risk. We also had very good industry selection during the period. We had a large exposure to sectors that performed very well and then we brought the exposure to these sectors back down after realizing attractive returns. In addition, we had a small position in the auto sector for much of the year, which proved prudent. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +9.31% +9.20% +9.04% +9.31% = RiverSource VP - High Yield Bond Fund +9.20% = JP Morgan Global High Yield Index (unmanaged) +9.04% = Lipper High Current Yield Bond Funds Index (See "The Fund's Long-term Performance" for Index descriptions) High-yield funds invest in lower-rated bonds, which generally have more volatile prices and carry more risk to principal and income than investment grade securities. - -------------------------------------------------------------------------------- 31 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Q: What changes did you make to the portfolio and how is it currently positioned? A: During 2004, we had a large exposure in the chemicals, manufacturing and industrial sectors, which provided attractive returns for the Fund during the period. However, during the latter part of the calendar 2004 we started lowering those exposures because we felt that valuations no longer justified having large positions. Throughout the period, we always had a lower exposure in the auto sector because in addition to poor fundamentals, we were worried about the impact that GM and Ford would have on the market. This helped us in 2004 and early 2005 when all of the uncertainty about GM caused bonds in the auto sector to decline in value. During that time, we used the opportunity to add some higher quality auto-related companies as valuations became compelling. We continue to have a large exposure in the health care sector, in particular hospitals. In addition, the Fund also has large positions in the cable and media area, which includes publishing, radio and TV broadcasting. Finally, we continue to have a large exposure to the telecommunications sector. Q: What is the Fund's tactical view and strategy for the months ahead? A: Going forward, we continue to believe this year is going to be a bond-picker's year and that the key to potential outperformance will be leveraging our strength in credit research. We strive to select the right bonds while maintaining a diligent review of potential credit risks at individual companies. We sell bonds when risks outweigh a bond's income and/or total return potential. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Consumer Discretionary 24.8% Telecommunication 20.1% Materials 11.9% Industrials 10.1% Health Care 9.1% Utilities 7.7% Consumer Staples 4.5% Energy 4.0% Short-Term Securities 4.0% Financials 3.8% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Liberty Media 5.70% 2013 1.4% $16,879,605 Boyd Gaming 6.75% 2014 1.3 15,829,374 Burns Philp Capital Property 10.75% 2011 1.2 15,214,175 MGM MIRAGE 5.88% 2014 1.2 14,807,924 INVISTA 9.25% 2012 1.2 14,629,199 Toys "R" Us 8.88% 2006 1.1 13,999,999 Quality Distribution LLC/Capital 8.10% 2012 1.1 13,492,800 GMAC 6.88% 2011 1.0 12,727,452 Dow Jones CDX HY 8.25% 2010 1.0 12,065,624 Loews Cineplex 9.00% 2014 1.0 11,642,625 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 11.5% of portfolio assets AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +9.31% 3 years +13.98% 5 years +5.68% Since inception (5/1/96) +4.89% at Sept. 30, 2005 1 year +6.79% 3 years +14.12% 5 years +5.60% Since inception (5/1/96) +4.75% - -------------------------------------------------------------------------------- 32 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund We have a large exposure to B-rated securities in the portfolio, a lower exposure to BB- rated securities and a neutral exposure relative to the JP Morgan Index in CCC-rated securities. We continue to believe that we are not getting paid to take additional amounts of risk in the market and so we will continue to look for ways to upgrade credit quality in the portfolio. We still have a positive view of the economy going forward and believe company fundamentals will, for the most part, remain decent. We continue to think that interest rates will trend higher in the months ahead. If the Federal Reserve Board continues to raise rates at a measured pace, we do not believe there will be as much risk to the high yield sector. We are not expecting any kind of a major slow down or recession in the near term; however, having said that, we are not at the beginning of the economic expansion anymore, and, therefore, taking incremental risk does not seem prudent. We believe that default rates have bottomed and are likely to rise modestly during the next 12 months. However, at this time, we do not expect a meaningful rise in high yield defaults during the next 12 months. Over time, as we get further and further into economic expansion, the Fund will likely focus on increasing credit quality. We are slowly heading in that direction; however, for now, we think we can still find value in the B-rated segment of the market. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - HIGH YIELD BOND FUND RiverSource VP - High Yield Bond Fund $10,000 $10,011 $11,614 $11,733 $12,040 $11,848 $11,624 $10,540 $12,522 $14,274 $15,603 JP Morgan Global High Yield Index $10,000 $10,337 $11,914 $12,144 $12,725 $12,951 $12,958 $12,532 $15,327 $17,568 $19,184 Lipper High Current Yield Bond Funds Index $10,000 $10,293 $11,895 $12,054 $12,710 $12,791 $11,828 $10,791 $13,142 $14,819 $16,158 5/1/96 8/96 8/97 8/98 8/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - High Yield Bond Fund (from 5/1/96 to 8/31/05) as compared to the performance of two widely cited performance indices, the JP Morgan Global High Yield Index and the Lipper High Current Yield Bond Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The JP Morgan Global High Yield Index is an unmanaged index used to mirror the investable universe of the U.S. dollar global high yield corporate debt market of both developed and emerging markets. The securities used to create the index may not be representative of the bonds held in the Fund. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper High Current Yield Bond Funds Index includes the 30 largest high yield bond funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 33 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Income Opportunities Fund (formerly AXPVP - Income Opportunities Fund) Below, the portfolio management team discusses RiverSource VP - Income Opportunities Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Income Opportunities Fund perform for the 12 months ended Aug. 31, 2005? A: RiverSource VP - Income Opportunities Fund rose 7.73% for the 12 months ended Aug. 31, 2005. The Fund underperformed its benchmark, the Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index (Merrill Lynch Index), which advanced 8.35%. The Lipper High Current Yield Bond Funds Index, representing the Fund's peer group, gained 9.04%. Q: What market conditions were present during the fiscal year? A: The fiscal year was a tale of two high yield bond markets. During the first half of the annual period, the high yield bond market provided strong returns even as the Federal Reserve Board (the Fed) raised the targeted federal funds rate four times. In our view, the Fed's four consecutive rate hikes of 25 basis points (0.25%) were widely expected by investors and, thus, already priced into the market. High yield bond prices were supported by ongoing economic growth, all-time low default rates and compelling valuations. During the second half of the fiscal year, the Fed raised rates four additional times, but economic growth fundamentals remained generally solid and high yield bond default rates remained low. The difference in yield between high yield bonds and U.S. Treasuries tightened dramatically by mid-March in response to the favorable economic and default fundamentals. As we moved into the spring, investors grew concerned that the Fed may continue to raise short-term interest rates to the point of putting economic growth at risk. Indeed, certain economic data during these months supported this theory, including what seemed like a pause in jobs creation and factory orders. The tight valuations and the economic cross-currents led to a pullback in the high yield market in the late spring. In looking at returns by risk category, lower quality bonds (bonds rated CCC) outperformed higher quality bonds by more than 500 basis points (5.0%) during the fiscal year ended Aug. 31, 2005. Q: What factors most significantly affected the Fund's performance? A: On the positive side, the Fund benefited from its sizable allocations to the energy distribution (pipeline), defense, cable and wireless industries, as these industries were solid performers. The Fund also benefited from its modest allocations to the autos and airlines areas, as these industries underperformed. The Fund further benefited from its emphasis on B-rated bonds and its smaller position in BB-rated bonds, as bonds with B credit ratings outperformed those rated BB for the fiscal year overall. As the year progressed, we started upgrading credit quality in the portfolio and believe that helped the Fund's performance during the sell-off in the high yield bond market this past spring. On the negative side, the riskiest areas of the high yield bond market outperformed higher quality bonds for the annual period, and because the Fund cannot invest in bonds rated CCC by both national rating agencies, the Fund's relative performance to the Lipper peer group lagged. The Fund's performance relative to the Merrill Lynch Index was due in part to its modest position in 20- to 30-year bonds, as longer maturity bonds performed well during the fiscal year. From an industry perspective, the Fund's large exposure to the broadcast radio and gaming industries detracted from performance. These higher rated and more stable industries underperformed in the environment of higher risk outperforming. Q: What changes did you make to the Fund and how is it currently positioned? A: As mentioned, we have been upgrading the credit quality in the Fund's portfolio through the fiscal year. During the second half of the annual period in particular, as we grew more cautious on high yield valuations, we somewhat reduced the Fund's significant exposure to bonds rated B and increased the allocation to higher quality bonds rated BB, thereby taking a more defensive posture. While maintaining the Fund's focus on B-rated bonds, the Fund's allocation to bonds rated BB and higher increased more than 20% from December 2004 to Aug. 31, 2005. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +7.73% +8.35% +9.04% +7.73% = RiverSource VP - Income Opportunities Fund +8.35% = Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index (unmanaged) +9.04% = Lipper High Current Yield Bond Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 34 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund During the annual period, we reduced the Fund's allocations to the building materials, wireless, paper and chemical industries. We increased the Fund's exposure to the integrated utilities and the energy distribution (pipeline) industry, which tend to be higher-rated securities. We also added publicly-traded floating rate securities to the Fund during the annual period to help balance interest rate risk. Floating rate securities, or instruments with a variable interest rate, tend to maintain their value in periods of rising rates because their coupon interest payments are pegged to short-term interest rates and "float" upward as rates rise. Throughout, we continued to seek out asset-rich companies. As of Aug. 31, 2005, the Fund had sizable allocations compared to the Merrill Lynch Index in the defense, energy distribution (pipeline), gaming, broadcast radio and integrated utilities industries. The Fund had more modest exposure than the Merrill Lynch Index to the retail, technology, airlines and paper and packaging industries at the end of the annual period. In all, the annual turnover rate for the portfolio was 93%. Q: How do you intend to manage the Fund in the coming months? A: Going forward, we continue to believe this year is going to be a bond-picker's year, and the key to potential outperformance will be leveraging our strength in credit research. We strive to select the right bonds while maintaining a diligent review of potential credit risks at individual companies. We sell bonds when risks outweigh a bond's total return potential. In addition, we expect to continue to upgrade credit quality in the portfolio when incremental spread does not compensate us for incremental risk. We have a bottom-up approach when selecting credits. One of our competitive advantages is our team of nine analysts who are experts in the industries they cover. We believe that good security selection based on quality and in-depth security research will be key to performance. We still have a positive view of the economy going forward and believe company fundamentals will remain solid. We continue to think that interest rates are likely to trend higher in the months ahead. If the Fed continues to raise rates at a measured pace, we believe the impact on high yield from AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +7.73% Since inception (6/1/04) +10.51% at Sept. 30, 2005 1 year +5.46% Since inception (6/1/04) +9.26% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Consumer Discretionary 23.0% Telecommunications 17.0% Utilities 14.0% Materials 13.1% Industrials 11.4% Health Care 5.8% Consumer Staples 4.5% Short-Term Securities 3.9% Energy 3.8% Financials 2.3% Asset-Backed 1.2% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Qwest 8.88% 2012 1.8% $770,212 GMAC 6.88% 2011 1.6 710,237 Utilicorp Canada Finance 7.75% 2011 1.4 595,649 Crown European Holdings 10.88% 2013 1.2 536,899 Dex Media East LLC/Finance 9.88% 2013 1.1 503,405 Encore Acquisition 6.25% 2014 1.1 497,500 Salem Communications 7.75% 2010 1.1 495,922 Norcraft CompaniesLP/Finance 9.00% 2011 1.1 493,500 NationsRent Companies 9.50% 2010 1.1 476,325 Emmis Operating 6.88% 2012 1.0 459,999 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 12.5% of portfolio assets - -------------------------------------------------------------------------------- 35 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund higher rates will be muted. We are not expecting a major slowdown or recession in the near term; however, having said that, we are no longer at the beginning of an economic expansion. We believe that default rates have bottomed out and are likely to rise modestly over the next 12 months, but currently, we do not expect a meaningful rise in high yield defaults. Over time, as we get further and further along in the economic expansion, the Fund will likely enhance its focus on increasing credit quality. While we have been gradually heading in that direction, for now, we think we can still find value in B-rated bonds and maintain the Fund's greatest allocation to this segment of the high yield bond market. As always, we will continue to monitor the pace of U.S. economic growth, the actions of the Fed and the quality of new issues in the high yield bond market. We continue to seek opportunities to capitalize on attractively valued bonds that have the potential for positive returns. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - INCOME OPPORTUNITIES FUND RiverSource VP - Income Opportunities Fund $10,000 $10,517 $10,930 $11,175 $10,997 $11,331 Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index $10,000 $10,477 $10,870 $11,158 $10,997 $11,352 Lipper High Current Yield Bond Funds Index $10,000 $10,388 $10,872 $11,178 $10,926 $11,328 6/1/04 8/04 11/04 2/05 5/05 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Income Opportunities Fund (from 6/1/04 to 8/31/05) as compared to the performance of two widely cited performance indices, the Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index and the Lipper High Current Yield Bond Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Merrill Lynch U.S. High Yield Cash Pay BB-B Rated Constrained Index is an unmanaged index of high yield bonds. The index is subject to a 2% cap on allocation to any one issuer. The 2% cap is intended to provide broad diversification and better reflect the overall character of the high yield market. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper High Current Yield Bond Funds Index includes the 30 largest high yield bond funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 36 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - International Opportunity Fund (formerly AXP VP - Threadneedle International Fund) Below, RiverSource VP - International Opportunity Fund portfolio managers Alex Lyle and Dominic Rossi of Threadneedle International Limited (Threadneedle) describe the Fund's results and positioning for the 12 months ended Aug. 31, 2005. Q: How did RiverSource VP - International Opportunity Fund perform for the fiscal year ended Aug. 31, 2005? A: The Fund gained 23.29% for the 12-month period ended Aug. 31, 2005. The Fund slightly underperformed its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index, which advanced 24.09% for the period. The Lipper International Large-Cap Core Funds Index, representing the Fund's peer group, rose 24.08% over the same time frame. Q: What factors most significantly affected performance? A: Throughout the fiscal year, we have been opportunistically shifting the portfolio towards growth-oriented stocks. In the first half of the period, in particular, this strategy hurt the Fund's performance, largely because we were ahead of most investors in our conviction toward growth-oriented companies. Although we had anticipated that investors' preference -- and hence market favor -- would move to growth stocks as the global recovery moved into its next phase, the change was slower than we had expected. In short, we increased our position in growth stocks, but these stocks did not perform well for the first half of the year, so Fund performance was adversely affected. The second half of the year showed better results for growth-type stocks with companies such as Indra Sistemas, an IT company in Spain; Standard Chartered, a U.K. bank specializing in the Far East; Continental, a German automobile parts and systems manufacturer; and Amada, a Japanese machinery company showing excellent performance. Our asset allocation in Japan had a strong impact on performance over the period, with market-driven performance early on hurting us and later in the period benefiting us. Japan is the largest position in the Fund, at approximately 20% of the Fund's assets. Early in the period, small company stocks in Japan saw phenomenally strong performance. However, the Fund was heavily invested in Japanese mid- and large-cap stocks and missed much of that rally. In the last few months of the period, however, the market rallied again, and this time to our advantage. The stocks we owned in Japan performed well, and our sizeable allocation to Japan was also helpful. Banks, brokers, and other companies within the financials sector have led the way. In addition, some of the domestic cyclical stocks, such as construction and steel companies, have also helped the Fund's performance. Typically, cyclical stocks get a boost in a recovering economy, as has been the case in Japan. Their domestic economy is still early in its recovery cycle and government reforms remain on the horizon. We have retained a reflationary focus in Asia. Singapore companies such as City Developments, a property company, and DBS Group Holdings, a commercial bank, are examples of this ongoing reflation story that have been good performers late in the period. Energy and mining stocks put in especially strong performance over the period. Among the noteworthy were oil stocks Neste Oil (Finland), ENI (Italy) and BG Group (U.K). In mining, names like Cia Vale do Rio Doce (Brazil) and BHP Billiton (Australia) significantly boosted performance. Q: What changes did you make to the Fund? A: Throughout the 12-month period, we have been selectively moving out of cyclical stocks, and adding good quality growth companies that we believe can achieve above-average growth. We think these companies will continue to serve the Fund as the global economy has moved more solidly into its next phase of growth, as mentioned in the question above. Some growth-oriented companies added within the period include: Fresenius Medical Care, a German health care company specializing in filters for dialysis machines; Reckitt Benckiser, a U.K. household goods company; Atos Origin, a French software integration company; and Neopost, a French office electronics business. Mining and energy-related sectors have been strong through the period. We added two mining stocks to complement the holdings. The first was Cameco, the Canadian uranium producer. For some time, there has been limited capacity for uranium production, as nuclear power has waned in popularity. Traditionally, Russia has been a good long-term supplier but that country's supplies are now dwindling. Bringing new uranium mines into production takes a considerable time, so Cameco should continue to benefit from the higher price of uranium, given the favorable [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +23.29% +24.09% +24.08% +23.29% RiverSource VP - International Opportunity Fund +24.09% MSCI EAFE Index (unmanaged) +24.08% Lipper International Large-Cap Core Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 37 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - International Opportunity Fund demand/supply dynamics. Another mining company we added to the Fund was Anglo American, a U.K. mining company. Anglo American is a global leader in the mining and natural resource sectors. In the energy sector, oil reached record highs during this reporting period. We sold our position in Petrobras. The Brazilian oil company had performed well, but we have growing concerns about the political environment in Latin America, with elections due next year in both Brazil and Mexico. We reinvested the proceeds in PetroChina, which is currently offering an attractive yield. In the financials sector, we have focused on banks with good growth prospects. We added Bank of Yokohama and Mizuho Financial Group in Japan. We also sold Anglo Irish Bank, a long-term holding that had performed very strongly. Given that the bank lends primarily to medium-sized businesses, we felt it could be vulnerable to the slowing pace of economic activity. We have also reduced the exposure to the Spanish bank Santander, which took over Abbey National in the U.K. Abbey remains heavily exposed to the U.K. housing market, which has shown clear signs of slowing. We reinvested the proceeds in banks that are well placed to benefit from European economies with low levels of consumer debt, such as EFG Eurobank Ergasias in Greece and Erste Bank in Austria, which has significant exposure to Eastern Europe. Both banks were sold-off by investors in light of the 'no' votes by France and the Netherlands in the EU referendums held in the summer. We took advantage of the dip in their share prices to purchase these stocks, as we liked the growth/valuation mix for both banks. We reduced exposure to several sectors, including telecommunications and real estate. Telecommunications remains a very competitive area particularly in businesses related to mobile telephone products and service, and AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +23.29% 3 years +13.88% 5 years -4.64% 10 years +3.22% Since inception (1/13/92) +4.72% at Sept. 30, 2005 1 year +23.94% 3 years +19.99% 5 years -2.79% 10 years +3.45% Since inception (1/13/92) +4.97% COUNTRY COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Japan 20.7% United Kingdom 19.8% France 10.0% Switzerland 8.9% Germany 8.6% Italy 3.8% Spain 3.0% Hong Kong 2.9% South Korea 2.7% Netherlands 2.3% Australia 1.9% Finland 1.6% Sweden 1.5% Taiwan 1.5% Denmark 1.3% Mexico 1.2% Austria 1.0% Singapore 1.0% Other* 6.3% * Includes Brazil, Canada, China, Czechoslovakia Federated Republic, Greece, Hungary, Ireland, South Africa, Thailand & Cash & Short-Term Securities. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Eni (Italy) 2.8% $33,218,061 Roche Holding (Switzerland) 2.7 31,941,809 Total (France) 2.5 29,360,358 Standard Chartered Bank (United Kingdom) 2.1 24,421,479 Tesco (United Kingdom) 1.8 21,523,128 UBS (Switzerland) 1.8 21,474,621 AXA (France) 1.7 20,135,850 Vodafone Group (United Kingdom) 1.6 19,213,019 BG Group (United Kingdom) 1.6 19,168,607 Nestle (Switzerland) 1.4 16,903,724 Note: Certain foreign investment risks include: changes in currency exchange rates, adverse political or economic order, and lack of similar regulatory requirements followed by U.S. companies. For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 20.0% of portfolio assets - -------------------------------------------------------------------------------- 38 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - International Opportunity Fund companies were not producing the high levels of revenue growth that the market had anticipated. We have reduced our holding in Vodafone Group, a U.K company, and we have also sold our holding in Belgacom -- the Belgium fixed-line equipment and services company. Real estate is another sector where we have reduced our exposure, primarily to take profits in some markets after strong performance. Q: How is the Fund currently positioned, and how do you intend to manage the Fund in the coming months? A: Overall, the Fund's focus on growth remains very much in place and is starting to bear fruit. We believe that quality growth stocks will be re-rated as economic and earnings momentum continues to wane. Commodities, such as oil and iron ore, remain 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. The Japanese recovery is still in play. We feel that Japan's economy and markets will grow stronger. Our opinion was validated when, on Sept. 11, 2005, a general election in Japan brought a landslide victory for Japanese Prime Minister Koizumi, who can now move forward with his broad mandate for much needed reforms. We maintain a greater-than-MSCI Index position in Japan. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - INTERNATIONAL OPPORTUNITY FUND RiverSource VP - International Opportunity Fund $10,000 $10,910 $11,930 $12,418 $15,172 $17,409 $10,985 $9,295 $9,619 $11,136 $13,729 MSCI EAFE Index $10,000 $10,819 $11,832 $11,847 $14,931 $16,396 $12,447 $10,619 $11,636 $14,323 $17,773 Lipper International Large-Cap Core Funds Index $10,000 $11,095 $13,077 $13,261 $16,684 $20,170 $15,340 $13,258 $14,303 $16,720 $20,746 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - International Opportunity Fund (from 9/1/95 to 8/31/05) as compared to the performance of two widely cited performance indices, the MSCI EAFE Index and the Lipper International Large-Cap Core Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Morgan Stanley Capital International EAFE Index (MSCI EAFE Index), an unmanaged index, is compiled from a composite of securities markets of Europe, Australia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper International Large-Cap Core Funds Index includes the 30 largest international large cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 39 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Large Cap Equity Fund (formerly AXP VP - Large Cap Equity Fund) On Oct. 1, 2004, Bob Ewing and Nick Thakore began managing the Fund on a temporary basis for Doug Chase, the Fund's portfolio manager, who took a leave of absence. Mr. Chase subsequently decided to leave American Express and on Jan. 3, 2005, Mr. Ewing and Mr. Thakore were named portfolio managers of the Fund. Together, they manage the Fund in conjunction with a team of equity analysts. Below, Bob Ewing and Nick Thakore discuss RiverSource VP - Large Cap Equity Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Large Cap Equity Fund perform for the fiscal year? A: RiverSource VP - Large Cap Equity Fund advanced 12.42% for the 12 months ended Aug. 31, 2005. The Fund underperformed its benchmarks, the Russell 1000(R) Index (Russell Index) and the Standard & Poor's 500 Index (S&P 500 Index), which increased 14.63% and 12.56%, respectively, during the period. The Fund's peer group, the Lipper Large-Cap Core Funds Index, gained 11.46% during the same time frame. Q: What factors most significantly affected performance for the period? A: During the 12-month period, stock selection and sector allocation detracted from performance relative to the Russell Index. Stock selection within the information technology and telecommunications sectors helped Fund performance. However, selection within the financials and consumer discretionary sectors detracted from performance. In terms of sector allocation, the industrial sector did not perform well and as a result, our smaller position helped performance. The Fund's cash position detracted from performance, as holding cash during the period when the market was up meant losing out on opportunities in the market for positive returns. In addition, the Fund's large exposure to the health care sector hurt performance. Three of the largest contributors to Fund performance during the period were Sprint Nextel, cell phone maker Nokia and Medco Health Solutions, a health services company. The Fund's smaller position in Home Depot detracted from performance during the period as did our smaller position in computer company Apple, which had strong performance throughout the year. Finally, our larger position in financial company Fannie Mae hurt performance as the stock struggled throughout the period. Q: What changes did you make to the portfolio and how is it currently positioned? A: The annual period encompassed our interim management period and the subsequent naming as portfolio managers. In January 2005, we began implementing our current three-sided investment process in which we each manage approximately one-third of the Fund's assets while our equity analyst team selects stocks for the remaining one-third of the Fund. Regarding sector allocation, we lowered our exposure to the health care sector the most throughout the 12-month period. We sold some holdings in the consumer staples area and in industrials, where we believe we are late in the economic expansion and do not think it is prudent to have large positions in the sector. Finally, we added positions to the telecommunications services, utilities and consumer discretionary sectors. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +12.42% +14.63% +12.56% +11.46% +12.42% = RiverSource VP - Large Cap Equity Fund +14.63% = Russell 1000(R) Index (unmanaged) +12.56% = S&P 500 Index (unmanaged) +11.46% = Lipper Large-Cap Core Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 40 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Q: How do you plan to manage the Fund in the coming months? A: We are somewhat cautious given that this is the fourth year of economic expansion. Though we believe the economy will continue to grow, we think its growth rate will noticeably decelerate. In the context of this economic outlook and what we consider to be high equity valuations, we think it is appropriate to be careful. Although this Fund essentially uses a fundamentally driven, bottom-up strategy, we realize how important it is to be cognizant of market trends and potential risks. We continue to have a more cautious stance, emphasizing higher quality stocks over lower quality stocks that have high amounts of leverage or exhibit volatile earnings. We continue to see benefits from our three-sided approach to managing this Fund. We oversee all three segments to monitor overall sector weightings and individual stock positions. We believe that our strategy, which taps opportunities across multiple sectors and investment styles, will be instrumental to the Fund's results in the current market environment. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +12.42% 3 years +10.14% 5 years -6.12% 10 years +5.03% Since inception (10/13/81) +10.59% at Sept. 30, 2005 1 year +14.14% 3 years +14.88% 5 years -4.37% 10 years +4.92% Since inception (10/13/81) +10.59% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Financials 19.9% Information Technology 12.6% Health Care 12.2% Telecommunication Services 10.8% Consumer Discretionary 10.5% Energy 8.5% Consumer Staples 8.3% Industrials 6.7% Short-Term Securities* 5.9% Materials 2.8% Utilities 1.8% * Of the 5.9%, 3.3% is due to security lending activity and 2.6% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Sprint Nextel 5.6% $146,090,113 NTL 2.8 72,709,876 Exxon Mobil 2.6 67,465,669 American Intl Group 1.7 45,253,132 Bank of America 1.7 44,652,015 Citigroup 1.6 42,516,426 Pfizer 1.6 41,010,418 Altria Group 1.4 37,276,716 General Electric 1.3 34,185,135 ConocoPhillips 1.3 33,497,849 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 21.6% 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. - -------------------------------------------------------------------------------- 41 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - LARGE CAP EQUITY FUND RiverSource VP - Large Cap Equity Fund $10,000 $10,590 $13,605 $13,378 $18,744 $22,354 $14,199 $12,200 $13,439 $14,497 $16,297 Russell 1000(R) Index $10,000 $11,801 $16,456 $17,460 $24,331 $29,231 $21,801 $17,992 $20,306 $22,607 $25,914 S&P 500 Index $10,000 $11,873 $16,699 $18,055 $25,240 $29,359 $22,198 $18,205 $20,402 $22,740 $25,596 Lipper Large-Cap Core Funds Index $10,000 $11,641 $15,742 $16,794 $22,650 $28,163 $20,807 $17,346 $19,052 $20,574 $22,932 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Large Cap Equity Fund (from 9/1/95 to 8/31/05) as compared to the performance of three widely cited performance indices, the Russell 1000(R) Index, the S&P 500 Index and the Lipper Large-Cap Core Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 1000(R) Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index and represents approximately 92% of the total market capitalization of the Russell 3000(R) Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. Recently, the Fund's investment manager recommended to the Fund that the Fund change its comparative index from S&P 500 Index to the Russell 1000(R) Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000(R) Index will be included. - -------------------------------------------------------------------------------- 42 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Large Cap Value Fund (formerly AXP VP - Large Cap Value Fund) Below, Portfolio Manager Bob Ewing discusses RiverSource VP - Large Cap Value Fund's results and positioning for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Large Cap Value Fund perform for the fiscal year? A: RiverSource VP - Large Cap Value Fund advanced 12.04% for the 12 months ended Aug. 31, 2005. The Fund underperformed its benchmark, the Russell 1000(R) Value Index (Russell Index), which increased 16.86% during the period. The Fund's peer group, the Lipper Large-Cap Value Funds Index, gained 13.74% during the same time frame. Q: What factors most significantly affected performance for the period? A: During the annual period, stock selection was favorable in some sectors, while detrimental in others. Stock selection within the information technology and telecommunications sectors helped Fund performance. However, selection within the financials and consumer staples sectors detracted from performance. In terms of sector allocation, the industrial sector did not perform well and as a result, our smaller-than-Russell Index position helped performance. In addition, our larger exposure to the technology sector compared to the Russell Index contributed positively during the fiscal year. The Fund's relatively small cash position detracted from performance, as holding cash during the period instead of investing it when the market was up meant losing out on opportunities in the market for positive returns. Finally, the Fund's low exposure to the utilities sector hurt performance while the sector was up approximately 40%. Overall, the energy sector performed extremely well during the period and stock selection within contributed positively to performance, specifically ConocoPhillips, Anadarko Petroleum and Transocean. Cell phone maker Nokia and hospital company HCA also performed well and were significant positive contributors. Conversely, not owning certain energy stocks or having smaller positions in these stocks during the period detracted from performance. The Fund's significantly lower-than-Russell Index position in Exxon Mobil detracted as the stock was a strong performer. Other energy stocks that detracted from relative performance included Occidental Petroleum and refining company Valero. In addition, General Electric, another large percentage of the Russell Index, performed well and our lower exposure hurt performance. Q: What changes did you make to the portfolio and how is it currently positioned? A: We increased the Fund's allocations to the information technology, energy and financials sectors. Throughout the period there were very exploitable valuation opportunities in information technology and we took the chance to add to the sector. Within energy, we added to the Fund's position throughout the year as we found attractive opportunities. However, we are currently in a volatile energy environment and are content to keep the Fund's energy allocation as is until we see how things play out through the close of the year. We lowered positions in health care, materials and industrials. Specifically, hospitals and health maintenance organizations (HMOs) have performed very well over the year, and we have taken down some of our positions, including well-known HMO Aetna. We also eliminated some strong performing stocks in the chemicals subsector of materials during the period. Finally, we decreased our holdings in the industrial sector as we are late in the economic expansion and a large position does not seem prudent. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +12.04% +16.86% +13.74% +12.04% = RiverSource VP - Large Cap Value Fund +16.86% = Russell 1000(R) Value Index (unmanaged) +13.74% = Lipper Large-Cap Value Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 43 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Value Fund Q: How do you plan to manage the Fund in the coming months? A: We are somewhat cautious given that this is the fourth year of economic expansion. Though we believe the economy will continue to grow, we think its growth rate will noticeably decelerate. In the context of this economic outlook and what we consider to be high equity valuations, we think it is appropriate to be careful. We are maintaining our key portfolio themes. We continue to emphasize higher quality stocks over lower quality stocks that have high amounts of leverage or exhibit volatile earnings. We have tried to keep the average price/earnings ratio of our holdings below that of the benchmark, the Russell Index. We have also sought to keep the portfolio's volatility close to or lower than that of the Fund's benchmark, thus positioning the Fund to perform better in a flat or down market. We are finding more opportunities among large-cap stocks, and therefore, the Fund's average market capitalization has increased. At this stage in the economic cycle, we expect economic and corporate growth to decelerate a bit and deceleration tends to favor bigger, more secure companies. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +12.04% Since inception (2/4/04) +7.96% at Sept. 30, 2005 1 year +12.15% Since inception (2/4/04) +8.12% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Financials 29.0% Energy 14.4% Consumer Discretionary 9.4% Information Technology 8.9% Consumer Staples 8.6% Industrials 8.5% Telecommunication Services 6.6% Health Care 6.2% Utilities 4.4% Materials 4.0% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Exxon Mobil 4.4% $614,813 Citigroup 3.4 475,474 Bank of America 3.3 470,490 ConocoPhillips 2.6 364,516 Altria Group 2.2 310,939 American Intl Group 2.2 306,892 Chevron 2.0 277,221 JPMorgan Chase & Co 1.9 264,816 Wells Fargo & Co 1.5 207,895 Pfizer 1.5 204,881 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 25.0% 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. - -------------------------------------------------------------------------------- 44 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Value Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - LARGE CAP VALUE FUND RiverSource VP - Large Cap Value Fund $10,000 $10,204 $9,954 $10,069 $10,675 $11,153 $10,996 $11,280 Russell 1000(R) Value Index $10,000 $10,214 $9,978 $10,214 $11,078 $11,618 $11,524 $11,935 Lipper Large-Cap Value Funds Index $10,000 $10,211 $9,975 $10,021 $10,692 $11,121 $10,974 $11,397 2/1/04 2/04 5/04 8/04 11/04 2/05 5/05 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Large Cap Value Fund (from 2/1/04 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell 1000(R) Value Index and the Lipper Large-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 1000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000(R) Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Large-Cap Value Funds Index, an index published by Lipper Inc., includes the 30 largest large-cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 45 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Mid Cap Growth Fund (formerly AXP VP - Equity Select Fund) Below, portfolio manager Duncan Evered discusses the results and positioning for RiverSource VP - Mid Cap Growth Fund for the annual period ended Aug. 31, 2005. Q: How did RiverSource VP - Mid Cap Growth Fund perform for the 12-month period ended Aug. 31, 2005? A: RiverSource VP - Mid Cap Growth Fund rose 23.03% for the fiscal year ended Aug. 31, 2005. This underperformed the Fund's benchmark, the Russell Midcap(R) Growth Index (Russell Index), which advanced 26.45% for the period. The Fund's peer group, as represented by the Lipper Mid-Cap Growth Funds Index, was up 23.93% for the same time frame. Q: What factors most significantly affected performance for the period? A: Performance for the fiscal year was a tale of two very different six-month periods, where stock selection weighed more heavily on performance than sector positioning. For the first half of the period (September through February), stocks in the healthcare and technology areas underperformed those in the Russell Index. One stock in particular, Biogen Idec, a biotechnology company, was a fairly large position in the Fund that had developed a promising new therapy drug for multiple sclerosis. Unexpectedly, and after FDA approval, the drug was pulled from the market, pending further research, which resulted in the single largest negative contribution to performance for the period. In the technology sector, Digital River and Juniper Networks detracted from performance during the first half of the period. The technology sector as a whole improved favorably later on in the period. The second half of the 12-month period really showed a significant reversal in stock selection and sector performance with stocks in sectors that were hurting earlier in the period became positive contributors. Whole Foods Market, a leading food retailer, investment firm Legg Mason, and EOG Resources, an oil and gas service company, contributed to performance during the second half of the period. The largest single sector in terms of contribution to performance in the second half of the period was health care. The health care sector ended up contributing to overall performance despite weak stock selection earlier in the period. Techne, a life science supplier, was a positive contributor during the period. Consumer staples and technology were the next largest sectors in terms of contribution. The change in market conditions during the second half of the period ended up favoring the Fund's style of investing in quality, durable, mid-sized growth holdings. Q: What changes did you make to the Fund? A: In terms of changes made to the Fund during the annual period we increased the Fund's weighting in health care, which consists of biotechnology, service and device companies. We think there are many interesting mid-sized growth opportunities within the health care sector that may be more economically resistant as the economy slows. We have maintained the Fund's lower exposure to the consumer discretionary sector relative to the Russell Index. We think the best days for the consumer are probably over for now. The significant fiscal and monetary stimulus -- tax cuts, low interest rates and the appreciation people have had in their homes -- have peaked, and we are in a period of slowing corporate earnings. There seems to be a reluctance to hire in corporate America and certainly in troubled industries like the automotive industry where we expect further workforce reductions. We think that the consumer discretionary sector is a place to be careful and yet we have found companies that we think will contribute to the Fund's performance, namely women's clothier Chico's and restaurant operator Panera Bread. During the fiscal year, we eliminated some of the Fund's technology holdings in larger companies that have grown too big for the Fund, in particular Electronic Arts and Symantec. In addition, there were a few buyouts during the period where we eliminated a position, including SunGard Data Systems, a software company, which was a good performer for the Fund during the period. Finally, we kept a large exposure in the energy sector due to surging global demand for oil (particularly in growing economies such as India and China), diminished supply, and the lack of new resources. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +23.03% +26.45% +23.93% +23.03% = RiverSource VP - Mid Cap Growth Fund +26.45% = Russell Midcap(R) Growth Index (unmanaged) +23.93% = Lipper Mid-Cap Growth Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 46 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Growth Fund Q: What is the Fund's tactical view and strategy for the months ahead? A: The Fund looks for quality, durable and growing mid-sized companies in the U.S. It may not be a strategy that the market favors every month or every quarter, but we believe it serves investors well over the long term. We select our holdings after we research each company thoroughly. We know the management, the franchise and the financials of each company well enough to commit our shareholders' capital. As always, we look to assemble 60 to 80 of the better up-and-coming companies across all industries. The Fund is a diversified fund. We manage risk within the Fund through diversification, by actively monitoring the fundamental change for each security, and by looking each week with our team for chronic underperformers and companies that are driving performance. We think focusing on each company's durability and balance sheets serve the Fund well. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +23.03% 3 years +13.34% Since inception (5/1/01) +4.51% at Sept. 30, 2005 1 year +20.11% 3 years +16.14% Since inception (5/1/01) +4.82% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Health Care 24.2% Information Technology 22.4% Consumer Discretionary 15.1% Energy 13.1% Industrials 10.1% Financials 5.3% Materials 4.0% Consumer Staples 3.9% Short-Term Securities 1.9% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Whole Foods Market 3.9% $9,997,615 Diagnostic Products 3.1 7,908,677 Legg Mason 2.9 7,516,439 Williams-Sonoma 2.8 7,034,734 Robert Half Intl 2.6 6,579,185 Fiserv 2.5 6,473,350 Fastenal 2.4 6,013,413 Techne 2.3 5,859,023 Fair Isaac 2.3 5,757,112 Paychex 2.2 5,635,511 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 27.0% 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. - -------------------------------------------------------------------------------- 47 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Growth Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - MID CAP GROWTH FUND RiverSource VP - Mid Cap Growth Fund $10,000 $9,318 $8,314 $9,828 $9,840 $12,107 Russell Midcap(R) Growth Index $10,000 $8,614 $6,600 $8,606 $9,248 $11,694 Lipper Mid-Cap Growth Funds Index $10,000 $8,877 $6,596 $8,177 $8,429 $10,446 5/1/01 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Mid Cap Growth Fund (from 5/1/01 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell Midcap(R) Growth Index and the Lipper Mid-Cap Growth Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell Midcap(R) Growth Index, an unmanaged index, measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000(R) Growth Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Mid-Cap Growth Funds Index includes the 30 largest mid cap growth funds tracked by Lipper Inc. The index's net returns include net reinvested dividends. - -------------------------------------------------------------------------------- 48 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Mid Cap Value Fund (formerly AXP VP - Mid Cap Value Fund) Below, portfolio managers Warren Spitz, Steve Schroll and Laton Spahr discuss the results and positioning for RiverSource VP - Mid Cap Value Fund for the reporting period ended Aug. 31, 2005. Q: How did RiverSource VP - Mid Cap Value Fund perform since its inception on May 2, 2005 through Aug. 31, 2005? A: RiverSource VP - Mid Cap Value Fund gained 12.70% for the period from its inception on May 2, 2005 through Aug. 31, 2005. The Fund's benchmark, the Russell Midcap(R) Value Index, advanced 11.78% for the period from April 30, 2005 through Aug. 31, 2005. The Lipper Mid-Cap Value Funds Index, representing the Fund's peer group, rose 11.29% over the same time frame. Q: What factors most significantly affected the Fund's performance? A: Contributing most to the period was the Fund's significant exposure to stock selection within the energy sector. Within energy, GlobalSantaFe, Suncor Energy, BJ Services and Sunoco were outstanding individual stock performers. In other areas, PacifiCare Health Systems in the health care sector and Aon in the insurance area also performed well. YORK International in the industrials sector was another strong performer, which saw its share price rise upon its announcement by Johnson Controls that is aiming to acquire YORK. Further boosting the Fund's returns was a modest allocation to the poorly performing consumer staples sector. The Fund also benefited from the fact that higher dividend-paying sectors outperformed lower dividend-paying sectors for the reporting period overall. Detracting modestly from relative results was a sizable allocation to consumer discretionary. The Fund's holding in Family Dollar Stores was among the Fund's worst individual stock performers for the period. Q: What changes did you make to the Fund? A: We made no meaningful strategic changes to the Fund over the reporting period. Rather, we focused during these nearly four months since the Fund's inception on the process of investing cash inflows as quickly, efficiently and effectively as possible into select mid-cap value stocks. Q: How do you intend to manage the Fund in the coming months? A: We are reasonably confident the U.S. economy will continue to grow. Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy and thus will not be the catalyst for any shift in our management strategy. For the near term, we do believe the Federal Reserve Board (the Fed) will likely continue to raise short-term interest rates before year-end 2005 despite the relief and rebuilding efforts following Katrina. In addition, Katrina may have a beneficial effect on the industrials sector, where the Fund has had a significant allocation for some time now, as the hurricane highlighted the need for infrastructure improvements not only along the Gulf Coast but in many other parts of the nation as well. That said, though the pace of economic growth ahead and the direction of Fed action may be less than certain due to recent events, neither our positioning of the Fund nor our allocation strategy going forward are highly dependent on these macro factors. Within the equity market, we believe that increased levels of merger and acquisition activity seen of late will likely continue to be a factor in the coming months. Just as several Fund holdings benefited from such activity during the period just ended, we expect select portfolio positions to benefit from corporate restructuring in the months ahead. We further believe that style investing may become less critical going forward, with equity returns increasingly dependent on individual industry and company performance, including the ability of corporations to maintain profit margins in the face of increasing cost pressures in raw materials and, eventually, higher labor costs. Still, we will stay disciplined to our deep value style of investing. We will continue to emphasize stocks with attractive valuations, with a focus on mid-sized company stocks. [BAR CHART] PERFORMANCE COMPARISON For the period ended Aug. 31, 2005 +12.70% +11.78% +11.29% +12.70% = RiverSource VP - Mid Cap Value Fund (inception 5/2/05) +11.78% = Russell Midcap(R) Value Index (unmanaged) (4/30/05 - 8/31/05) +11.29% = Lipper Mid-Cap Value Funds Index (4/30/05 - 8/31/05) (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 49 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Value Fund Finally, we remain optimistic about dividend-paying stocks. Current yield on dividend-paying stocks is still quite attractive relative to fixed income alternatives at present, and we anticipate this trend will continue. In addition, as rhetoric surrounding potential inflationary pressures grows, it is worth noting that unlike Treasury bonds, which pay a fixed rate of income and may not keep pace with inflation, stock dividends have historically outpaced the inflation rate. Interestingly, in the first half of 2005, dividends started growing faster than corporate profits. In the first quarter of 2005, corporate earnings grew by less than 14%, while dividends increased by almost 16%. In the second quarter, dividends jumped by nearly 13%, or almost double the estimated 7% rate of profit growth. Dividends typically have grown faster than earnings only in economic downturns, like in 2001. However, this phenomenon is happening now midway into a business cycle -- a rare occurrence. Furthermore, evidence indicates that there is great potential for this trend to continue. Given these factors and the many other historical benefits of dividend-paying stocks, we expect that investors will be willing to pay more for companies demonstrating dividend growth as part of a total return strategy going forward. The pace of corporate dividend increases continued to accelerate both in frequency and in magnitude during the annual period, with a growing number of companies either initiating or increasing dividend payments. TOTAL RETURNS at Aug. 31, 2005 Since inception (5/2/05)* +12.70% at Sept. 30, 2005 Since inception (5/2/05)* +14.04% * Not annualized. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Financials 22.8% Industrials 18.0% Energy 16.4% Consumer Discretionary 12.0% Materials 9.8% Utilities 8.6% Information Technology 5.8% Consumer Staples 2.9% Telecommunication Services 2.0% Health Care 1.7% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) GlobalSantaFe 3.2% $220,335 XL Capital Cl A 2.3 162,631 Aon 2.3 156,482 ACE 2.2 154,724 Pioneer Natural Resources 2.2 150,669 Suncor Energy 1.8 126,224 Public Service Enterprise Group 1.7 116,318 YORK Intl 1.6 113,268 Pinnacle West Capital 1.6 111,876 NiSource 1.6 111,044 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 20.5% 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. - -------------------------------------------------------------------------------- 50 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - New Dimensions Fund (formerly AXP VP - New Dimensions Fund) RiverSource VP - New Dimensions Fund advanced 7.28% for the 12 months ended Aug. 31, 2005. The Fund underperformed its benchmark, the Standard and Poor's 500 Index (S&P 500 Index), which increased 12.56% during the period. During the fiscal year, the Russell 1000(R) Index was added as the benchmark for the Fund. For the 12-month period, the Fund underperformed the Russell 1000(R) Index, which rose 14.63%. The Fund's peer groups, the Lipper Large-Cap Growth Funds Index, gained 15.47% and the Lipper Large-Cap Core Funds Index, which gained 11.46%, during the same time frame. On Feb. 11, 2005, Michael Nance and Trisha Schuster joined the Fund's portfolio management team as associate portfolio managers. In July 2005, Portfolio Manager Gordon Fines announced his retirement effective Jan. 6, 2006. Michael Nance assumed management of 50% of the Fund's portfolio effective Aug. 1, 2005. Below, the Fund's portfolio managers discuss the Fund's performance for the annual period ended Aug. 31, 2005. Shareholders will be asked to approve a merger of the Fund into RiverSource Variable Portfolio - Large Cap Equity Fund at a shareholder meeting on Feb. 15, 2006. This approval is not guaranteed. Q: What factors most significantly contributed to the Fund's underperformance for the period? A: In our view, there were several factors that contributed to the Fund's underperformance. o We didn't have enough exposure to companies with lower market capitalizations. Companies with market capitalizations between $2 billion and $10 billion continued to outperform larger market capitalization stocks for most of the period. The Fund's fiscal period results were negatively affected by the larger market cap positioning of the portfolio. Because mid-cap stocks are an element of the S&P 500 Index, the Fund's smaller-than-S&P 500 Index position in mid-cap stocks caused the Fund's performance to lag relative to the benchmark. o The Fund's higher-than-S&P 500 Index position in mega-cap stocks detracted during the period. The Fund held large positions in mega-cap stocks such as Citigroup, Pfizer and Wal-Mart Stores resulting in a higher median market capitalization than our peer group. This decision detracted from performance in this fiscal year. o Our stock selection efforts were not as effective as we would have liked. Our stock selection, specifically in the consumer discretionary and health care sectors, hurt performance. Biotechnology company Biogen Idec was a sizeable position in the Fund and the stock was hit very hard during the first quarter of the calendar year as the company faced product safety concerns. In addition, media company Time Warner detracted from performance. o Value stocks outperformed growth stocks, which hurt performance relative to the S&P 500 Index. Since the Fund has a distinct and consistent growth focus, and the S&P 500 Index has both growth and value stocks, it has been a challenging period for growth funds relative to that benchmark. However, the Fund also underperformed our growth fund peer group due to the other factors noted above. We do not believe this style trend can be sustained indefinitely. We firmly believe this imbalance in the equity markets will correct itself at some point. In this environment, we believe it makes sense for investors to maintain their exposure to growth stocks in order to benefit when the market again begins to favor growth stocks. Q: What were the success stories during the period? A: The Fund's large position in the energy industry, which performed well throughout the period, contributed positively to performance. In addition, the Fund's low exposure to the consumer staples industry also contributed. Stocks that helped performance included computer giant Apple Computer, retailer Target and cell phone maker Motorola. Although the Fund's sizeable health care position in Biogen Idec and Pfizer negatively impacted Fund performance as previously mentioned, Fund holdings in health care service company UnitedHealth Group and Amgen helped offset some of the negative returns in the sector. Q: What changes did you make to the portfolio and how is it currently positioned? A: The annual period encompassed the addition of two associate portfolio managers to the management team, which provides the Fund with additional resources. The two managers bring a combined 24 years of investment experience that we believe will add value for shareholders [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +7.28% +12.56% +15.47% +14.63% +11.46% +7.28% = RiverSource VP - New Dimensions Fund +12.56% = S&P 500 Index (unmanaged) +15.47% = Lipper Large-Cap Growth Funds Index +14.63% = Russell 1000(R) Index (unmanaged) +11.46% = Lipper Large-Cap Core Funds Index (unmanaged) (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 51 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - New Dimensions Fund and can help enhance results. With the additional managers, the Fund remains focused on providing shareholders with long-term growth of capital. In addition, the Fund's managers believe that minimizing volatility in the portfolio will help preserve capital for shareholders. Portfolio changes during the annual period include increasing the Fund's exposure to the technology sector as we have started seeing some strong companies emerge in the market. As a result of adding to some of our technology positions, we have more technology companies in the Fund's Ten Largest Holdings such as Microsoft and Motorola. Overall, we emphasize companies that we think are well managed, healthy growing companies in terms of balance sheet and income characteristics. We try to find companies that show not only earnings and sales growth, but the ability to generate sustainable levels of free cash flow. In our view, dividend yield and dividend growth are very important themes in this market cycle. Q: How do you intend to manage the Fund in the coming months? A: We are going to be very stock specific in terms of what we seek to add to the portfolio. We continue to have a preference for select energy stocks, and we are also focusing on the health care segment of the portfolio. In the technology sector, we are focusing on those unique offerings that demonstrate above average growth potential. We feel that an overwhelming driver right now in the marketplace is energy. With gasoline at the pump now approaching $3.00 per gallon, we believe this will start to have an impact on people's behavior and thinking. This is likely a long-term phenomenon. The plus for us of course is to be on the right side of the energy sector and we think we are. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +7.28% 3 years +6.51% 5 years -7.26% Since inception (5/1/96) +6.33% at Sept. 30, 2005 1 year +7.25% 3 years +10.96% 5 years -5.49% Since inception (5/1/96) +6.47% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Information Technology 26.0% Health Care 16.1% Consumer Discretionary 15.4% Energy 11.5% Industrials 9.8% Consumer Staples 7.4% Financials 7.1% Short-Term Securities* 3.5% Telecommunication Services 1.2% Materials 1.0% Utilities 1.0% * Of the 3.5%, 1.4% is due to security lending activity and 2.1% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Microsoft 3.5% $78,466,174 Procter & Gamble 3.3 74,166,885 Boeing 3.2 72,557,460 Motorola 2.8 63,486,088 Comcast Special Cl A 2.8 63,167,977 ConocoPhillips 2.8 62,027,977 Johnson & Johnson 2.8 61,976,214 Charles Schwab 2.7 60,554,936 Exxon Mobil 2.5 56,298,093 Pulte Homes 2.4 53,250,998 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 28.8% 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. - -------------------------------------------------------------------------------- 52 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - New Dimensions Fund Our experience has taught us that during periods of rising interest rates and slowing economic growth, when corporate earnings are nearing a peak, higher quality companies generally perform better than lower quality companies. In fact, a shift in the market emphasis toward quality growth companies with sound balance sheets -- the kind of companies that dominate the Fund's portfolio -- will provide an excellent opportunity for the Fund to regain ground. We express our gratitude for shareholders' patience, and we are optimistic that investors who have expressed long-term confidence in our strategy will be rewarded. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - NEW DIMENSION FUND RiverSource VP - New Dimensions Fund $10,000 $9,914 $13,021 $13,436 $19,162 $25,679 $17,192 $14,584 $16,058 $16,426 $17,622 S&P 500 Index $10,000 $10,050 $14,135 $15,283 $21,364 $24,851 $18,790 $15,409 $17,269 $19,248 $21,666 Russell 1000(R) Index $10,000 $10,023 $13,977 $14,830 $20,665 $24,827 $18,516 $15,281 $17,246 $19,201 $22,010 Lipper Large-Cap Core Funds Index $10,000 $10,020 $13,550 $14,455 $19,496 $24,241 $17,909 $14,931 $16,399 $17,709 $19,738 Lipper Large-Cap Growth Funds Index $10,000 $9,946 $13,519 $14,376 $21,127 $28,010 $15,627 $12,246 $13,597 $13,986 $16,150 5/1/96 8/96 8/97 8/98 8/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - New Dimensions Fund (from 5/1/96 to 8/31/05) as compared to the performance of four widely cited performance indices, the S&P 500 Index, the Russell 1000(R) Index, the Lipper Large-Cap Core Funds Index and the Lipper Large-Cap Growth Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 1000(R) Index, an unmanaged index, measures the performance of the 1,000 largest companies in the Russell 3000(R) Index, and represents approximately 92% of the total market capitalization of the Russell 3000(R) Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Large-Cap Core Funds Index includes the 30 largest large-cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Lipper Large-Cap Growth Funds Index includes the 30 largest large-cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. The Fund's investment manager recommended to the Fund that the Fund change its comparative index from the S&P 500 Index to the Russell 1000(R) Index. The investment manager made this recommendation because the new index more closely represents the Fund's holdings. We will include both indices in this transition year. In the future, however, only the Russell 1000(R) Index will be included. - -------------------------------------------------------------------------------- 53 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - S&P 500 Index Fund (formerly AXP VP - S&P 500 Index Fund) Q: How did RiverSource VP - S&P 500 Index Fund perform for the fiscal year ended Aug. 31, 2005? A: RiverSource VP - S&P 500 Index Fund rose 11.98% for the 12 months ended Aug. 31, 2005. This was less than the Fund's benchmark, the unmanaged Standard & Poor's 500 Index (S&P 500 Index or the Index), which advanced 12.56% during the same period. The Lipper S&P 500 Objective Funds Index, representing the Fund's peer group, returned 12.30% over the same time frame. Q: What market factors most significantly affected Fund performance? A: The Federal Reserve Board (the Fed) raised its short-term interest rate target eight times during the fiscal year to 3.50% at Aug. 31, 2005. The overall stock market provided strong returns during the first half of the annual period, as oil prices began to retreat, consumer confidence remained relatively high and investors generally agreed that the Fed's measured pace of rate increases would help keep inflation in check without derailing U.S. economic growth. Stock prices rose by relatively higher amounts for S&P 500 Index companies that delivered sustainable earnings growth and had less leverage on their balance sheets. Early in the second half of the fiscal year, the U.S. equity markets overall were weak amid concerns about rising interest rates, a flatter yield curve, a slowing of corporate earnings growth and higher energy costs. Stocks then rallied in fits and starts during the second calendar quarter, suggesting that investors were learning to live in harmony, at least temporarily, with higher oil prices and were also encouraged by speculation that Fed tightening was nearing its end. Fear re-entered the picture when oil prices hit $60 per barrel in late June, and markets responded negatively. Nervousness about the overall strength of the economy and the extent and duration of the Fed's tightening cycle also resurfaced. Despite ongoing choppiness, July was a rather bullish month for the broad equity market, reflecting what many economists called a Goldilocks economy -- not too hot and not too cold. Stocks then fell in August, as slower economic growth combined with high jobless claims, soaring gas prices, oil prices jumping past $70 a barrel and the devastating impact of Hurricane Katrina to outweigh surprisingly strong consumer spending. The trend toward an increased focus on the relative importance of dividends, both in terms of investor preference and in the number of companies either initiating or increasing dividend payments, continued through the period. Q: Which equity sectors and securities affected the S&P 500 Index's performance most during the 12 months? A: Energy and information technology were the best performing sectors for the period. On an industry level, oil, gas & consumable fuels provided the strongest returns for the Index, followed by health care providers & services and semiconductors and related companies. On the other hand, materials and telecommunications services lagged the other sectors. Pharmaceuticals, thrifts & mortgage finance and automobiles were the industries that detracted most. Several individual stocks contributed significantly to the performance of the S&P 500 Index over the 12-month period. Some strong performers for the period were Exxon Mobil and ConocoPhillips, both energy giants in the U.S. Other positive contributors included consumer staples conglomerate Altria Group, software behemoth Microsoft and electronics bellwether Intel. Performance laggards for the S&P 500 Index during the annual period included Pfizer, Merck, American International Group, Wal-Mart Stores and Fannie Mae. Each sector and stock in the S&P 500 Index was represented in the Fund at a weighting that approximated that of the Index and therefore had a similar effect on the Fund. Q: What changes were made to the Fund? A: The Fund strives to stay fully invested in the stocks that make up the S&P 500 Index, and we attempt to replicate the Index's performance. Standard & Poor's rebalances the S&P 500 Index each quarter, and we align the Fund's portfolio on that timetable as well. Overall portfolio turnover was just 5% for the annual period. During the fiscal year, Standard & Poor's made 20 additions and 20 deletions to the S&P 500 Index. We made the same changes within the Fund. Some of the additions came from companies that grew in capitalization beyond the S&P MidCap 400 Index, an unmanaged group of [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +11.98% +12.56% +12.30% +11.98% = RiverSource VP - S&P 500 Index Fund +12.56% = S&P 500 Index (unmanaged) +12.30% = Lipper S&P 500 Objective Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 54 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund medium-sized company stocks. Others were the result of mergers & acquisitions or corporate restructurings. Companies added to the S&P 500 Index included Coach, CIT Group, News Corp., Molson Coors Brewing, Sears Holdings Corp., Tyson Foods, Murphy Oil and Public Storage. Deletions from the Index included AT&T Wireless, Winn-Dixie, PeopleSoft, Adolph Coors, Sears Roebuck, Veritas Software, Toys R Us and Delta Airlines. Q: How are you positioning the Fund for the months ahead? A: The Fund will always attempt to stay fully invested in stocks that make up the S&P 500 Index, as we strive to mirror the performance of the Index. One change scheduled to be implemented in mid-September that may affect the Fund is that Standard & Poor's is expected to reconfigure the Index to reflect a "full float" of actively traded shares. Historically, the S&P 500 Index has been a market-capitalization weighted index, meaning that index composition is weighted according to the prices and number of total outstanding shares of its component stocks. Standard & Poor's plans to reconfigure the Index to reflect the elimination of shares not actively traded, such as certain shares held by company insiders. We began to transition the Fund during the first calendar quarter of 2005 to the full float-adjusted methodology by moving to a "half float" methodology with the plan to completely move to the full float methodology along with Standard & Poor's during the third quarter. We implemented this transition in two stages, so as to minimize portfolio turnover and liquidity constraints at any given time. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +11.98% 3 years +11.44% 5 years -3.23% Since inception (5/1/00) -2.41% at Sept. 30, 2005 1 year +11.67% 3 years +16.09% 5 years -2.03% Since inception (5/1/00) -2.23% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Financials 19.5% Information Technology 15.2% Health Care 13.1% Industrials 11.0% Consumer Discretionary 11.0% Consumer Staples 10.0% Energy 9.5% Utilities 3.4% Telecommunication Services 3.1% Materials 2.8% Short-Term Securities 1.4% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Exxon Mobil 3.4% $12,367,433 General Electric 3.1 11,561,538 Microsoft 2.4 8,929,496 Citigroup 2.0 7,384,918 Pfizer 1.7 6,142,294 Johnson & Johnson 1.7 6,113,649 Bank of America 1.5 5,612,575 Intel 1.4 5,149,580 American Intl Group 1.4 4,982,567 Wal-Mart Stores 1.3 4,878,745 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 19.9% 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. - -------------------------------------------------------------------------------- 55 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund From a broader standpoint, we are reasonably confident the U.S. economy will continue to grow, although the debilitating effects of Hurricane Katrina going forward are of concern. While the Gulf Coast economies do not produce a significant amount of the nation's Gross Domestic Product, they are critical to both trade and energy supply and thus may hurt consumers throughout the nation. Further, the hurricane may give the Fed pause for thought, although we believe the Fed will continue to raise short-term interest rates ahead. Within the equity market, we believe returns may be increasingly dependent on individual sector and company performance, including the ability of corporations to maintain profit margins in the face of increasing cost pressures in raw materials and, eventually, higher labor costs. We also remain optimistic about dividend-paying stocks, as current yield on dividend-paying stocks is still quite attractive relative to fixed income alternatives at present, and we anticipate this trend will continue. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - S&P 500 INDEX FUND RiverSource VP - S&P 500 Index Fund $10,000 $10,349 $7,766 $6,346 $7,076 $7,843 $8,782 S&P 500 Index $10,000 $10,493 $7,934 $6,506 $7,292 $8,127 $9,148 Lipper S&P 500 Objective Funds Index $10,000 $10,485 $7,907 $6,466 $7,223 $8,023 $9,010 5/1/00 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - S&P 500 Index Fund (from 5/1/00 to 8/31/05) as compared to the performance of two widely cited performance indices, the S&P 500 Index and the Lipper S&P 500 Objective Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper S&P 500 Objective Funds Index includes the 30 largest S&P 500 funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 56 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Select Value Fund (formerly AXP VP - Partners Select Value Fund) RiverSource VP - Select Value Fund rose 16.18% for the 12 months ended Aug. 31, 2005. This underperformed the Russell 3000(R) Value Index, which increased 17.33%. The Fund also underperformed its peer group, the Lipper Multi-Cap Value Index, which advanced 16.78% for the period. RiverSource VP - Select Value Fund is managed by Gabelli Asset Management Company, an independent asset management firm. The Fund seeks to provide long-term capital growth by investing in undervalued stocks of all sizes. Q: What factors most significantly impacted performance for the period? Gabelli: Disappointing performance came from a group of small broadcasters, including Paxson Communications, LIN TV and Young Broadcasting. Newspaper publishers The New York Times, Tribune and McClatchy Holdings were among some of our worst performers for the fiscal year. A factor worth noting during the period was the increase in mergers and acquisitions. Among the most prominent included Cingular's acquisition of AT&T Wireless, Sprint's merger with Nextel, Lee Enterprises' buyout of St. Louis newspaper publisher Pulitzer, and News Corp.'s purchase of Fox Entertainment's remaining shares that it did not already own. In addition, Neiman Marcus agreed to be acquired by Texas Pacific Group and Warburg Pincus for $100 per share in cash. Gencorp's stock rose on a takeover offer it then rebuffed. Finally, Energizer's stock rose in sympathy for Procter & Gamble's offer to acquire Gillette. As a result of the increase in merger and acquisition activity during the period, the Fund's cash position was higher than normal at the end of the annual period. This was the result of several mergers and acquisitions that closed during the last few months of the fiscal year. We sold large positions in Pulitzer, United Defense Industries, Thomas Industries, Titan, Cuno, Unocal and Storage Technology when their deals closed between June and the end of August. One of the most significant contributions during the period came from our largest holding, Cablevision Systems, which announced a deal to buy out public shareholders and spin off its Rainbow Networks for $33.50 per share. As a result, Cablevision's stock rose 35% during the period. Other strong performers during the period included MGM Mirage, ConocoPhillips and Kaman, whose stock rose approximately 95%, 77% and 76%, respectively. Manufactured housing stocks such as Cavco Industries and Champion Enterprises rose sharply at the end of the period in response to Hurricane Katrina. Q: What changes were made to the portfolio and why? Gabelli: As mentioned, several of the stocks in our portfolio were taken over including: AT&T Wireless was bought by Cingular, Cox Communications shares were bought by parent company Cox Enterprises, and Pulitzer was bought by Lee Enterprises. Clean water, whether for drinking or industrial uses, has become increasingly valuable here and abroad. Therefore, we have been adding stocks of companies providing water purification products and services such as ITT Industries and Watts Water Technologies. We note several water acquisitions in the past 12 months: General Electric bought Ionics, Danaher bought Germany's Leica Microsystems AG, and 3M purchased CUNO. This leads us to believe that in the year ahead, companies such as Watts and ITT Industries, which derive 20% of revenue from water treatment products, will attract some interest from larger companies ready to dip their toes in the water purification business. We added shares of Disney, which we hope will have the catalyst of a management change, and satellite company EchoStar Communications. In addition, we added to LIN TV, which we believe could be a takeover candidate, and gaming stocks Aztar and Kerzner International. Finally, we added Cavco Industries, a building manufacturer, for the potential cyclical turn in the industry. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +16.18% +17.33% +16.78% +16.18% RiverSource VP - Select Value Fund +17.33% Russell 3000(R) Value Index (unmanaged) +16.78% Lipper Multi-Cap Value Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 57 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Select Value Fund Q: How are you positioning the portfolio going forward? Gabelli: At the end of the period, Hurricane Katrina emerged as the largest natural disaster in the U.S. since the San Francisco earthquake in 1906. While the economy began to slow before Katrina, the hurricane has temporarily accelerated energy prices and an economic slowdown. This particular hurricane has national implications, as New Orleans is the second largest port in the nation and its freight distribution network has been compromised. Oil and gas facilities in the Gulf of Mexico have been damaged, as have the electricity and transportation infrastructure. Our expectation is that the current high level of merger and acquisition activity will continue. Companies merge to increase revenues and profitability and grow market share. There is plenty of ammunition left to hunt for corporate bargains. Stock is still a valuable deal currency. In addition, corporations are flush with cash and have plenty of borrowing power to fund cash deals. We will continue to invest in companies that will be the object of a takeover. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Consumer Discretionary 29.9% Short-Term Securities 21.2% Industrials 15.1% Consumer Staples 9.6% Health Care 7.0% Telecommunications Services 4.0% Information Technology 3.5% Energy 3.1% Utilities 2.6% Materials 2.4% Financials 1.6% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Cablevision Systems Cl A 2.4% $561,600 ITT Inds 2.1 491,040 US Cellular 2.0 477,456 Thomas & Betts 1.8 426,480 General Mills 1.8 415,080 Storage Technology 1.6 369,500 Commercial Federal 1.6 366,228 Chevron 1.5 359,695 Viacom Cl A 1.4 340,800 Aztar 1.4 334,000 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 17.6% 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. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +16.18% Since inception (2/4/04) +9.87% at Sept. 30, 2005 1 year +13.07% Since inception (2/4/04) +9.13% - -------------------------------------------------------------------------------- 58 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Select Value Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - SELECT VALUE FUND RiverSource VP - Select Value Fund $10,000 $10,288 $10,064 $9,990 $10,938 $11,237 $11,176 $11,596 Russell 3000(R) Value Index $10,000 $10,213 $9,974 $10,198 $11,115 $11,614 $11,514 $11,967 Lipper Multi-Cap Value Funds Index $10,000 $10,191 $9,963 $9,986 $10,861 $11,299 $11,227 $11,661 2/1/04 2/04 5/04 8/04 11/04 2/05 5/05 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Select Value Fund (from 2/1/04 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell 3000(R) Value Index and the Lipper Multi-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 3000(R) Value Index is an unmanaged index that measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Multi-Cap Value Funds Index includes the 30 largest multi cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 59 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Short Duration U.S. Government Fund (formerly AXP VP - Short Duration U.S. Government Fund) Below, portfolio managers Scott Kirby and Jamie Jackson discuss RiverSource VP - Short Duration U.S. Government Fund's positioning and results for the fiscal year ended Aug. 31, 2005. Q: How did RiverSource VP - Short Duration U.S. Government Fund perform for the fiscal year? A: RiverSource VP - Short Duration U.S. Government Fund rose 1.43% for the 12 months ended Aug. 31, 2005. The Fund outperformed the Lehman Brothers 1-3 Year Government Index (Lehman Index), which gained 1.27%. However, the Fund underperformed the Lipper Short U.S. Government Funds Index, representing the Fund's peer group, which rose 1.54% during the same time frame. Q: What factors most significantly affected Fund performance during the annual period? A: The Fund's returns were helped primarily by effective yield curve positioning (the way the Fund was positioned to respond to changes in short- vs. long-term interest rates), duration positioning (its overall sensitivity to interest rates) and sector allocation, despite a challenging environment for short-term fixed income investors. As the Federal Reserve Board (the Fed) raised interest rates eight times during the annual period, bringing the targeted federal funds rate to 3.50%, the U.S. Treasury yield curve flattened dramatically. Indeed, the two-year Treasury yield rose 142 basis points (1.42%) during the 12 months to a level of 3.81%. The five-year Treasury yield rose 55 basis points (0.55%) to a level of 3.86%, while the 10-year Treasury yield actually fell 10 basis points (0.10%) to a level of 4.01%. We had prudently positioned the portfolio early in the reporting period for just such a yield curve flattening scenario, where short-term interest rates rose more than long-term rates, and thus, the Fund outperformed the Lehman Index even with this significant increase in short-term yields. We kept the Fund's duration shorter than the Lehman Index. Agencies, asset-backed securities and mortgage-backed securities outperformed U.S. Treasuries for the annual period. As the Fund had greater exposure to these sectors compared to the Lehman Index, such allocation further boosted its results. Mortgages, where the Fund had its greatest allocation, performed positively, supported by a well-advertised measured pace of rate hikes by the Fed, which led, in turn, to muted overall volatility. Exposure to asset-backed securities and AAA-rated commercial mortgage-backed securities (CMBS), which are securities based on pools of commercial mortgages, also was a positive contributor to the Fund's annual performance. The Fund modestly lagged its Lipper group due to its comparatively defensive positioning, generally maintaining a more conservative risk profile than many of its peers. Q: What changes did you make to the portfolio and how is it currently positioned? A: During the annual period, we increased the Fund's allocation to asset-backed securities, CMBS and agencies, and we reduced its allocation to mortgages, taking profits from several securities that had performed well. Within the mortgage sector, we added some lower coupons and some longer-maturity securities. Still, we continued to focus within the sector on higher coupons and more seasoned bonds, as we expect these securities to outperform in a rising rate environment. We also continued to hold those pools of mortgages with historically lower-than-average prepayment risks, which we have owned for some time now. Not only do these pools continue to offer attractive yields, but also, as they age, are transitioning well into what the market is increasingly favoring. [PIE CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +1.43% +1.27% +1.54% +1.43% RiverSource VP - Short Duration U.S. Government Fund +1.27% Lehman Brothers 1-3 Year Government Index (unmanaged) +1.54% Lipper Short U.S. Government Funds Index (See "The Fund's Long-term Performance" for Index descriptions) Shares of the Short Duration U.S. Government Fund are not insured or guaranteed by the U.S. government. - -------------------------------------------------------------------------------- 60 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund During the second half of the fiscal year, we sold some of the Fund's positions in collateralized mortgage obligations and focused on holding those that we believe will perform better as rates rise. Collateralized mortgage obligations are attractively structured mortgage-backed securities in that they separate mortgage pools into short-, medium- and long-term cash flows. As the yield curve flattened dramatically, we also removed some of the Fund's yield curve flattening bias and reduced the portfolio's sensitivity to changes in interest rates. While we kept duration shorter than the Lehman Index throughout the annual period, we made minor adjustments to portfolio duration and yield curve positioning as market conditions changed. Overall, the opportunistic changes we made in response to valuations or market developments resulted in an annual portfolio turnover rate of 171%. Q: How do you intend to manage the Fund in the coming months? A: We believe the U.S. economic recovery will continue and interest rates will move still higher. Our best assessment at this time leads us to believe that the devastation caused by Hurricane Katrina will have only a transitory impact on the U.S. economy overall. We expect energy shortages to be temporary and oil prices to recede as refining and production capacities come back on line. We expect the Fed to focus on the risks to higher inflation caused by higher energy prices, supply-chain disruptions and the strain on resources resulting from the massive rescue, relief and rebuilding efforts now underway. As a result, we expect the Fed to continue to raise the targeted federal funds rate through the balance of 2005. Consequently, we believe fixed income yields will move materially higher in the months ahead. In addition, we anticipate that the yield curve has flattened to near fair value and the move to higher yields across short- and long-term maturities going forward may be more parallel in nature. Based on this view, we intend to maintain the Fund's duration shorter than the Lehman Index for the near term. Within mortgage-backed securities, we expect to maintain a conservative risk posture. Should rates move higher, we would seek select opportunities to remove some of the Fund's defensive overall positioning. At the same time, we would also reassess the Fund's positioning should unexpected shocks to the economy, such as the impact of Hurricane Katrina, change the Fed's policy. As always, however, our strategy is to provide added portfolio value with a moderate amount of risk. Quality issues and security selection remain a priority as we continue to seek attractive buying opportunities. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] U.S. Government Obligations & Agencies 46.4% Mortgage-Backed 42.3% Asset-Backed 4.7% Short-Term Securities 3.5% Commercial Mortgage-Backed 2.1% Foreign Government 1.0% AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +1.43% 3 years +1.76% 5 years +3.97% Since inception (9/15/99) +4.11% at Sept. 30, 2005 1 year +1.23% 3 years +1.43% 5 years +3.74% Since inception (9/15/99) +4.01% - -------------------------------------------------------------------------------- 61 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - SHORT DURATION U.S. GOVERNMENT FUND RiverSource VP - Short Duration U.S. Government Fund $10,000 $10,464 $11,436 $12,055 $12,303 $12,510 $12,689 Lehman Brothers 1-3 Year Government Index $10,000 $10,502 $11,521 $12,299 $12,618 $12,904 $13,068 Lipper Short U.S. Government Funds Index $10,000 $10,495 $11,422 $12,076 $12,298 $12,514 $12,706 10/1/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Short Duration U.S. Government Fund (from 10/1/99 to 8/31/05) as compared to the performance of two widely cited performance indices, the Lehman Brothers 1-3 Year Government Index and the Lipper Short U.S. Government Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Lehman Brothers 1-3 Year Government Index, an unmanaged index, is made up of all publicly issued, non-convertible domestic debt of the U.S. government, or agency thereof, or any quasi-federal corporation. The index also includes corporate debt guaranteed by the U.S. government. Only notes and bonds with a minimum maturity of one year up to a maximum maturity of 2.9 years are included. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Short U.S. Government Funds Index includes the 30 largest short U.S. government funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 62 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Small Cap Advantage Fund (formerly AXP VP - Small Cap Advantage Fund) Performance Summary RiverSource VP - Small Cap Advantage Fund increased 24.88% for the 12 months ended Aug. 31, 2005. The Fund outperformed its benchmark, the Russell 2000(R) Index (Russell Index), which rose 23.10% for the same time frame. The Fund's peer group, as represented by the Lipper Small-Cap Core Funds Index, advanced 22.59% during annual period. Small-cap stocks traded higher in the first half of the fiscal period but retraced some of those gains during the first four months of 2005. Then, following a market bottom at the end of April, small caps rallied sharply as investors set aside fears of higher oil prices and inflation and began to discount an end to the Federal Reserve Board's (the Fed) tightening cycle. The Russell Index hit an all-time high in early August to close the period with solid gains. Overall, the year was a very favorable one for small-cap investors, with all segments of the small-cap market advancing and small-cap stocks significantly outperforming large-cap stocks. The Fund is primarily managed by Jake Hurwitz and Kent Kelley of Kenwood Capital Management in Minneapolis. Dimitris Bertsimas and Jonathan Calvert with RiverSource Investment's Cambridge office, a quantitative investing office, manage less than 20% of the Fund assets. Each team employs a separate and distinct small company equity selection process. Hurwitz and Kelley have been portfolio managers since the Fund's inception in 1999. Q: What factors most significantly affected performance for the period? Hurwitz and Kelley: Our portion of the Fund outperformed the Russell Index during the period thanks to strong contributions from positive stock selection across nearly all sectors. The portfolio's best performance occurred in the consumer discretionary sector. In particular, holdings in advertising, auto parts and retailers, such as bebe stores and American Eagle Outfitters, contributed significantly to the Fund's performance. The Fund also benefited from strong stock selection in the health care sector. Holdings in Sierra Health Services, a health maintenance organization, and Psychiatric Solutions, a hospital, both performed particularly well, as did Lifecell, Immucor, and Haemonetics, medical device companies. In addition, security selection in consumer staples such as convenience retailers Pantry and 7-Eleven contributed positively to the Fund's performance. Finally, several of the Fund's holdings in energy exploration and production were strong performers during the year and made a significant positive contribution to the Fund's return. Southwestern Energy and Swift Energy both reported strong production growth during the period and advanced on expectations that productions gains would translate to future earnings growth. Stock selection in two sectors contributed negatively to the portfolio's performance: finance and capital goods. In finance, stock selection in the regional bank and savings and loans group detracted from performance for the period. Within the capital goods sector, the Fund's holdings in electrical equipment and engineering and construction underperformed. Bertsimas and Calvert: During the fiscal year, all three of our investment disciplines -- the momentum, the value and the quality adjusted value models -- performed well. In particular, the value model, which chooses stocks based on attractive valuations, drove returns and outperformed during the first half of the fiscal year. In the second half of the period, the momentum model, which picks stocks based on recent returns, helped the Fund outperform the Russell Index. Specifically, the momentum model had strong stock selection within the energy sector, which was up more than 80% during the period, and the Fund's large exposure relative to the Russell Index contributed positively to performance. Southwestern Energy was a strong contributor, nearly doubling during the annual period. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +24.88% +23.10% +22.59% +24.88% RiverSource VP - Small Cap Advantage Fund +23.10% Russell 2000(R) Index (unmanaged) +22.59% Lipper Small-Cap Core Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 63 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Within the industrial sector, building materials company USG Corp. performed well during the period and contributed positively to performance. In addition, mining company Joy Global, which was purchased based on its momentum characteristics, benefited from increasing commodity prices and increased demand from customers during the fiscal year. Detracting from performance was healthcare company OCA Inc., one of the larger holdings in our portion of the portfolio. OCA announced major accounting issues with their financial reports and as a result, the stock fell significantly during the period. Q: How would you describe the Fund's investment approach? Hurwitz and Kelley: Our goal is to find attractive small-cap growth and value holdings by using quantitative and qualitative analysis. We use a computer screening process to identify the best investment opportunities in all sectors of the small-cap market. Our approach favors companies with superior cash flow generation and attractive relative valuations. We invest in all sectors of the small-cap market and avoid "top down" bets. Rather, we invest in all of the market sectors with roughly the same weightings as the Russell Index. We believe that using a balanced strategy -- focused on valuation, earnings and price-related variables -- will produce consistent and attractive risk-adjusted returns for the Fund's investors over the long term. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +24.88% 3 years +21.58% 5 years +5.36% Since inception (9/15/99) +8.92% at Sept. 30, 2005 1 year +18.15% 3 years +24.28% 5 years +5.99% Since inception (9/15/99) +8.81% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Financials 18.4% Information Technology 17.5% Industrials 14.1% Consumer Discretionary 13.8% Health Care 13.1% Energy 6.9% Materials 5.1% Consumer Staples 3.5% Utilities 3.1% Short-Term Securities* 3.0% Telecommunications Services 1.5% * Of the 3.0%, 0.9% is due to security lending activity and 2.1% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31,2005) iShares Russell 2000 Small Cap Index Fund 0.8% $1,925,310 Microsemi 0.7 1,654,982 Delphi Financial Group Cl A 0.6 1,379,701 Haemonetics 0.6 1,368,752 Oil States Intl 0.5 1,296,284 Ohio Casualty 0.5 1,232,689 Jarden 0.5 1,216,498 ProAssurance 0.5 1,211,376 St. Mary Land & Exploration 0.5 1,206,449 Cal Dive Intl 0.5 1,174,248 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 5.7% 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. - -------------------------------------------------------------------------------- 64 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Bertsimas and Calvert: We manage the Fund using a quantitative approach designed to invest in a diversified portfolio of value and growth stocks that will perform well regardless of market conditions. Our approach for selecting value stocks is to buy securities that are undervalued based on our proprietary estimate of future earnings. We also buy higher quality stocks that are attractively priced. Our strategy for choosing growth stocks uses a momentum model that identifies securities with improving sentiment. We employ proprietary optimization techniques to reduce the expected risk of the portfolio, to avoid large deviations from the benchmark across multiple risk factors such as sectors and industries, and to limit the amount of trading in the portfolio. Three of our holdings that have had a positive impact on performance during the period illustrate how our different investment strategies work together. We previously purchased building materials company USG, homebuilder Beazer Homes USA and retailer Burlington Coat Factory Warehouse based on our two valuation models that found these stocks attractive. During the fiscal year, these stocks performed extremely well in the portfolio and are now exhibiting strong momentum characteristics. Although the valuations of these stocks have become less attractive, they are now favored by the momentum strategy. Thus, we are maintaining our large position in these holdings. Q: How do you plan to manage the Fund in the coming months? Hurwitz and Kelley: We remain generally constructive in our outlook for small-cap stocks. So far in 2005, small-cap earnings and revenue growth rates have been strong. Although the current economic expansion is mature, real interest rates remain low, and therefore, monetary conditions can still be characterized as stimulating. All of this combines to benefit equities in general and small-cap stocks, in particular. Furthermore, small-cap stocks exhibit levels of valuation relative to large caps that are generally in line with historical averages. However, a number of risks remain regarding the course of the economy and the U.S. equity market. High energy prices may affect consumer spending and lead to an economic slowdown. Inflation may cause the Fed to keep raising rates beyond levels now generally expected and over a longer period of time, which could inhibit economic growth. In the event of an economic downturn, there is considerable risk to small-cap earnings, which have been a primary driver of the favorable relative performance of small-cap stocks vs. large-cap stocks during the past several years. Our small cap strategy remains focused on individual stock selection based on our quantitative appraisal discipline. Consistent with our strategy, we maintain a risk-neutral position relative to the Russell Index in terms of characteristics such as sector membership, market capitalization, and share price. Bertsimas and Calvert: We believe that our quality adjusted value strategy will serve us well going forward, focusing on what we believe are the higher quality stocks that tend to perform better than their peers during volatile market periods. We believe that our use of multiple investment disciplines serves us well in all investment environments. Whether it's a surge in small-cap stocks or a downturn, the combination of models helps us deliver value relative to the Russell Index. - -------------------------------------------------------------------------------- 65 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - SMALL CAP ADVANTAGE FUND RiverSource VP - Small Cap Advantage Fund $10,000 $12,819 $10,681 $9,262 $11,852 $13,322 $16,647 Russell 2000(R) Index $10,000 $12,713 $11,234 $9,500 $12,262 $13,654 $16,808 Lipper Small-Cap Core Funds Index $10,000 $13,626 $12,874 $11,196 $13,803 $15,693 $19,237 10/1/99 8/00 8/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Small Cap Advantage Fund (from 10/1/99 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell 2000(R) Index and the Lipper Small-Cap Core Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 2000(R) Index, an unmanaged index, measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index, which represents approximately 8% of the Russell 3000 total market capitalization. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Small-Cap Core Funds Index includes the 30 largest small cap core funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 66 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Small Cap Value Fund (formerly AXP VP - Partners Small Cap Value Fund) RiverSource VP - Small Cap Value Fund rose 20.02% for the 12 months ended Aug. 31, 2005. The Fund underperformed its benchmark, the Russell 2000(R) Value Index (Russell Index), which returned 22.61%. It also underperformed the Fund's peer group, the Lipper Small-Cap Value Funds Index, which advanced 23.85% for the period. Five money management firms manage a portion of RiverSource VP - Small Cap Value Fund's portfolio. Each firm selects small-cap value stocks in an effort to provide Fund shareholders with long-term capital appreciation. As of Aug. 31, 2005, the five subadvisors managed the following portions of the Fund's portfolio: Barrow, Hanley, Mewhinney & Strauss (Barrow, Hanley) (21.0%); Donald Smith & Co., Inc. (Donald Smith) (18.5%); Franklin Portfolio Associates LLC (21.3%); Goldman Sachs Asset Management, L.P. (GSAM) (18.2%); and Royce & Associates LLC (Royce) (21.0%). Q: What factors most significantly affected results for your portion of the Fund for the period? Barrow, Hanley: Our exposure to the energy sector, specifically the oil and gas industry was the best performing sector for the 12-month period. Specifically, Chesapeake Energy and Encore Acquisition both notably added to our performance. Our second best performing sector relative to the Russell Index was health care, in which the Fund's total return was more than twice that of the Russell Index. Finally, our relatively low exposure in the financials sector worked in our favor, and similarly, our large exposure in the industrials sector was a positive contributor. Advanced Auto Parts was the Fund's second best performing holding for the 12-month period, up approximately 46% before we sold it after reaching our pricing targets. The consumer staples sector was our worst performing sector as our holding American Italian Pasta was also our worst performing stock overall. Donald Smith: Our portion of the portfolio underperformed the Russell Index for the fiscal year ended Aug. 31, 2005. The Fund's stock holdings, not including cash, performed roughly in line with the Russell Index. Our inability to find enough companies that meet our strict valuation criteria led to underperformance. Stocks that did well in the last year include: Alaska Air Group, Genesis HealthCare and Reliant Energy. The worst performer was Sea Containers, a shipping and container company that has suffered from increased competition and high fuel costs. Franklin Portfolio Associates: For the 12-month period, our portion of the Fund's portfolio performed well against the Russell Index. Most of the seven stock selection themes that we use to rank securities discriminated well between winners and losers. The best performing stock selection themes were those that focused on stock "momentum," either related to the underlying business momentum of the company, its stock price momentum, or its longer term growth prospects. Only the theme that focused on peer-relative valuation based on balance sheet information failed to perform well. Our industry-neutral approach added value in most sectors during the period, but did particularly well within the financial services, technology, health care and consumer durables sectors. Within the health care sector, Alpharma, an animal and human specialty pharmaceuticals company, First Horizon Pharmaceutical and Intuitive Surgical performed well. Within the durables sector, two construction companies contributed positively: building materials company USG and residential homebuilder Technical Olympic USA. In the technology area, Internet marketing firm Doubleclick saw its stock rise in response to a buyout offer. Within financial services, Compucredit more than doubled during the year. Although performance was strong in most sectors, there were some areas that detracted. Those sectors included consumer services and consumer staples, specifically. Within consumer services, two entertainment related firms in the portfolio declined substantially during the period: toy manufacturer Jakks Pacific and music distributor Handleman. Within consumer staples, Sensient Technologies, a manufacturer of food flavorings, fell almost 10% during the period, underperforming other food and beverage stocks. GSAM: Our stock selection in the industrials and technology sectors detracted from performance for the period. GrafTech International, a manufacturer of graphite [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +20.02% +22.61% +23.85% +20.02% RiverSource VP - Small Cap Value Fund +22.61% Russell 2000(R) Value Index (unmanaged) +23.85% Lipper Small-Cap Value Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 67 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund and carbon electrodes, lowered near term expectations but reported improved revenues across its business lines. Caraustar Industries, a manufacturer of recycled paperboard tube and core products, reported disappointing first quarter results despite its adoption of recent price increases. Conversely, the Fund was aided by successful positioning in the energy and health care sectors. Some individual stocks were standouts, including Tessera Technologies and Commercial Metals. In addition, the Fund's energy positions contributed positively to performance as they benefited from historical gains in commodity prices. The Fund's strongest performers in the sector included Whiting Petroleum and Range Resources. Royce: Performance for our portion of the Fund was primarily positive, based upon the strong results in natural resources and health care stocks. We also had solid gains from the technology, industrial products, consumer products, consumer services and financial services sectors. In fact, each of the Fund's nine sectors showed gains during the one-year period ended Aug. 31, 2005. Q: What changes did you make to your portion of the Fund and why? Barrow, Hanley: Given our methodology, portfolio change significantly depends on finding companies with the potential for continued fundamental improvement. During the last 12 months, we eliminated Advanced Auto Parts, Sola International, Murphy Oil Corp., and JB Hunt. We added positions in Plexus Corporation, Tidewater, Littelfuse, Champion Enterprises, Fleetwood Enterprises and Helen of Troy. Donald Smith: We continued to purchase companies that sell at reasonable prices relative to their tangible book values and underlying earnings power. We purchased a number of new stocks during the first half of the period including Royal Group Technologies, a building products company, 3Com and AK Steel Holding. In the second half of the period, we added Stillwater Mining, the sole domestic supplier of palladium and platinum; Knight Capital Group, a broker with a large cash position that is supporting a major stock buyback; Tech Data, a conservatively capitalized technology distributor; Quanta Capital Holdings, a new insurance company; and Ryerson Tull, a steel distributor. We eliminated positions in Assured Guaranty, Phoenix Companies, RTI International and Seacor Holdings. Franklin Portfolio Associates: Our normal trading activity consists of selling stocks out of the portfolio with ranks that have deteriorated and replacing them with stocks that are attractively ranked. Other than that, the major change to the portfolio during the period was in response to the annual rebalancing of the Russell Index that occurred near the end of June 2005. Although the change in the Index was smaller than it had been over the past several years, we have been repositioning the portfolio to track the new Index more closely by selling stocks no longer in the Index and adding some new companies. GSAM: We trimmed the Fund's positions in Range Resources and Whiting Petroleum due to valuation issues and changing risk/return characteristics. We eliminated the Fund's holdings in OMI, an oil tanker company, as we believe the stock is near fair value. We added new technology positions during the period, including ScanSource, BearingPoint and Integrated Device Technology. Royce: We recently sold our positions in two electronic and video game retailers that did well in the portfolio: Electronic Boutiques Holdings and GameStop. We also took some profits in health care companies CNS, Healthcare Services Group, Horizon Health and U.S. Physical Therapy. Moving beyond the health care sector, we sold shares of CoolBrands after a period of disappointing performance. Declining share prices led us to increase our stake in multiservice financial company eFunds, circuit board components business TTM Technologies, and pharmaceutical and nutritional products maker Perrigo. Prior to these transactions, we took some profits in companies such as Sybase and Foundry Networks, as technology stock prices rose late in 2004. Q: How will you manage your portion of the Fund in the coming months? Barrow, Hanley: Our portion of the portfolio should always be composed of stocks that are selling at significant discounts to their fundamental long-term value. We do not trade stocks as our typical holding period is approximately four years. We seek to minimize the role of commodity prices in the portfolio because we believe that over time they are largely unpredictable. We also believe that high or low prices are difficult to forecast in terms of timing reversal. Our recently successful oil and natural gas investments are an example of the power of patient stock selection, coupled with a dose of good fortune. Murphy Oil, Encore Acquisition, and Chesapeake Energy have been with us for six, four, and three and a half years, respectively. When Murphy, Encore and Chesapeake were initially purchased, natural gas prices were at about $25 per barrel. In no case was the primary, or even secondary, consideration the potential for a large increase in commodity prices. Rather, it was the belief that each company was uniquely positioned to achieve rapidly increasing reserve levels over the long-run. That has proven true, and in addition, we have benefited from a near tripling of the commodity price. Each company would probably have been an excellent investment in an environment of flat energy prices. The current, past and future construction of the portfolio should remain grounded in the discovery and exploitation of - -------------------------------------------------------------------------------- 68 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund individual stock values more or less independent of sector or industry conditions. Donald Smith: At this point, we have a smaller position in energy stocks, which on average sell at five and a half times the book value. We have more exposure to companies that are either direct or indirect beneficiaries of lower oil prices such as airlines, auto parts, retailers and technology. Technology now represents a large portion of the portfolio. We have been buying technology companies with large cash positions and little debt, factors that lead to minimal downside. Some of the top holdings have undervalued real estate, such as Royal Group Technologies, Genesis HealthCare, Dillard's and Lodgian. Franklin Portfolio Associates: We continue to position the portfolio to emphasize stocks with the characteristics that we've identified as leading to long-term outperformance in the small-cap value universe. We emphasize stocks that have inexpensive valuations relative to their peers and their own history and also have identifiable business or market momentum so that their potential is realized. We perform this analysis within industry and sector and are careful to maintain sector and industry weights within the portfolio similar to those in the Russell Index. When stocks within the portfolio no longer have the desired characteristics, we replace them with stocks that meet our criteria. GSAM: As we near the end of 2005, we feel company-specific results will greatly impact stock price returns. Corporations will continue to struggle to maintain margins as energy, raw materials and regulatory costs continue to rise sharply. We believe our disciplined, research-intensive approach to identifying cash generating businesses and buying them at attractive valuations should enable our portfolio to perform well over the long term. Royce: As always, we continue to look for what we believe is good value on a stock-by-stock basis. Our goal remains to take advantage of falling prices by adding to existing positions and initiating new ones in businesses that we find attractive. We see the possibility for large-cap stocks to outperform small-cap stocks, although not by much. We also suspect that there will be frequent leadership rotation between large- and small-cap companies, and we do not see any asset class or approach dominating as it has in the past 10 years. We fully expect that smaller stocks will be caught up in the generally positive direction of the market that we think is probable during the next five years. Small-cap stocks led in the previous five years, but not to the same degree that large-cap stocks had from 1995 through 2000. The upshot is that for the 10-year period ended June 30, 2005, the S&P 500 Index and the Russell Index had identical results. Without a similar level of excess to work through, we see no reason why active small-cap management cannot remain competitive with large-cap stocks in the coming years. SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Financials 18.4% Information Technology 17.5% Industrials 14.1% Consumer Discretionary 13.8% Health Care 13.1% Energy 6.9% Materials 5.1% Consumer Staples 3.5% Utilities 3.1% Short-Term Securities* 3.0% Telecommunications Services 1.5% THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Royal Group Technologies 1.1% $4,568,002 Terex 1.1 4,413,469 Dillard's Cl A 1.1 4,360,187 Reliant Energy 1.0 4,050,001 Flowserve 0.9 3,851,418 3Com 0.9 3,845,401 Tech Data 0.9 3,807,439 Tidewater 0.9 3,723,543 Genesis HealthCare 0.9 3,625,041 MI Developments Cl A 0.8 3,321,524 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 9.6% 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. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +20.02% 3 years +19.00% Since inception (8/14/01) +12.36% at Sept. 30, 2005 1 year +14.97% 3 years +22.61% Since inception (8/14/01) +12.17% - -------------------------------------------------------------------------------- 69 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - SMALL CAP VALUE FUND RiverSource VP - Small Cap Value Fund $10,000 $9,531 $11,460 $13,383 $16,062 Russell 2000(R) Value Index $10,000 $9,440 $11,675 $13,951 $17,105 Lipper Small-Cap Value Funds Index $10,000 $9,491 $11,782 $14,011 $17,353 9/1/01 8/02 8/03 8/04 8/05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Small Cap Value Fund (from 9/1/01 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell 2000(R) Value Index and the Lipper Small-Cap Value Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell 2000(R) Value Index, an unmanaged index, measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Small-Cap Value Funds Index includes the 30 largest small cap value funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 70 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Portfolio Management Q&A RiverSource VP - Strategy Aggressive Fund (formerly AXP VP - Strategy Aggressive Fund) Below, portfolio manager Paul Rokosz discusses the Fund's positioning and results for the fiscal year ended Aug. 31, 2005. Shareholders will be asked to approve a merger of the Fund into RiverSource VP - Mid Cap Growth Fund at a shareholder meeting on Feb. 15, 2006. This approval is not guaranteed. Q: How did RiverSource VP - Strategy Aggressive Fund perform for the fiscal year? A: RiverSource VP - Strategy Aggressive Fund gained 21.58% for the 12 months ended Aug. 31, 2005. While producing strong absolute returns, the Fund underperformed on a relative basis. The Russell Midcap(R) Growth Index (Russell Index), representing the Fund's benchmark, rose 26.45% and its peer group, the Lipper Mid-Cap Growth Funds Index, advanced 23.93%. Q: What factors most significantly affected the Fund's performance during the annual period? A: On the positive side, effective stock selection and a significant position in energy helped the Fund's relative returns. Within energy, an emphasis on oil and natural gas exploration & production companies was especially beneficial, with Fund holdings XTO Energy, EOG Resources and Precision Drilling performing particularly well. Effective stock selection in consumer staples and a modest position in consumer discretionary also were positive contributors to Fund performance. Within health care, a focus on health care services stocks rather than product-oriented firms proved particularly prudent, as several of these services companies performed well for the fiscal year. These included HMO WellChoice, pharmacy benefits manager Caremark Rx, rural hospital Community Health Systems and biomedical services & supply firm Invitrogen. Other strong performers for the Fund during the annual period included coal company Peabody Energy and two information technology companies that each benefited from successful new products, specifically semiconductor firm Marvell Technology Group and software company Autodesk. Unfortunately, these positives were not enough to offset the negative effects on the Fund's relative results of poor individual security selection in the information technology, consumer discretionary and basic materials sectors. Not having any allocation to the solidly-performing telecommunications sector also hurt. On a stock-specific basis, health care company Eyetech Pharmaceuticals detracted from the Fund's performance, as the potential for its macular degeneration treatment was marginalized by the pre-empting and better-than-anticipated results from its major competitor. Smurfit-Stone and Bowater were also poor performers for the annual period, as a supply/demand imbalance did not generate higher pricing levels in these paper stocks as it did in other segments of the basic materials sector. Another weak performer for the Fund was industrial company Zebra Technologies, which, among other products, manufactures and distributes direct thermal and thermal transfer bar code label and receipt printers. In our view, this stock got over-hyped and suffered from concerns over its valuation rather than from any company-specific fundamentals. We sold the Fund's positions in each of these stocks. OSI Pharmaceuticals, which focuses on cancer drugs, was another poor performer for the Fund, as it faced negative reaction to its acquisition of Eyetech Pharmaceuticals. While we reduced the Fund's holding in OSI Pharmaceuticals, we maintained a position, as we believed its share price decline to be temporary. Q: What changes did you make to the Fund and how is it currently positioned? A: We maintained the Fund's sizable exposure to the energy sector, but trimmed its allocation somewhat during the fiscal year, taking profits. We decreased to a greater degree the Fund's already modest position in consumer discretionary. We moved the Fund's position in basic materials from a neutral to a more modest allocation, and we shifted the Fund's significant allocation to industrials to a neutral position. Finally, we added to the Fund's consumer staples holdings, though still maintaining a moderate exposure. [BAR CHART] PERFORMANCE COMPARISON For the year ended Aug. 31, 2005 +21.58% +26.45% +23.93% +21.58% RiverSource VP - Strategy Aggressive Fund +26.45% Russell Midcap(R) Growth Index (unmanaged) +23.93% Lipper Mid-Cap Growth Funds Index (See "The Fund's Long-term Performance" for Index descriptions) - -------------------------------------------------------------------------------- 71 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Strategy Aggressive Fund In other areas, the Fund maintained its significant allocations to health care and technology and its more moderate position in financials. The Fund continued to have no exposure to the telecommunications and utilities sectors. Interestingly, the average market capitalization of the holdings in the Fund's portfolio drifted up a bit over the fiscal year, not by any pro-active strategy on our part, but due primarily to strongly-performing stocks in the energy and health care sectors. Q: How do you intend to manage the Fund in the coming months? A: While the U.S. economy continues to show strength, we believe economic growth in the coming months may be muted compared to widespread expectations. We also remain cognizant of the increasing pressure placed on corporations to raise prices for their goods and services. In our view, among the key questions now are how sustainable high energy costs are and what effect these costs may have on consumer spending and the industrial sectors of the economy and, subsequently in turn, on interest rates. We intend to seek stocks that can grow through these economic pressures and/or through the specter of rising interest rates. For example, within the energy sector, we are focusing on those exploration & production companies that we feel may be able to find and produce supply most efficiently. AVERAGE ANNUAL TOTAL RETURNS at Aug. 31, 2005 1 year +21.58% 3 years +13.07% 5 years -14.28% 10 years +2.57% Since inception (1/13/92) +4.75% at Sept. 30, 2005 1 year +20.44% 3 years +16.48% 5 years -12.99% 10 years +2.53% Since inception (1/13/92) +4.98% SECTOR COMPOSITION Percentage of portfolio assets at Aug. 31, 2005 [PIE CHART] Health Care 25.6% Information Technology 23.8% Industrials 13.3% Energy 11.9% Consumer Discretionary 9.5% Short-Term Securities* 6.1% Financials 4.6% Materials 3.3% Consumer Staples 1.6% U.S. Government Obligations & Agencies 0.3% * Of the 6.1%, 2.5% is due to security lending activity and 3.6% is the Fund's cash equivalent position. THE TEN LARGEST HOLDINGS Percent Value (of portfolio assets) (at Aug. 31, 2005) Caremark Rx 2.9% $20,706,062 Marvell Technology Group 2.8 19,574,412 Gilead Sciences 2.5 17,556,900 WellChoice 2.5 17,476,380 Network Appliance 2.2 15,471,358 CR Bard 2.1 14,866,663 Peabody Energy 1.9 13,688,970 Invitrogen 1.9 13,671,609 XTO Energy 1.9 13,655,380 EOG Resources 1.9 13,595,790 For further detail about these holdings, please refer to the section entitled "Investments in Securities." [PIE CHART] The 10 holdings listed here make up 22.6% 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. - -------------------------------------------------------------------------------- 72 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Strategy Aggressive Fund Another key question facing the markets, of course, is the impact of Hurricane Katrina's devastation of the Gulf Coast. While the Gulf Coast economies do not produce a significant amount of the nation's Gross Domestic Product, they are critical to both trade and energy supply and thus may affect consumers throughout the nation. But clearly, the effect will go far beyond that of the energy and other commodity industries. Also benefiting from the debilitating effects of the Katrina will likely be home-building product companies and nursing companies. Firms with major manufacturing plants in the region will likely be hurt. Overall, we believe the coming months will continue to be a stock-picker's market. Thus, our ongoing strategy is to build the portfolio stock-by-stock, so our economic and market views ahead are not a primary driver of the Fund's positioning. We continue to build the core of the Fund's portfolio with high-quality growth companies -- companies with high returns on capital, high profitability and significant but sustainable growth rates. We then look to the smaller, opportunistic portion of the portfolio to participate in more unique growth stories that may be realized over a three- to nine-month time frame. The Fund's Long-term Performance [LINE CHART]
VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN RIVESOURCE VP - STRATEGY AGGRESSIVE FUND RiverSource VP - Strategy Aggressive Fund $10,000 $11,159 $13,312 $11,128 $15,053 $27,844 $12,917 $8,917 $10,893 $10,602 $12,890 Russell Midcap(R) Growth Index $10,000 $11,182 $14,675 $12,991 $19,335 $32,324 $17,766 $13,612 $17,749 $19,073 $24,117 Lipper Mid-Cap Growth Funds Index $10,000 $11,579 $13,237 $10,935 $17,340 $29,868 $17,147 $12,740 $15,796 $16,282 $20,178 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
This chart illustrates the total value of an assumed $10,000 investment in RiverSource VP - Strategy Aggressive Fund (from 9/1/95 to 8/31/05) as compared to the performance of two widely cited performance indices, the Russell Midcap(R) Growth Index and the Lipper Mid-Cap Growth Funds Index. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. 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 calling (800) 862-7919. Also see "Past Performance" in the Fund's current prospectus. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The Russell Midcap(R) Growth Index, an unmanaged index, measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000(R) Growth Index. The index reflects reinvestment of all distributions and changes in market prices, but excludes brokerage commissions or other fees. The Lipper Mid-Cap Growth Funds Index includes the 30 largest mid cap growth funds tracked by Lipper Inc. The index's returns include net reinvested dividends. - -------------------------------------------------------------------------------- 73 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Board Members and Officers Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. Each member oversees 14 Master Trust portfolios and 90 RiverSource funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. Under the current Board policy, members may serve until the end of the meeting following their 75th birthday, or the fifteenth anniversary of the first Board meeting they attended as members of the Board, whichever occurs first. This policy does not apply to Ms. Jones who must retire after her 75th birthday.
Independent Board Members Name, Position held Principal occupation Other address, with Fund and during past five years directorships age length of service - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Arne H. Carlson Board member Chair, Board Services Corporation 901 S. Marquette Ave. Minneapolis, since 1999 (provides administrative services to MN 55402 boards); former Governor of Minnesota Age 71 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Philip J. Carroll, Jr. Board member Retired Chairman and CEO, Fluor Scottish Power PLC, Vulcan 901 S. Marquette Ave. since 2002 Corporation (engineering and Materials Company, Inc. Minneapolis, MN 55402 construction) (construction Age 67 materials/chemicals) - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Patricia M. Flynn Board member Trustee Professor of Economics and 901 S. Marquette Ave. since 2004 Management, Bentley College; former Minneapolis, MN 55402 Dean, McCallum Graduate School of Age 54 Business, Bentley College - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Anne P. Jones Board member Attorney and Consultant 901 S. Marquette Ave. since 1985 Minneapolis, MN 55402 Age 70 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Stephen R. Lewis, Jr. Board member President Emeritus and Professor of Valmont Industries, Inc. 901 S. Marquette Ave. since 2002 Economics, Carleton College (manufactures Minneapolis, MN 55402 irrigation systems) Age 65 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Catherine James Paglia Board member Director, Enterprise Asset Strategic Distribution, Inc. 901 S. Marquette Ave. since 2004 Management, Inc. (private real (transportation, Minneapolis, MN 55402 estate and asset management company) distribution and logistics Age 53 consultants) - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Alan K. Simpson Board member Former three-term United States Alison Taunton-Rigby 901 S. 1201 Sunshine Ave. since 1997 Senator Marquette Ave. Minneapolis, Cody, WY 82414 for Wyoming MN 55402 Age 61 Age 74 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer, RiboNovix, Hybridon, Inc. 901 S. Marquette Ave. 2002 Inc. since 2003 (biotechnology); (biotechnology) Minneapolis, MN 55402 former President, Forester Biotech Age 61 - -------------------------------------- --------------------- -------------------------------------- ------------------------------
- -------------------------------------------------------------------------------- 74 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
Board Member Affiliated with Ameriprise Financial, Inc. (formerly AEFC)* Name, address, age Position held Principal occupation Other directorships with Fund and during past five years length of service - -------------------------------------- --------------------- -------------------------------------- ------------------------------ William F. Truscott Board member President - U.S. Asset Management 53600 Ameriprise Financial Center since 2001, and Chief Investment Officer of Minneapolis, MN 55474 Vice President Ameriprise Financial, Inc. and Age 45 since 2002 President, Chairman of the Board and Chief Investment Officer of RiverSource Investments, LLC since 2005. Senior Vice President - Chief Investment Officer of Ameriprise Financial, Inc. and Chairman of the Board and Chief Investment Officer of RiverSource Investments, LLC, 2001-2005; former Chief Investment Officer and Managing Director, Zurich Scudder Investments - -------------------------------------- --------------------- -------------------------------------- ------------------------------ * Interested person by reason of being an officer, director and/or employee of Ameriprise Financial, Inc. (formerly American Express Financial Corporation) or of RiverSource Investments, LLC, its wholly owned subsidiary. The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: Fund Officers Name, address, age Position held Principal occupation during past Other directorships with Fund and five years length of service - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Jeffrey P. Fox Treasurer Vice President - Investment 105 Ameriprise Financial Center since 2002 Accounting, Ameriprise Financial, Minneapolis, MN 55474 Inc., since 2002; Vice President - Age 50 Finance, American Express Company, 2000-2002; Vice President - Corporate Controller, Ameriprise Financial, Inc., 1996-2000 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Paula R. Meyer President 2002Senior Vice President - Mutual 596 Ameriprise Financial Center since Funds, Ameriprise Financial, Inc., Minneapolis, MN 55474 since 2002 and Senior Vice Age 51 President, RiverSource Investments, LLC since 2004; Vice President and Managing Director - American Express Funds, Ameriprise Financial, Inc., 2000-2002; Vice President, Ameriprise Financial, Inc., 1998-2000 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Leslie L. Ogg Vice President, President of Board Services 901 S. Marquette Ave. General Counsel, Corporation Minneapolis, MN 55402 and Secretary Age 67 since 1978 - -------------------------------------- --------------------- -------------------------------------- ------------------------------ Beth E. Weimer Chief Compliance Vice President and Chief Compliance 172 Ameriprise Financial Center Officer since 2004 Officer, Ameriprise Financial, Inc., Minneapolis, MN 55474 since 2001 and Chief Compliance Age 52 Officer, RiverSource Investments, LLC since 2005; Vice President and Chief Compliance Officer - Asset Management and Insurance, Ameriprise Financial Services, Inc., since 2001; Partner, Arthur Andersen Regulatory Risk Services, 1998-2001 - -------------------------------------- --------------------- -------------------------------------- ------------------------------
The SAI has additional information about the Fund's directors and is available, without charge, upon request by calling (800) 862-7919. 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 (800) 862-7919; by looking at the website www.riversource.com/investments; or by 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 calling he Fund's administrator, Board Services Corporation, collect at (612) 330-9283; by looking at the website www.riversource.com/investments; or by searching the website of the SEC at www.sec.gov. - -------------------------------------------------------------------------------- 75 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Approval of Investment Management Services Agreement During the period covered by this report, Ameriprise Financial, Inc. (formerly American Express Financial Corporation or AEFC) (the investment manager), a wholly-owned subsidiary of American Express Company, served as the investment manager to the Fund. Under an Investment Management Services Agreement (the Agreement), the investment manager provides investment advice and other services to the Fund. Throughout the year, the Funds' Board of Directors and the Board's Investment Review Committee monitor these services. Each year the Board determines whether to continue the Agreement by evaluating the quality and level of service received and the costs associated with those services. The investment manager prepares detailed reports for the Board and its Contracts Committee in March and April and provides data prepared by independent organizations to assist the Board in making this determination. The Board gives considerable weight to the work, deliberations and conclusions of the Contracts and Investment Review Committees in determining whether to continue the Agreement. On Feb. 1, 2005, American Express Company announced its intention to pursue a spin-off of AEFC by distributing shares of the common stock of AEFC to shareholders of American Express Company. At a meeting held in person on April 14, 2005, the Board, including a majority of the independent members, approved the continuation of the Agreement for an interim period, not to exceed one year, ending on the later of (i) the effective date of the spin-off or (ii) the approval by the Fund's shareholders of a new investment management services agreement with the investment manager (the Interim Period). The spin-off will not result in an "assignment" of the Agreement under the Investment Company Act of 1940 and, therefore, will not cause the termination of the Agreement according to its terms. In connection with the spin-off the investment manager has proposed that going forward, services under the Agreement be provided by an affiliate, RiverSource Investments, LLC (RiverSource Investments). Independent counsel advised the Board that it would be prudent, in connection with the spin-off, to consider a new agreement with RiverSource Investments and to seek shareholder approval of that agreement as soon as practical thereafter. Investment performance is a major factor in the evaluation process, and the Board reviewed the Fund's performance over a range of different periods by comparing its performance to relevant Lipper and broader market indices. The Board considered that over time each Fund's performance should be above median for its peer group of funds with similar investment goals. For VP - Balanced, VP - Diversified Bond, VP - Diversified Equity Income, VP - Global Bond, VP - Growth, VP - High Yield Bond and VP - International Opportunity, the Board considered that the Fund's investment performance in 2004 exceeded the median. For VP - Emerging Markets, VP - Short Duration U.S. Government, VP - Small Cap Advantage and VP - Small Cap Value, the Board considered that the Fund's investment performance in 2004 approximated the median. For VP - Mid Cap Growth, VP - Large Cap Equity and VP - Strategy Aggressive, the Board considered that although the Fund's investment performance in 2004 was below median, it was consistent with the management style of the Fund in light of market conditions in 2004. For VP - New Dimensions, the Board considered that although the Fund's investment performance in 2004 was below median, Ameriprise Financial has taken steps to address the below median performance. Each of VP - Core Bond, VP - Global Inflation Protected Securities, VP - Income Opportunities, VP - Large Cap Value and VP - Select Value were first launched in 2004. The Board noted that, in addition to portfolio management and investment research, the investment manager provides portfolio trading, daily net asset value calculation, management of cash flow, product development, administration of its compliance and legal departments, access to distribution, accounting and recordkeeping, and reporting to the Board and shareholders. To evaluate these services, the Board referred to surveys and benchmarks established by commercial providers, trade associations and the investment manager's internal processes. The Board concluded that the services provided were consistent with services provided by investment managers to comparable mutual funds. The Board also evaluated the price paid for the services provided by the investment manager, noting the existence of a pricing philosophy, established by the Board and the investment manager, that seeks to maintain total Fund expenses within a range of the median expenses charged to comparable funds sold through financial advisors. The Board considered detailed information set forth in an annual report on fees and expenses, including, among other things, data showing a comparison of the Fund's expenses with median expenses paid by funds in its comparison group and data showing the Fund's contribution to the investment manager's profitability. - -------------------------------------------------------------------------------- 76 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT For VP - Balanced, VP - Diversified Equity Income, VP - Growth, VP - High Yield Bond, VP - Income Opportunities, VP - International Opportunity, VP - Mid Cap Growth, VP - New Dimensions, VP - Small Cap Advantage and VP - Strategy Aggressive, the Board determined that the total expense ratio of the Fund is below the median of its comparison group. For VP - Large Cap Equity and VP - Short Duration U.S. Government, the Board determined that the total expense ratio of the Fund is at median. For VP - Cash Management, the Board determined that while the Fund's expenses are close to the median, its yield have been competitive with other money market funds within its comparison group. For VP - Diversified Bond and VP - Global Bond, the Board determined that while the Fund's expenses are somewhat higher than the median for its comparison group, the Fund's strong performance justified the level of expenses. For VP - Core Bond, VP - Emerging Markets, VP - Global Inflation Protected Securities, VP - Large Cap Value, VP - S&P 500, VP - Select Value and VP - Small Cap Value, the Board determined that while the Fund's expenses are slightly higher than the median for its comparison group, the Fund has a fee waiver to reduce further the expenses the Fund will pay. The Board considered the economies of scale that might be realized by the investment manager as the Funds grew and took note of the extent to which Fund shareholders also might benefit from such growth. The Board considered that the Agreement provided for lower fees as assets increase at pre-established breakpoints and concluded that the Agreement satisfactorily provided for sharing these economies of scale. The Board took into account the Contracts Committee's discussion comparing the fees the investment manager charges to the Fund with those it charges to institutional clients, noting that the relatively higher fees paid by the Fund were principally attributable to the additional services required to manage a regulated mutual fund, like the Fund, and the operation of a large mutual fund family. The Board also considered the profitability realized by the investment manager and its affiliates from its relationship with the Fund. The Board took into account the services acquired by the investment manager through the use of commission dollars paid by the Fund on portfolio transactions. The Board concluded that the investment manager's overall costs and profitability were appropriate, although profitability may be too low on an ongoing basis. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. Based on the foregoing, the Board concluded that the fees paid to the investment manager under the Agreement were fair and reasonable and determined to approve renewal of the Agreement for the Interim Period. Following the period covered by this report, on Sept. 8, 2005, the Board approved a new investment management agreement with RiverSource Investments and recommended its approval by shareholders. The agreement will be considered by shareholders at a meeting scheduled to be held on Feb. 15, 2006. If approved, the new agreement would take effect shortly after such approval. The Board based its approval on, among other factors, its determination that RiverSource Investments, following the spin-off, would be in a position to continue to provide the Fund with a level and quality of services that would meet expectations. The Board also determined that fees to be paid under the new agreement were fair and reasonable in light of the services to be provided. - -------------------------------------------------------------------------------- 77 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Report of Independent Registered Public Accounting Firm THE BOARD AND SHAREHOLDERS AXP(R) VARIABLE PORTFOLIO-- INCOME SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- INVESTMENT SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- MANAGED SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- MONEY MARKET SERIES, INC. AXP(R) VARIABLE PORTFOLIO-- PARTNERS SERIES, INC. We have audited the accompanying statements of assets and liabilities, including the schedules of investments in securities, of RiverSource VP - Core Bond Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - Income Opportunities Fund and RiverSource VP - Short Duration U.S. Government Fund (funds within AXP Variable Portfolio - Income Series, Inc.), RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity Fund, RiverSource VP - Large Cap Value Fund, RiverSource VP - Mid Cap Growth Fund, RiverSource VP - Mid Cap Value Fund, RiverSource VP - New Dimensions Fund, RiverSource VP - S&P 500 Index Fund, RiverSource VP - Small Cap Advantage Fund and RiverSource VP - Strategy Aggressive Fund (funds within AXP Variable Portfolio - Investment Series, Inc.), RiverSource VP - Balanced Fund and RiverSource VP - Diversified Equity Income Fund (funds within AXP Variable Portfolio - Managed Series, Inc.), RiverSource VP - Cash Management Fund (fund within AXP Variable Portfolio - Money Market Series, Inc.), and RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund (funds within AXP Variable Portfolio - Partners Series, Inc.) as of August 31, 2005, and the related statements of operations, statements of changes in net assets and the financial highlights for the periods presented. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2005, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of RiverSource VP - Core Bond Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - Income Opportunities Fund, RiverSource VP - Short Duration U.S. Government Fund, RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity Fund, RiverSource VP - Large Cap Value Fund, RiverSource VP - Mid Cap Growth Fund, RiverSource VP - Mid Cap Value Fund, RiverSource VP - New Dimensions Fund, RiverSource VP - S&P 500 Index Fund, RiverSource VP - Small Cap Advantage Fund, RiverSource VP - Strategy Aggressive Fund, RiverSource VP - Balanced Fund, RiverSource VP - Diversified Equity Income Fund, RiverSource VP - Cash Management Fund, RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund as of August 31, 2005, and the results of their operations, the changes in their net assets, and the financial highlights for each of the periods presented, in conformity with U.S. generally accepted accounting principles. KPMG LLP Minneapolis, Minnesota October 20, 2005 - -------------------------------------------------------------------------------- 78 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Financial Statements
Statements of assets and liabilities RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Aug. 31, 2005 Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $2,287,314,133, $694,123,658 and $62,004,968) $2,506,748,863 $694,123,658 $62,314,846 Cash in bank on demand deposit 433,360 99,820 12,158 Receivable for investment securities sold 86,064,523 -- 3,731,755 Dividends and accrued interest receivable 9,681,913 659,696 319,972 Unrealized appreciation on swap transactions, at value (Note 9) 333,825 -- 17,496 -------------- ------------ ----------- Total assets 2,603,262,484 694,883,174 66,396,227 -------------- ------------ ----------- Liabilities Dividends payable to shareholders (Note 1) 14,740,923 1,764,743 155,948 Payable for investment securities purchased 48,948,982 4,999,830 3,780,135 Payable for securities purchased on a forward-commitment basis (Note 1) 28,439,783 -- 3,907,593 Accrued investment management services fee 1,354,823 315,355 32,511 Accrued distribution fee 279,350 77,293 6,451 Accrued administrative services fee 71,692 18,550 2,580 Payable upon return of securities loaned (Note 6) 31,055,150 -- -- Other accrued expenses 351,114 102,276 25,077 Forward sale commitments, at value (proceeds receivable $40,276,090 for RiverSource VP - Balanced Fund and $538,148 for RiverSource VP - Core Bond Fund) (Note 1) 40,694,342 -- 546,141 -------------- ------------ ----------- Total liabilities 165,936,159 7,278,047 8,456,436 -------------- ------------ ----------- Net assets applicable to outstanding capital stock $2,437,326,325 $687,605,127 $57,939,791 ============== ============ =========== Represented by Capital stock -- $.01 par value ($.001 for RiverSource VP - Balanced Fund) (Note 1) $ 160,604 $ 6,878,507 $ 57,634 Additional paid-in capital 2,233,207,371 680,728,417 57,492,637 Undistributed (excess of distributions over) net investment income (303,746) -- 11,000 Accumulated net realized gain (loss) (Note 10) (14,590,924) (1,797) 80,353 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 7 and 9) 218,853,020 -- 298,167 -------------- ------------ ----------- Total -- representing net assets applicable to outstanding capital stock $2,437,326,325 $687,605,127 $57,939,791 ============== ============ =========== Shares outstanding 160,604,257 687,850,731 5,763,369 -------------- ------------ ----------- Net asset value per share of outstanding capital stock $ 15.18 $ 1.00 $ 10.05 -------------- ------------ ----------- * Including securities on loan, at value (Note 6) $ 30,653,472 $ -- $ -- -------------- ------------ -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 79 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $1,950,772,404, $1,477,324,953 and $171,984,013) $1,962,030,067 $1,726,073,222 $190,043,792 Cash in bank on demand deposit 150,458 66,674 51,846 Foreign currency holdings for RiverSource VP - Emerging Markets Fund (identified cost $2,372,944) (Note 1) -- -- 2,374,728 Receivable for investment securities sold 128,129,938 275,496 318,999 Dividends and accrued interest receivable 11,581,951 3,378,809 218,605 Unrealized appreciation on swap transactions, at value (Note 9) 644,215 -- -- -------------- -------------- ------------ Total assets 2,102,536,629 1,729,794,201 193,007,970 -------------- -------------- ------------ Liabilities Dividends payable to shareholders (Note 1) 5,605,902 6,524,927 232,237 Payable for investment securities purchased 95,428,529 11,028,826 533,394 Payable for securities purchased on a forward-commitment basis (Note 1) 83,374,383 -- -- Accrued investment management services fee 981,458 802,163 193,282 Accrued distribution fee 203,340 184,392 20,650 Accrued administrative services fee 77,723 51,035 16,520 Payable upon return of securities loaned (Note 6) 30,678,750 31,891,100 -- Other accrued expenses 251,309 230,561 51,003 Forward sale commitments, at value (proceeds receivable $61,051,441 for RiverSource VP - Diversified Bond Fund) (Note 1) 61,665,312 -- -- -------------- -------------- ------------ Total liabilities 278,266,706 50,713,004 1,047,086 -------------- -------------- ------------ Net assets applicable to outstanding capital stock $1,824,269,923 $1,679,081,197 $191,960,884 ============== ============== ============ Represented by Capital stock -- $.01 par value (Note 1) $ 1,711,534 $ 1,214,311 $ 146,043 Additional paid-in capital 1,954,526,477 1,361,550,437 161,218,809 Undistributed (excess of distributions over) net investment income (137,182) (460,246) 86,481 Accumulated net realized gain (loss) (Note 10) (142,509,882) 68,022,719 12,429,849 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 7 and 9) 10,678,976 248,753,976 18,079,702 -------------- -------------- ------------ Total -- representing net assets applicable to outstanding capital stock $1,824,269,923 $1,679,081,197 $191,960,884 ============== ============== ============ Shares outstanding 171,153,440 121,431,081 14,604,276 -------------- -------------- ------------ Net asset value per share of outstanding capital stock $ 10.66 $ 13.83 $ 13.14 -------------- -------------- ------------ * Including securities on loan, at value (Note 6) $ 30,193,200 $ 31,393,856 $ -- -------------- -------------- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 80 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Aug. 31, 2005 Fund Fund Assets Investments in securities, at value (Note 1) (identified cost $548,217,601 $115,188,941 and $371,796,816) $565,867,366 $116,041,776 $ 393,243,032 Cash in bank on demand deposit 76,636 737,173 129,785 Foreign currency holdings for RiverSource VP - Global Bond Fund (identified cost $5,149,539) (Note 1) 5,189,374 -- -- Receivable for investment securities sold 5,671,977 -- 3,841,419 Dividends and accrued interest receivable 6,455,613 585,987 298,073 Unrealized appreciation on foreign currency contracts held, at value (Note 5) 103,303 -- -- Unrealized appreciation on swap transactions, at value (Note 9) 198,029 -- -- ------------ ------------ ------------- Total assets 583,562,298 117,364,936 397,512,309 ------------ ------------ ------------- Liabilities Dividends payable to shareholders (Note 1) 1,123,713 230,081 167,211 Payable for investment securities purchased 5,967,951 666,996 5,103,997 Payable for securities purchased on a forward-commitment basis (Note 1) 537,876 -- -- Unrealized depreciation on foreign currency contracts held, at value (Note 5) 27,554 -- -- Accrued investment management services fee 422,769 45,582 213,758 Accrued distribution fee 63,673 11,628 42,412 Accrued administrative services fee 28,859 4,651 16,965 Other accrued expenses 97,587 9,035 66,841 ------------ ------------ ------------- Total liabilities 8,269,982 967,973 5,611,184 ------------ ------------ ------------- Net assets applicable to outstanding capital stock $575,292,316 $116,396,963 $ 391,901,125 ============ ============ ============= Represented by Capital stock -- $.01 par value (Note 1) $ 522,087 $ 114,182 $ 592,479 Additional paid-in capital 555,177,749 115,428,587 490,171,675 Undistributed (excess of distributions over) net investment income (544,665) 782 -- Accumulated net realized gain (loss) (Note 10) 2,339,456 429 (120,309,207) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Notes 5, 7 and 9) 17,797,689 852,983 21,446,178 ------------ ------------ ------------- Total -- representing net assets applicable to outstanding capital stock $575,292,316 $116,396,963 $ 391,901,125 ============ ============ ============= Shares outstanding 52,208,744 11,418,190 59,247,936 ------------ ------------ ------------- Net asset value per share of outstanding capital stock $ 11.02 $ 10.19 $ 6.61 ------------ ------------ -------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 81 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1) (identified cost $1,211,616,181, $43,303,619 and $995,394,748) $1,219,217,603 $43,835,776 $1,186,728,982 Cash in bank on demand deposit 83,598 26,090 58,032 Foreign currency holdings for RiverSource VP - International Opportunity Fund (identified cost $1,102,402) (Note 1) -- -- 1,098,229 Receivable for investment securities sold 21,225,859 741,225 -- Dividends and accrued interest receivable 20,880,198 795,551 2,244,850 Other receivable 629,139 -- -- -------------- ----------- -------------- Total assets 1,262,036,397 45,398,642 1,190,130,093 -------------- ----------- -------------- Liabilities Dividends payable to shareholders (Note 1) 7,013,491 210,093 3,215,736 Payable for investment securities purchased 3,266,939 150,071 1,303,405 Payable for securities purchased on a forward-commitment basis (Note 1) 4,219,341 418,950 -- Accrued investment management services fee 694,748 24,832 899,137 Accrued distribution fee 140,741 4,850 133,524 Accrued administrative services fee 55,187 1,940 54,029 Other accrued expenses 170,585 25,029 185,841 -------------- ----------- -------------- Total liabilities 15,561,032 835,765 5,791,672 -------------- ----------- -------------- Net assets applicable to outstanding capital stock $1,246,475,365 $44,562,877 $1,184,338,421 -------------- ----------- -------------- Represented by Capital stock -- $.01 par value (Note 1) $ 1,843,853 $ 42,882 $ 1,181,418 Additional paid-in capital 1,454,691,006 43,749,315 1,683,356,219 Undistributed (excess of distributions over) net investment income 4,068,451 8,000 (612,581) Accumulated net realized gain (loss) (Note 10) (222,358,506) 230,523 (690,998,245) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 8,230,561 532,157 191,411,610 -------------- ----------- -------------- Total -- representing net assets applicable to outstanding capital stock $1,246,475,365 $44,562,877 $1,184,338,421 ============== =========== ============== Shares outstanding 184,385,297 4,288,162 118,141,847 -------------- ----------- -------------- Net asset value per share of outstanding capital stock $ 6.76 $ 10.39 $ 10.02 -------------- ----------- --------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 82 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP -RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $2,453,308,825, $13,478,870 and $204,206,933) $2,603,198,595 $14,126,334 $255,619,816 Cash in bank on demand deposit -- 760,759 99,982 Receivable for investment securities sold 14,018,617 26,814 1,194,644 Dividends and accrued interest receivable 4,065,474 32,625 149,793 -------------- ----------- ------------ Total assets 2,621,282,686 14,946,532 257,064,235 -------------- ----------- ------------ Liabilities Disbursements in excess of cash on demand deposit 642,259 -- -- Dividends payable to shareholders (Note 1) 5,955,728 48,953 -- Payable for investment securities purchased 16,397,501 30,939 1,595,133 Accrued investment management services fee 1,412,824 8,290 150,466 Accrued distribution fee 285,862 1,645 28,952 Accrued administrative services fee 105,038 658 13,869 Payable upon return of securities loaned (Note 6) 85,758,400 -- -- Other accrued expenses 347,384 35,427 71,249 -------------- ----------- ------------ Total liabilities 110,904,996 125,912 1,859,669 -------------- ----------- ------------ Net assets applicable to outstanding capital stock $2,510,377,690 $14,820,620 $255,204,566 ============== =========== ============ Represented by Capital stock -- $.01 par value (Note 1) $ 1,168,709 $ 13,482 $ 205,276 Additional paid-in capital 2,789,070,553 13,867,930 190,702,436 Excess of distributions over net investment income (114,369) (2,179) -- Accumulated net realized gain (loss) (Note 10) (429,636,794) 293,923 12,883,971 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 149,889,591 647,464 51,412,883 -------------- ----------- ------------ Total -- representing net assets applicable to outstanding capital stock $2,510,377,690 $14,820,620 $255,204,566 ============== =========== ============ Shares outstanding 116,870,943 1,348,162 20,527,588 -------------- ----------- ------------ Net asset value per share of outstanding capital stock $ 21.48 $ 10.99 $ 12.43 -------------- ----------- ------------ * Including securities on loan, at value (Note 6) $ 83,948,719 $ -- $ -- -------------- ----------- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 83 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP -RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $6,474,960, $2,085,102,846 and $334,351,254) $6,941,643 $2,243,508,518 $367,947,017 Cash in bank on demand deposit 389,685 103,595 94,589 Expense reimbursement receivable from Ameriprise Financial (formerly AEFC) -- -- 4,950 Foreign currency holdings for RiverSource VP - New Dimensions Fund (identified cost $132) (Note 1) -- 142 -- Receivable for investment securities sold 16,135 21,513,093 231,343 Dividends and accrued interest receivable 8,977 3,333,683 752,065 ---------- -------------- ------------ Total assets 7,356,440 2,268,459,031 369,029,964 ---------- -------------- ------------ Liabilities Dividends payable to shareholders (Note 1) 7,912 3,103,263 1,340,385 Payable for investment securities purchased 225,459 30,965,874 99,260 Accrued investment management services fee 4,141 1,265,405 96,852 Accrued distribution fee 709 255,150 41,747 Accrued administrative services fee 284 95,210 26,718 Payable upon return of securities loaned (Note 6) -- 32,850,000 -- Other accrued expenses 2,100 328,430 74,379 ---------- -------------- ------------ Total liabilities 240,605 68,863,332 1,679,341 ---------- -------------- ------------ Net assets applicable to outstanding capital stock $7,115,835 $2,199,595,699 $367,350,623 ========== ============== ============ Represented by Capital stock -- $.01 par value (Note 1) $ 6,230 $ 1,425,895 $ 442,410 Additional paid-in capital 6,607,405 2,301,634,730 334,632,659 Undistributed (excess of distributions over) net investment income 260 1 (18,268) Accumulated net realized gain (loss) (Note 10) 35,256 (261,870,632) (1,282,406) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 7) 466,684 158,405,705 33,576,228 ---------- -------------- ------------ Total -- representing net assets applicable to outstanding capital stock $7,115,835 $2,199,595,699 $367,350,623 ========== ============== ============ Shares outstanding 623,021 142,589,501 44,241,047 ---------- -------------- ------------ Net asset value per share of outstanding capital stock $ 11.42 $ 15.43 $ 8.30 ---------- -------------- ------------ * Including securities on loan, at value (Note 6) $ -- $ 32,556,000 $ -- ---------- -------------- ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 84 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP -RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Aug. 31, 2005 Fund Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $22,067,355, $498,733,654 and $208,843,721) $23,555,304 $496,354,284 $237,102,466 Cash in bank on demand deposit 47,344 71,335 84,288 Expense reimbursement receivable from Ameriprise Financial 2,775 -- -- Receivable for investment securities sold 55,054 32,736,866 1,793,235 Dividends and accrued interest receivable 23,896 2,678,264 105,891 ----------- ------------ ------------ Total assets 23,684,373 531,840,749 239,085,880 ----------- ------------ ------------ Liabilities Dividends payable to shareholders (Note 1) 15,876 1,160,748 -- Payable for investment securities purchased 149,956 17,455,717 1,090,709 Payable for securities purchased on a forward-commitment basis (Note 1) -- 13,921,642 -- Accrued investment management services fee 16,597 267,593 354,745 Accrued distribution fee 2,561 54,835 26,535 Accrued administrative services fee 1,229 21,934 12,737 Payable upon return of securities loaned (Note 6) -- -- 2,103,400 Other accrued expenses 24,917 87,565 52,198 Forward sale commitments, at value (proceeds receivable $14,247,473 for RiverSource VP - Short Duration U.S. Government Fund Fund) (Note 1) -- 14,387,125 -- ----------- ------------ ------------ Total liabilities 211,136 47,357,159 3,640,324 ----------- ------------ ------------ Net assets applicable to outstanding capital stock $23,473,237 $484,483,590 $235,445,556 =========== ============ ============ Represented by Capital stock -- $.01 par value (Note 1) $ 20,507 $ 474,580 $ 155,837 Additional paid-in capital 21,670,639 494,132,687 178,093,107 Undistributed (excess of distributions over) net investment income (2,727) 38,457 53,169 Accumulated net realized gain (loss) (Note 10) 296,869 (7,670,015) 28,884,698 Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (Note 7) 1,487,949 (2,492,119) 28,258,745 ----------- ------------ ------------ Total -- representing net assets applicable to outstanding capital stock $23,473,237 $484,483,590 $235,445,556 =========== ============ ============ Shares outstanding 2,050,743 47,457,973 15,583,696 ----------- ------------ ------------ Net asset value per share of outstanding capital stock $ 11.45 $ 10.21 $ 15.11 ----------- ------------ ------------ * Including securities on loan, at value (Note 6) $ -- $ -- $ 2,072,775 ----------- ------------ ------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 85 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of assets and liabilities (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Small Cap Strategy Value Aggressive Aug. 31, 2005 Fund Fund Assets Investments in securities, at value (Note 1)* (identified cost $375,928,159, $529,347,835) $412,104,129 $ 707,657,563 Cash in bank on demand deposit 280,059 29,118 Receivable for investment securities sold 3,877,227 243,370 Dividends and accrued interest receivable 193,481 302,168 ------------ --------------- Total assets 416,454,896 708,232,219 ------------ --------------- Liabilities Payable for investment securities purchased 3,806,618 3,354,433 Accrued investment management services fee 369,697 396,923 Accrued distribution fee 45,647 77,974 Accrued administrative services fee 28,519 34,580 Payable upon return of securities loaned (Note 6) -- 17,617,900 Other accrued expenses 94,949 105,209 ------------ --------------- Total liabilities 4,345,430 21,587,019 ------------ --------------- Net assets applicable to outstanding capital stock $412,109,466 $ 686,645,200 ============ =============== Represented by Capital stock -- $.01 par value (Note 1) $ 285,038 $ 830,200 Additional paid-in capital 344,795,055 1,845,692,516 Undistributed (excess of distributions over) net investment income 169,285 (1) Accumulated net realized gain (loss) (Note 10) 30,684,118 (1,338,187,243) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 36,175,970 178,309,728 ------------ --------------- Total -- representing net assets applicable to outstanding capital stock $412,109,466 $ 686,645,200 ============ =============== Shares outstanding 28,503,827 83,019,997 ------------ --------------- Net asset value per share of outstanding capital stock $ 14.46 $ 8.27 ------------ --------------- * Including securities on loan, at value (Note 6) $ -- $ 17,417,130 ------------ ---------------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 86 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Year ended Aug. 31, 2005 Fund Fund Investment income Income: Dividends $ 40,162,482 $ -- $ -- Interest 42,352,858 18,339,546 1,862,263 Fee income from securities lending (Note 6) 263,715 -- -- Less foreign taxes withheld (322,914) -- -- ------------ ----------- ---------- Total income 82,456,141 18,339,546 1,862,263 ------------ ----------- ---------- Expenses (Note 2): Investment management services fee 16,475,472 3,618,791 290,514 Distribution fee 3,258,265 886,958 57,634 Administrative services fees and expenses 892,514 228,193 19,968 Custodian fees 326,925 52,955 57,746 Compensation of board members 22,118 12,485 9,676 Printing and postage 458,928 146,240 11,055 Audit fees 26,500 20,000 19,500 Other 48,114 9,579 557 ------------ ----------- ---------- Total expenses 21,508,836 4,975,201 466,650 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- -- (28,302) ------------ ----------- ---------- 21,508,836 4,975,201 438,348 Earnings credits on cash balances (Note 2) (2,863) (1,574) (5,873) ------------ ----------- ---------- Total net expenses 21,505,973 4,973,627 432,475 ------------ ----------- ---------- Investment income (loss) -- net 60,950,168 13,365,919 1,429,788 ------------ ----------- ---------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 161,598,063 1,275 265,895 Foreign currency transactions (70,034) -- (185) Futures contracts 614,455 -- 41,238 Swap transactions (182,999) -- (8,907) ------------ ----------- ---------- Net realized gain (loss) on investments 161,959,485 1,275 298,041 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 20,254,609 -- (8,029) ------------ ----------- ---------- Net gain (loss) on investments and foreign currencies 182,214,094 1,275 290,012 ------------ ----------- ---------- Net increase (decrease) in net assets resulting from operations $243,164,262 $13,367,194 $1,719,800 ============ =========== ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 87 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ -- $ 30,534,184 $ 2,303,176 Interest 77,211,100 835,666 133,915 Fee income from securities lending (Note 6) 154,464 152,678 -- Less foreign taxes withheld -- (255,472) (287,245) ----------- ------------ ----------- Total income 77,365,564 31,267,056 2,149,846 ----------- ------------ ----------- Expenses (Note 2): Investment management services fee 10,446,764 7,790,892 1,128,628 Distribution fee 2,163,215 1,559,298 126,227 Administrative services fees and expenses 863,405 468,417 98,265 Custodian fees 214,024 355,460 146,667 Compensation of board members 22,793 13,018 9,676 Printing and postage 355,670 265,560 22,521 Audit fees 26,500 22,000 20,000 Other 39,660 14,296 13,013 ----------- ------------ ----------- Total expenses 14,132,031 10,488,941 1,564,997 Earnings credits on cash balances (Note 2) (3,850) (810) (3,983) ----------- ------------ ----------- Total net expenses 14,128,181 10,488,131 1,561,014 ----------- ------------ ----------- Investment income (loss) -- net 63,237,383 20,778,925 588,832 ----------- ------------ ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 15,413,826 74,284,659 13,698,293 Foreign currency transactions (127,527) (8,928) (162,228) Futures contracts (788,826) -- -- Swap transactions (345,127) -- -- ----------- ------------ ----------- Net realized gain (loss) on investments 14,152,346 74,275,731 13,536,065 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (4,469,293) 176,095,823 16,517,176 ----------- ------------ ----------- Net gain (loss) on investments and foreign currencies 9,683,053 250,371,554 30,053,241 ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations $72,920,436 $271,150,479 $30,642,073 =========== ============ ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 88 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Year ended Aug. 31, 2005 Fund Fund(a) Investment income Income: Dividends $ -- $ -- $ 3,592,538 Interest 18,298,742 1,423,510 389,124 Fee income from securities lending (Note 6) 24,785 -- 28,779 Less foreign taxes withheld (20,582) -- (90,673) ----------- ---------- ----------- Total income 18,302,945 1,423,510 3,919,768 ----------- ---------- ----------- Expenses (Note 2): Investment management services fee 4,107,042 167,833 2,023,076 Distribution fee 617,003 42,814 365,846 Administrative services fees and expenses 289,959 16,066 149,053 Custodian fees 179,440 34,503 63,060 Compensation of board members 10,968 2,044 10,435 Printing and postage 94,060 15,100 61,070 Audit fees 23,500 19,500 20,500 Other 6,218 100 2,931 ----------- ---------- ----------- Total expenses 5,328,190 297,960 2,695,971 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- (40,988) -- ----------- ---------- ----------- 5,328,190 256,972 2,695,971 Earnings credits on cash balances (Note 2) (1,347) (3,486) (3,312) ----------- ---------- ----------- Total net expenses 5,326,843 253,486 2,692,659 ----------- ---------- ----------- Investment income (loss) -- net 12,976,102 1,170,024 1,227,109 ----------- ---------- ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 13,010,235 8,849 26,303,633 Foreign currency transactions 1,643,879 869 (3,840) Futures contracts (122,299) -- -- Options contracts written (Note 8) -- -- (561,055) Swap transactions (100,114) -- -- ----------- ---------- ----------- Net realized gain (loss) on investments 14,431,701 9,718 25,738,738 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 955,738 853,992 17,284,007 ----------- ---------- ----------- Net gain (loss) on investments and foreign currencies 15,387,439 863,710 43,022,745 ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations $28,363,541 $2,033,734 $44,249,854 =========== ========== ===========
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 89 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ -- $ -- $ 27,087,608 Interest 90,518,441 1,719,885 412,485 Fee income from securities lending (Note 6) -- -- 642,537 Less foreign taxes withheld (3,183) (413) (3,203,422) ------------ ---------- ------------ Total income 90,515,258 1,719,472 24,939,208 ------------ ---------- ------------ Expenses (Note 2): Investment management services fee 7,533,530 165,239 8,953,186 Distribution fee 1,525,551 32,273 1,392,429 Administrative services fees and expenses 625,083 15,279 593,033 Custodian fees 93,250 23,697 398,819 Compensation of board members 14,760 3,528 13,776 Printing and postage 273,668 3,586 242,031 Audit fees 26,500 19,500 26,000 Other 16,064 2,216 19,794 ------------ ---------- ------------ Total expenses 10,108,406 265,318 11,639,068 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- (9,563) -- ------------ ---------- ------------ 10,108,406 255,755 11,639,068 Earnings credits on cash balances (Note 2) (1,913) (7,252) (2,124) ------------ ---------- ------------ Total net expenses 10,106,493 248,503 11,636,944 ------------ ---------- ------------ Investment income (loss) -- net 80,408,765 1,470,969 13,302,264 ------------ ---------- ------------ Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 33,067,201 305,821 106,699,807 Foreign currency transactions -- -- (646,434) ------------ ---------- ------------ Net realized gain (loss) on investments 33,067,201 305,821 106,053,373 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (6,289,026) 147,007 107,127,444 ------------ ---------- ------------ Net gain (loss) on investments and foreign currencies 26,778,175 452,828 213,180,817 ------------ ---------- ------------ Net increase (decrease) in net assets resulting from operations $107,186,940 $1,923,797 $226,483,081 ============ ========== ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 90 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ 47,068,166 $ 260,163 $ 1,083,028 Interest 1,821,970 5,537 149,402 Fee income from securities lending (Note 6) 609,965 -- -- Less foreign taxes withheld (493,543) (2,691) -- ------------ ---------- ----------- Total income 49,006,558 263,009 1,232,430 ------------ ---------- ----------- Expenses (Note 2): Investment management services fee 15,079,399 70,240 1,435,137 Distribution fee 3,171,288 13,898 310,975 Administrative services fees and expenses 1,227,017 5,559 151,155 Custodian fees 236,000 123,705 48,280 Compensation of board members 21,085 -- 9,676 Printing and postage 500,900 50,845 55,300 Audit fees 27,000 19,000 19,000 Other 50,238 -- 1,870 ------------ ---------- ----------- Total expenses 20,312,927 283,247 2,031,393 Expenses waived/reimbursed by Ameriprise Financial (Note 2) -- (166,423) -- ------------ ---------- ----------- 20,312,927 116,824 2,031,393 Earnings credits on cash balances (Note 2) (1,170) (5,757) (3,943) ------------ ---------- ----------- Total net expenses 20,311,757 111,067 2,027,450 ------------ ---------- ----------- Investment income (loss) -- net 28,694,801 151,942 (795,020) ------------ ---------- ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 211,305,211 357,850 19,871,209 Foreign currency transactions (68,721) -- (907) ------------ ---------- ----------- Net realized gain (loss) on investments 211,236,490 357,850 19,870,302 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 57,887,507 625,405 31,461,353 ------------ ---------- ----------- Net gain (loss) on investments and foreign currencies 269,123,997 983,255 51,331,655 ------------ ---------- ----------- Net increase (decrease) in net assets resulting from operations $297,818,798 $1,135,197 $50,536,635 ============ ========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 91 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Year ended Aug. 31, 2005 Fund(a) Fund Fund Investment income Income: Dividends $ 23,968 $ 44,123,215 $ 6,974,503 Interest 156 2,908,412 217,686 Fee income from securities lending (Note 6) -- 87,797 -- Less foreign taxes withheld (35) (123,320) -- -------- ------------ ----------- Total income 24,089 46,996,104 7,192,189 -------- ------------ ----------- Expenses (Note 2): Investment management services fee 10,481 14,503,077 973,909 Distribution fee 1,795 3,323,835 419,788 Administrative services fees and expenses 718 1,284,313 272,087 Custodian fees 7,610 193,090 90,195 Compensation of board members -- 23,776 10,210 Printing and postage 3,030 587,200 65,977 Licensing fees -- -- 31,832 Audit fees 19,000 26,500 20,000 Other -- 49,637 3,921 -------- ------------ ----------- Total expenses 42,634 19,991,428 1,887,919 Expenses waived/reimbursed by Ameriprise Financial (Note 2) (27,089) -- (224,165) -------- ------------ ----------- 15,545 19,991,428 1,663,754 Earnings credits on cash balances (Note 2) (300) (986) (6,515) -------- ------------ ----------- Total net expenses 15,245 19,990,442 1,657,239 -------- ------------ ----------- Investment income (loss) -- net 8,844 27,005,662 5,534,950 -------- ------------ ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 34,458 141,472,104 363,278 Foreign currency transactions (10) (75,535) -- Futures contracts -- 31,708 904,140 Options contracts written (Note 8) -- (770,318) -- -------- ------------ ----------- Net realized gain (loss) on investments 34,448 140,657,959 1,267,418 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 437,214 27,273,899 29,628,952 -------- ------------ ----------- Net gain (loss) on investments and foreign currencies 471,662 167,931,858 30,896,370 -------- ------------ ----------- Net increase (decrease) in net assets resulting from operations $480,506 $194,937,520 $36,431,320 ======== ============ ===========
(a) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 92 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Year ended Aug. 31, 2005 Fund Fund Fund Investment income Income: Dividends $ 179,403 $ -- $ 1,559,010 Interest 69,992 17,469,695 154,639 Fee income from securities lending (Note 6) -- -- 34,245 Less foreign taxes withheld (1,738) -- (3,428) ---------- ----------- ----------- Total income 247,657 17,469,695 1,744,466 ---------- ----------- ----------- Expenses (Note 2): Investment management services fee 123,757 3,045,061 1,757,829 Distribution fee 19,359 623,988 275,040 Administrative services fees and expenses 9,292 258,743 132,967 Custodian fees 7,635 69,184 118,470 Compensation of board members -- 11,193 9,676 Printing and postage 1,947 100,751 41,262 Audit fees 19,000 21,500 20,000 Other -- 5,978 893 ---------- ----------- ----------- Total expenses 180,990 4,136,398 2,356,137 Expenses waived/reimbursed by Ameriprise Financial (Note 2) (2,775) -- -- ---------- ----------- ----------- 178,215 4,136,398 2,356,137 Earnings credits on cash balances (Note 2) -- (1,429) (146) ---------- ----------- ----------- Total net expenses 178,215 4,134,969 2,355,991 ---------- ----------- ----------- Investment income (loss) -- net 69,442 13,334,726 (611,525) ---------- ----------- ----------- Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 328,478 (2,981,388) 29,970,230 Futures contracts -- (221,881) 50,601 Options contracts written (Note 8) -- 41,887 -- ---------- ----------- ----------- Net realized gain (loss) on investments 328,478 (3,161,382) 30,020,831 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,579,596 (3,182,742) 17,135,003 ---------- ----------- ----------- Net gain (loss) on investments and foreign currencies 1,908,074 (6,344,124) 47,155,834 ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations $1,977,516 $ 6,990,602 $46,544,309 ========== =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 93 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of operations (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Small Cap Strategy Value Aggressive Year ended Aug. 31, 2005 Fund Fund Investment income Income: Dividends $ 3,186,761 $ 2,621,092 Interest 1,246,576 716,232 Fee income from securities lending (Note 6) -- 78,917 Less foreign taxes withheld (11,630) -- ----------- ------------ Total income 4,421,707 3,416,241 ----------- ------------ Expenses (Note 2): Investment management services fee 3,087,940 4,288,049 Distribution fee 394,484 946,936 Administrative services fees and expenses 251,446 431,432 Custodian fees 205,993 61,900 Compensation of board members 10,210 12,935 Printing and postage 62,715 152,510 Audit fees 20,500 23,500 Other 2,834 13,438 ----------- ------------ Total expenses 4,036,122 5,930,700 Earnings credits on cash balances (Note 2) -- (1,129) ----------- ------------ Total net expenses 4,036,122 5,929,571 ----------- ------------ Investment income (loss) -- net 385,585 (2,513,330) ----------- ------------ Realized and unrealized gain (loss)-- net Net realized gain (loss) on: Security transactions (Note 3) 31,279,697 65,875,966 Foreign currency transactions (148) (2,849) ----------- ------------ Net realized gain (loss) on investments 31,279,549 65,873,117 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 22,038,842 86,549,108 ----------- ------------ Net gain (loss) on investments and foreign currencies 53,318,391 152,422,225 ----------- ------------ Net increase (decrease) in net assets resulting from operations $53,703,976 $149,908,895 =========== ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 94 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Balanced Fund Cash Management Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 60,950,168 $ 53,859,632 $ 13,365,919 $ 3,650,350 Net realized gain (loss) on investments 161,959,485 93,004,681 1,275 19 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 20,254,609 121,962,828 -- -- -------------- -------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations 243,164,262 268,827,141 13,367,194 3,650,369 -------------- -------------- ------------- ------------- Distributions to shareholders from: Net investment income (61,685,753) (53,848,054) (13,366,319) (3,649,950) -------------- -------------- ------------- ------------- Capital share transactions (Note 4) Proceeds from sales 33,994,949 31,554,087 278,245,964 407,746,489 Fund merger (Note 11) -- 377,379,266 -- 46,089,994 Reinvestment of distributions at net asset value 61,564,207 52,211,162 12,094,809 3,353,286 Payments for redemptions (503,321,951) (428,968,239) (375,917,897) (552,023,361) -------------- -------------- ------------- ------------- Increase (decrease) in net assets from capital share transactions (407,762,795) 32,176,276 (85,577,124) (94,833,592) -------------- -------------- ------------- ------------- Total increase (decrease) in net assets (226,284,286) 247,155,363 (85,576,249) (94,833,173) Net assets at beginning of year 2,663,610,611 2,416,455,248 773,181,376 868,014,549 -------------- -------------- ------------- ------------- Net assets at end of year $2,437,326,325 $2,663,610,611 $ 687,605,127 $ 773,181,376 ============== ============== ============= ============= Undistributed (excess of distributions over) net investment income $ (303,746) $ (634,659) $ -- $ 400 -------------- -------------- ------------- -------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Core Bond Fund Diversified Bond Fund Year ended Aug. 31, 2005 2004(a) 2005 2004 Operations and distributions Investment income (loss) -- net $ 1,429,788 $ 401,727 $ 63,237,383 $ 61,331,133 Net realized gain (loss) on investments 298,041 (189,295) 14,152,346 (12,291,058) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (8,029) 374,009 (4,469,293) 47,889,837 ----------- ----------- -------------- -------------- Net increase (decrease) in net assets resulting from operations 1,719,800 586,441 72,920,436 96,929,912 ----------- ----------- -------------- -------------- Distributions to shareholders from: Net investment income (1,450,986) (404,035) (66,121,267) (60,644,287) ----------- ----------- -------------- -------------- Capital share transactions (Note 4) Proceeds from sales 26,946,369 11,561,509 266,496,135 122,995,561 Fund merger (Note 11) -- -- -- 82,520,680 Reinvestment of distributions at net asset value 1,374,055 330,063 65,971,457 59,930,752 Payments for redemptions (6,193,096) (1,480,349) (211,228,785) (370,385,419) ----------- ----------- -------------- -------------- Increase (decrease) in net assets from capital share transactions 22,127,328 10,411,223 121,238,807 (104,938,426) ----------- ----------- -------------- -------------- Total increase (decrease) in net assets 22,396,142 10,593,629 128,037,976 (68,652,801) Net assets at beginning of year (Note 1) 35,543,649 24,950,020(b) 1,696,231,947 1,764,884,748 ----------- ----------- -------------- -------------- Net assets at end of year $57,939,791 $35,543,649 $1,824,269,923 $1,696,231,947 =========== =========== ============== ============== Undistributed (excess of distributions over) net investment income $ 11,000 $ (312) $ (137,182) $ 230,380 ----------- ----------- -------------- --------------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $25,000,000 was contributed on Jan. 7, 2004. The Fund had a decrease in net assets resulting from operations of $49,980 during the period from Jan. 7, 2004 to Feb. 4, 2004 (date the Fund became available). See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 95 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - Diversified RiverSource VP - Equity Income Fund Emerging Markets Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 20,778,925 $ 10,967,407 $ 588,832 $ 195,481 Net realized gain (loss) on investments 74,275,731 18,962,648 13,536,065 2,910,195 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 176,095,823 45,647,551 16,517,176 (611,215) -------------- ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations 271,150,479 75,577,606 30,642,073 2,494,461 -------------- ------------ ------------ ----------- Distributions to shareholders from: Net investment income (19,986,713) (10,327,123) (502,237) (313,397) Net realized gain -- -- (2,148,317) -- -------------- ------------ ------------ ----------- Total distributions (19,986,713) (10,327,123) (2,650,554) (313,397) -------------- ------------ ------------ ----------- Capital share transactions (Note 4) Proceeds from sales 586,505,709 406,109,798 121,975,171 31,500,657 Fund merger (Note 11) -- 12,770,996 -- -- Reinvestment of distributions at net asset value 17,749,939 7,522,149 2,508,714 235,868 Payments for redemptions (19,307,264) (18,803,894) (6,438,923) (4,264,788) -------------- ------------ ------------ ----------- Increase (decrease) in net assets from capital share transactions 584,948,384 407,599,049 118,044,962 27,471,737 -------------- ------------ ------------ ----------- Total increase (decrease) in net assets 836,112,150 472,849,532 146,036,481 29,652,801 Net assets at beginning of year 842,969,047 370,119,515 45,924,403 16,271,602 -------------- ------------ ------------ ----------- Net assets at end of year $1,679,081,197 $842,969,047 $191,960,884 $45,924,403 ============== ============ ============ =========== Undistributed (excess of distributions over) net investment income $ (460,246) $ 694,393 $ 86,481 $ 56,017 -------------- ------------ ------------ -----------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Global Inflation Global Bond Fund Protected Securities Fund Year ended Aug. 31, 2005 2004 2005(a) Operations and distributions Investment income (loss) -- net $ 12,976,102 $ 10,211,630 $ 1,170,024 Net realized gain (loss) on investments 14,431,701 14,624,481 9,718 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 955,738 9,351,111 853,992 ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 28,363,541 34,187,222 2,033,734 ------------ ------------ ------------ Distributions to shareholders from: Net investment income (23,132,048) (21,683,991) (1,175,862) Net realized gain -- -- (3,185) ------------ ------------ ------------ Total distributions (23,132,048) (21,683,991) (1,179,047) ------------ ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 160,817,306 94,154,709 115,848,581 Reinvestment of distributions at net asset value 23,811,853 20,466,297 948,966 Payments for redemptions (23,514,676) (30,570,369) (6,253,997) ------------ ------------ ------------ Increase (decrease) in net assets from capital share transactions 161,114,483 84,050,637 110,543,550 ------------ ------------ ------------ Total increase (decrease) in net assets 166,345,976 96,553,868 111,398,237 Net assets at beginning of year (Note 1) 408,946,340 312,392,472 4,998,726(b) ------------ ------------ ------------ Net assets at end of year $575,292,316 $408,946,340 $116,396,963 ============ ============ ============ Undistributed (excess of distributions over) net investment income $ (544,665) $ (632,421) $ 782 ------------ ------------ ------------
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (b) Initial capital of $5,000,000 was contributed on Sept. 8, 2004. The Fund had a decrease in net assets resulting from operations of $1,274 during the period from Sept. 8, 2004 to Sept. 13, 2004 (date the Fund became available). See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 96 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Growth Fund High Yield Bond Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 1,227,109 $ 712,105 $ 80,408,765 $ 75,141,855 Net realized gain (loss) on investments 25,738,738 22,550,457 33,067,201 46,539,857 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 17,284,007 (12,844,248) (6,289,026) 6,392,162 ------------ ------------ -------------- -------------- Net increase (decrease) in net assets resulting from operations 44,249,854 10,418,314 107,186,940 128,073,874 ------------ ------------ -------------- -------------- Distributions to shareholders from: Net investment income (1,085,812) (689,607) (80,490,774) (73,307,082) ------------ ------------ -------------- -------------- Capital share transactions (Note 4) Proceeds from sales 109,153,959 50,659,678 146,257,335 277,494,372 Reinvestment of distributions at net asset value 1,123,472 484,737 80,093,618 71,998,362 Payments for redemptions (22,493,936) (23,073,984) (135,588,640) (117,945,342) ------------ ------------ -------------- -------------- Increase (decrease) in net assets from capital share transactions 87,783,495 28,070,431 90,762,313 231,547,392 ------------ ------------ -------------- -------------- Total increase (decrease) in net assets 130,947,537 37,799,138 117,458,479 286,314,184 Net assets at beginning of year 260,953,588 223,154,450 1,129,016,886 842,702,702 ------------ ------------ -------------- -------------- Net assets at end of year $391,901,125 $260,953,588 $1,246,475,365 $1,129,016,886 ============ ============ ============== ============== Undistributed (excess of distributions over) net investment income $ -- $ (137,458) $ 4,068,451 $ 4,150,460 ------------ ------------ -------------- --------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Income Opportunities Fund International Opportunity Fund Year ended Aug. 31, 2005 2004(a) 2005 2004 Operations and distributions Investment income (loss) -- net $ 1,470,969 $ 228,967 $ 13,302,264 $ 8,270,928 Net realized gain (loss) on investments 305,821 47,176 106,053,373 73,662,728 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 147,007 493,990 107,127,444 26,990,475 ----------- ----------- -------------- ------------- Net increase (decrease) in net assets resulting from operations 1,923,797 770,133 226,483,081 108,924,131 ----------- ----------- -------------- ------------- Distributions to shareholders from: Net investment income (1,466,967) (229,533) (14,185,535) (8,834,774) Net realized gain (121,799) -- -- -- ----------- ----------- -------------- ------------- Total distributions (1,588,766) (229,533) (14,185,535) (8,834,774) ----------- ----------- -------------- ------------- Capital share transactions (Note 4) Proceeds from sales 36,842,482 41,340 93,707,558 87,427,540 Fund merger (Note 11) -- -- -- 185,670,291 Reinvestment of distributions at net asset value 1,456,121 152,695 13,916,731 8,514,464 Payments for redemptions (9,664,775) (30,162) (109,415,941) (146,172,823) ----------- ----------- -------------- ------------- Increase (decrease) in net assets from capital share transactions 28,633,828 163,873 (1,791,652) 135,439,472 ----------- ----------- -------------- ------------- Total increase (decrease) in net assets 28,968,859 704,473 210,505,894 235,528,829 Net assets at beginning of year (Note 1) 15,594,018 14,889,545(b) 973,832,527 738,303,698 ----------- ----------- -------------- ------------- Net assets at end of year $44,562,877 $15,594,018 $1,184,338,421 $ 973,832,527 =========== =========== ============== ============= Undistributed (excess of distributions over) net investment income $ 8,000 $ 3,998 $ (612,581) $ 658,503 ----------- ----------- -------------- -------------
(a) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $15,000,000 was contributed on May 26, 2004. The Fund had a decrease in net assets resulting from operations of $110,455 during the period from May 26, 2004 to June 1, 2004 (date the Fund became available). See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 97 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Large Cap Equity Fund Large Cap Value Fund Year ended Aug. 31, 2005 2004 2005 2004(a) Operations and distributions Investment income (loss) -- net $ 28,694,801 $ 15,369,716 $ 151,942 $ 28,905 Net realized gain (loss) on investments 211,236,490 162,346,824 357,850 (11,792) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 57,887,507 (33,295,604) 625,405 33,353 -------------- -------------- ----------- ---------- Net increase (decrease) in net assets resulting from operations 297,818,798 144,420,936 1,135,197 50,466 -------------- -------------- ----------- ---------- Distributions to shareholders from: Net investment income (28,626,032) (15,364,313) (151,392) (30,866) Net realized gain -- -- (61,040) -- -------------- -------------- ----------- ---------- Total distributions (28,626,032) (15,364,313) (212,432) (30,866) -------------- -------------- ----------- ---------- Capital share transactions (Note 4) Proceeds from sales 200,687,349 65,446,592 7,390,064 4,344,307 Fund merger (Note 11) -- 678,508,195 -- -- Reinvestment of distributions at net asset value 27,520,509 13,165,107 180,662 13,683 Payments for redemptions (521,735,962) (332,967,741) (955,062) (91,005) -------------- -------------- ----------- ---------- Increase (decrease) in net assets from capital share transactions (293,528,104) 424,152,153 6,615,664 4,266,985 -------------- -------------- ----------- ---------- Total increase (decrease) in net assets (24,335,338) 553,208,776 7,538,429 4,286,585 Net assets at beginning of year (Note 1) 2,534,713,028 1,981,504,252 7,282,191 2,995,606(b) -------------- -------------- ----------- ---------- Net assets at end of year $2,510,377,690 $2,534,713,028 $14,820,620 $7,282,191 ============== ============== =========== ========== Excess of distributions over net investment income $ (114,369) $ (49) $ (2,179) $ (550) -------------- -------------- ----------- ----------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $3,000,000 was contributed on Jan. 7, 2004. The Fund had a decrease in net assets resulting from operations of $4,394 during the period from Jan. 7, 2004 to Feb. 4, 2004 (date the Fund became available).
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Mid Cap Growth Fund Mid Cap Value Fund Year ended Aug. 31, 2005 2004 2005(a) Operations and distributions Investment income (loss) -- net $ (795,020) $ (1,049,687) $ 8,844 Net realized gain (loss) on investments 19,870,302 (5,223,928) 34,448 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 31,461,353 3,899,551 437,214 ------------ ------------ ---------- Net increase (decrease) in net assets resulting from operations 50,536,635 (2,374,064) 480,506 ------------ ------------ ---------- Distributions to shareholders from: Net investment income -- -- (9,698) ------------ ------------ ---------- Capital share transactions (Note 4) Proceeds from sales 20,390,489 66,699,751 4,671,932 Reinvestment of distributions at net asset value -- -- 1,787 Payments for redemptions (40,608,349) (9,789,197) (58,967) ------------ ------------ ---------- Increase (decrease) in net assets from capital share transactions (20,217,860) 56,910,554 4,614,752 ------------ ------------ ---------- Total increase (decrease) in net assets 30,318,775 54,536,490 5,085,560 Net assets at beginning of year (Note 1) 224,885,791 170,349,301 2,030,275(b) ------------ ------------ ---------- Net assets at end of year $255,204,566 $224,885,791 $7,115,835 ============ ============ ========== Undistributed net investment income $ -- $ -- $ 260 ------------ ------------ ----------
(a) For the period from May 2, 2005 (date the Fund became available ) to Aug. 31, 2005. (b) Initial capital of $1,999,940 was contributed on April 28, 2005. The Fund had a increase in net assets resulting from operations of $30,335 during the period from April 28, 2005 to May 2, 2005 (date the Fund became available). See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 98 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - New Dimensions Fund S&P 500 Index Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ 27,005,662 $ 21,349,393 $ 5,534,950 $ 2,899,942 Net realized gain (loss) on investments 140,657,959 113,281,860 1,267,418 307,230 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 27,273,899 (56,933,106) 29,628,952 16,624,060 -------------- -------------- ------------ ------------ Net increase (decrease) in net assets resulting from operations 194,937,520 77,698,147 36,431,320 19,831,232 -------------- -------------- ------------ ------------ Distributions to shareholders from: Net investment income (26,931,431) (21,246,034) (5,503,403) (2,885,111) -------------- -------------- ------------ ------------ Total distributions (26,931,431) (21,246,034) (5,503,403) (2,885,111) -------------- -------------- ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 17,563,427 136,096,503 69,811,420 106,203,535 Reinvestment of distributions at net asset value 29,634,120 20,376,110 5,036,258 2,508,534 Payments for redemptions (947,752,244) (395,590,246) (21,521,879) (13,865,522) -------------- -------------- ------------ ------------ Increase (decrease) in net assets from capital share transactions (900,554,697) (239,117,633) 53,325,799 94,846,547 -------------- -------------- ------------ ------------ Total increase (decrease) in net assets (732,548,608) (182,665,520) 84,253,716 111,792,668 Net assets at beginning of year 2,932,144,307 3,114,809,827 283,096,907 171,304,239 -------------- -------------- ------------ ------------ Net assets at end of year $2,199,595,699 $2,932,144,307 $367,350,623 $283,096,907 ============== ============== ============ ============ Undistributed (excess of distributions over) net investment income $ 1 $ 1,305 $ (18,268) $ (18,476) -------------- -------------- ------------ ------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Short Duration Select Value Fund U.S. Government Fund Year ended Aug. 31, 2005 2004(a) 2005 2004 Operations and distributions Investment income (loss) -- net $ 69,442 $ 16,415 $ 13,334,726 $ 11,305,758 Net realized gain (loss) on investments 328,478 17,217 (3,161,382) (4,325,495) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,579,596 (86,117) (3,182,742) 1,235,800 ----------- ---------- ------------ ------------ Net increase (decrease) in net assets resulting from operations 1,977,516 (52,485) 6,990,602 8,216,063 ----------- ---------- ------------ ------------ Distributions to shareholders from: Net investment income (66,667) (15,818) (13,288,036) (11,328,609) Net realized gain (54,328) -- (148,999) (2,271,221) ----------- ---------- ------------ ------------ Total distributions (120,995) (15,818) (13,437,035) (13,599,830) ----------- ---------- ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 13,500,858 5,846,593 53,612,824 88,108,864 Fund merger (Note 11) -- -- -- 24,690,160 Reinvestment of distributions at net asset value 117,486 3,451 13,354,736 13,262,385 Payments for redemptions (605,448) (170,754) (82,040,384) (93,603,954) ----------- ---------- ------------ ------------ Increase (decrease) in net assets from capital share transactions 13,012,896 5,679,290 (15,072,824) 32,457,455 ----------- ---------- ------------ ------------ Total increase (decrease) in net assets 14,869,417 5,610,987 (21,519,257) 27,073,688 Net assets at beginning of year (Note 1) 8,603,820 2,992,833(b) 506,002,847 478,929,159 ----------- ---------- ------------ ------------ Net assets at end of year $23,473,237 $8,603,820 $484,483,590 $506,002,847 =========== ========== ============ ============ Undistributed (excess of distributions over) net investment income $ (2,727) $ -- $ 38,457 $ (22,848) ----------- ---------- ------------ ------------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) Initial capital of $3,000,000 was contributed on Jan. 7, 2004. The Fund had a decrease in net assets resulting from operations of $7,167 during the period from Jan. 7, 2004 to Feb. 4, 2004 (date the Fund became available). See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 99 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - RiverSource VP - Small Cap Advantage Fund Small Cap Value Fund Year ended Aug. 31, 2005 2004 2005 2004 Operations and distributions Investment income (loss) -- net $ (611,525) $ (657,062) $ 385,585 $ (372,960) Net realized gain (loss) on investments 30,020,831 19,228,857 31,279,549 23,789,033 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 17,135,003 (6,776,507) 22,038,842 815,713 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations 46,544,309 11,795,288 53,703,976 24,231,786 ------------ ------------ ------------ ------------ Distributions to shareholders from: Net investment income -- -- (148,562) -- Net realized gain (9,460,720) -- (22,655,414) (2,498,969) ------------ ------------ ------------ ------------ Total distributions (9,460,720) -- (22,803,976) (2,498,969) ------------ ------------ ------------ ------------ Capital share transactions (Note 4) Proceeds from sales 24,255,001 76,014,037 137,742,641 81,763,916 Reinvestment of distributions at net asset value 9,460,720 -- 22,803,976 2,498,969 Payments for redemptions (19,393,071) (5,345,989) (8,205,722) (10,954,929) ------------ ------------ ------------ ------------ Increase (decrease) in net assets from capital share transactions 14,322,650 70,668,048 152,340,895 73,307,956 ------------ ------------ ------------ ------------ Total increase (decrease) in net assets 51,406,239 82,463,336 183,240,895 95,040,773 Net assets at beginning of year 184,039,317 101,575,981 228,868,571 133,827,798 ------------ ------------ ------------ ------------ Net assets at end of year $235,445,556 $184,039,317 $412,109,466 $228,868,571 ============ ============ ============ ============ Undistributed (excess of distributions over) net investment income $ 53,169 $ 51,407 $ 169,285 $ (13,343) ------------ ------------ ------------ ------------
Statements of changes in net assets (continued) RiverSource Variable Portfolio Funds RiverSource VP - Strategy Aggressive Fund Year ended Aug. 31, 2005 2004 Operations Investment income (loss) -- net $ (2,513,330) $ (3,987,624) Net realized gain (loss) on investments 65,873,117 (54,072,544) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 86,549,108 39,937,743 ------------- ------------- Net increase (decrease) in net assets resulting from operations 149,908,895 (18,122,425) ------------- ------------- Capital share transactions (Note 4) Proceeds from sales 2,881,464 18,672,159 Payments for redemptions (249,498,256) (185,879,018) ------------- ------------- Increase (decrease) in net assets from capital share transactions (246,616,792) (167,206,859) ------------- ------------- Total increase (decrease) in net assets (96,707,897) (185,329,284) Net assets at beginning of year 783,353,097 968,682,381 ------------- ------------- Net assets at end of year $ 686,645,200 $ 783,353,097 ============= =============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 100 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Notes to Financial Statements RiverSource Variable Portfolio Funds 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Each Fund is registered under the Investment Company Act of 1940 (as amended) (the 1940 Act) as a diversified, (non-diversified for RiverSource VP - Global Bond Fund and RiverSource VP - Global Inflation Protected Securities Fund) open-end management investment company. Each Fund has 10 billion authorized shares of capital stock. The following Funds became available on Feb. 4, 2004. On Jan. 7, 2004, IDS Life Insurance Company (IDS Life) purchased the following shares of capital stock at $10 per share, which represented the initial capital in each Fund:
Fund Number of shares RiverSource VP - Core Bond Fund 2,500,000 RiverSource VP - Large Cap Value Fund 300,000 RiverSource VP - Select Value Fund 300,000
RiverSource VP - Income Opportunities Fund became available on June 1, 2004. On May 26, 2004, IDS Life purchased 1,500,000 shares of capital stock at $10 per share, which represented the initial capital in the Fund. RiverSource VP - Global Inflation Protected Securities Fund became available on Sept. 13, 2004. On Sept. 8, 2004, Ameriprise Financial, Inc. (Ameriprise Financial) (formerly American Express Financial Corporation) purchased 500,000 shares of capital stock at $10 per share, which represented the initial capital in the Fund. RiverSource VP - Mid Cap Value Fund became available on May 2, 2005. On April 28, 2005, Ameriprise Financial purchased 199,994 shares of capital stock at $10 per share, which represented the initial capital in the Fund. The primary investments of each Fund are as follows: RiverSource VP - Balanced Fund (formerly AXP VP - Managed Fund) invests primarily in a combination of common and preferred stocks, bonds and other debt securities. RiverSource VP - Cash Management Fund (formerly AXP VP - Cash Management Fund) invests primarily in money market instruments, such as marketable debt obligations issued by corporations or the U.S. government or its agencies, bank certificates of deposit, bankers' acceptances, letters of credit and commercial paper, including asset-backed commercial paper. RiverSource VP - Core Bond Fund (formerly AXP VP - Core Bond Fund) invests primarily in securities like those included in the Lehman Brothers Aggregate Bond Index (the "Index"), which are investment grade and denominated in U.S. dollars. The Index includes securities issued by the U.S. government, corporate bonds and mortgage- and asset-backed securities. RiverSource VP - Diversified Bond Fund (formerly AXP VP - Diversified Bond Fund) invests primarily in bonds and other debt securities issued by the U.S. government, corporate bonds and mortgage- and asset-backed securities. RiverSource VP - Diversified Equity Income Fund (formerly AXP VP - Diversified Equity Income Fund) invests primarily in dividend-paying common and preferred stocks. RiverSource VP - Emerging Markets Fund (formerly AXP VP - Threadneedle Emerging Markets Fund) invests primarily in equity securities of companies in emerging market countries. RiverSource VP - Global Bond Fund (formerly AXP VP - Global Bond Fund) invests primarily in debt obligations of U.S. and foreign issuers. RiverSource VP - Global Inflation Protected Securities Fund (formerly AXP VP - Inflation Protected Securities Fund) invests primarily in inflation-protected debt securities. These securities include inflation-indexed bonds of varying maturities issued by U.S. and foreign governments, their agencies or instrumentalities, and corporations. RiverSource VP - Growth Fund (formerly AXP VP - Growth Fund) invests primarily in common stocks that appear to offer growth opportunities. RiverSource VP - High Yield Bond Fund (formerly AXP VP - High Yield Bond Fund) invests primarily in high-yielding, high risk corporate bonds (junk bonds) issued by U.S. and foreign companies and governments. RiverSource VP - Income Opportunities Fund (formerly AXP VP - Income Opportunities Fund) invests primarily in income-producing debt securities, with an emphasis on the higher rated segment of the high-yield (junk bond) market. RiverSource VP - International Opportunity Fund (formerly AXP VP - Threadneedle International Fund) invests primarily in equity securities of foreign issuers that offer strong growth potential. RiverSource VP - Large Cap Equity Fund (formerly AXP VP - Large Cap Equity Fund) invests primarily in equity securities of companies with a market capitalization greater than $5 billion at the time of purchase. - -------------------------------------------------------------------------------- 101 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Large Cap Value Fund (formerly AXP VP - Large Cap Value Fund) invests primarily in equity securities of companies with a market capitalization greater than $5 billion. RiverSource VP - Mid Cap Growth Fund (formerly AXP VP - Equity Select Fund) invests primarily in common stocks of mid-capitalization companies. RiverSource VP - Mid Cap Value Fund (formerly AXP VP - Mid Cap Value Fund) invests primarily in equity securities of medium-sized companies. RiverSource VP - New Dimensions Fund (formerly AXP VP - New Dimensions Fund) invests primarily in common stocks showing potential for significant growth. RiverSource VP - S&P 500 Index Fund (formerly AXP VP - S&P 500 Index Fund) invests primarily in common stocks included in the Standard & Poor's 500 Composite Stock Price Index (S&P 500). RiverSource VP - Select Value Fund (formerly AXP VP - Partners Select Value Fund) invests primarily in common stocks, preferred stocks and securities convertible into common stocks that are listed on a nationally recognized securities exchange or traded on the NASDAQ National Market System of the National Association of Securities Dealers. RiverSource VP - Short Duration U.S. Government Fund (formerly AXP VP - Short Duration U.S. Government Fund) invests primarily in debt securities issued or guaranteed as to principal and interest by the U.S. government, or its agencies or instrumentalities. RiverSource VP - Small Cap Advantage Fund (formerly AXP VP - Small Cap Advantage Fund) invests primarily in equity securities of small cap companies. RiverSource VP - Small Cap Value Fund (formerly AXP VP - Partners Small Cap Value Fund) invests primarily in equity securities of small capitalization companies. RiverSource VP - Strategy Aggressive Fund (formerly AXP VP - Strategy Aggressive Fund) invests primarily in securities of growth companies. You may not buy (nor will you own) shares of each Fund directly. You invest by buying a variable annuity contract or life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the subaccounts) that invests in each Fund. Each Fund's significant accounting policies are summarized as follows: Use of estimates Preparing financial statements that conform to U.S generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued at a price that reflects fair value as quoted by dealers in these securities or by an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. Pursuant to procedures adopted by the Board of Directors of the funds, Ameriprise Financial utilizes Fair Value Pricing (FVP). FVP determinations are made in good faith in accordance with these procedures. If a development or event is so significant that there is a reasonably high degree of certainty that the effect of the development or event has actually caused the closing price to no longer reflect the actual value, the closing prices, as determined at the close of the applicable foreign market, may be adjusted to reflect the fair value of the affected foreign securities at the close of the New York Stock Exchange. Significant events include material movements in the U.S. securities markets prior to the opening of foreign markets on the following trading day. FVP results in an estimated price that reasonably reflects the current market conditions in order to value the portfolio holdings such that shareholder transactions receive a fair net asset value. Short-term securities in all Funds, except RiverSource VP - Cash Management Fund, maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on the current interest rates; those maturing in 60 days or less are valued at amortized cost. Pursuant to Rule 2a-7 of the 1940 Act, all securities in RiverSource VP - Cash Management Fund are valued daily at amortized cost, which approximates market value in order to maintain a constant net asset value of $1 per share. - -------------------------------------------------------------------------------- 102 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Illiquid securities At Aug. 31, 2005, investments in securities for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - International Opportunity Fund and RiverSource VP - Small Cap Value Fund included issues that are illiquid which the Funds currently limit to 10% of net assets, at market value, at the time of purchase. The aggregate value of such securities at Aug. 31, 2005, was $17, $1, $21,370,705, $497,270 and $20,600, representing 0.00%, 0.00%, 1.71%, 0.04% and 0.005% of net assets for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - International Opportunity Fund and RiverSource VP - Small Cap Value Fund, respectively. These securities are valued at fair value according to methods selected in good faith by the board. According to board guidelines, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. Securities purchased on a forward-commitment basis Delivery and payment for securities that have been purchased by the Funds on a forward-commitment basis, including when-issued securities, other forward-commitments and future capital commitments for limited partnership interests, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect each Fund's net assets the same as owned securities. The Funds designate cash or liquid securities at least equal to the amount of its forward-commitments. At Aug. 31, 2005, the outstanding forward-commitments for the Funds are as follows:
When-issued Other Future Fund securities forward-commitments capital commitments RiverSource VP - Balanced Fund $25,011,770 $3,428,013 $-- RiverSource VP - Core Bond Fund 3,907,593 -- -- RiverSource VP - Diversified Bond Fund 75,803,440 7,570,943 -- RiverSource VP - Global Bond Fund 343,375 194,501 -- RiverSource VP - High Yield Bond Fund 4,219,341 -- -- RiverSource VP - Income Opportunities Fund 316,581 102,369 -- RiverSource VP - Short Duration U.S. Government Fund 13,921,642 -- --
Certain Funds may also enter into transactions to sell purchase commitments to third parties at current market values and concurrently acquire other purchase commitments for similar securities at later dates. As an inducement for these Funds to "roll over" their purchase commitments, these Funds receive negotiated amounts in the form of reductions of the purchase price of the commitment. Option transactions To produce incremental earnings, protect gains and facilitate buying and selling of securities for investments, the Funds, except RiverSource VP - Cash Management Fund, may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter market where completing the obligation depends upon the credit standing of the other party. The Funds also may buy and sell put and call options and write covered call options on portfolio securities as well as write cash-secured put options. The risk in writing a call option is that the Funds give up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Funds may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Funds pay a premium whether or not the option is exercised. The Funds also have the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Funds will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions To gain exposure to or protect itself from market changes, the Funds, except RiverSource VP - Cash Management Fund, may buy and sell financial futures contracts traded on any U.S. or foreign exchange. The Funds also may buy or write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility of an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Funds each day. The variation margin payments are equal to the daily changes in the contract value and recorded as unrealized gains and losses. The Funds recognize a realized gain or loss when the contract is closed or expires. - -------------------------------------------------------------------------------- 103 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. In the statement of operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Aug. 31, 2005, foreign currency holdings for RiverSource VP - Emerging Markets Fund consisted of multiple denominations, primarily South African rands and Taiwan dollars, foreign currency holdings for RiverSource VP - Global Bond Fund consisted of multiple denominations, primarily European monetary units, foreign currency holdings for RiverSource VP - International Opportunity Fund consisted of multiple denominations and foreign currency holdings for RiverSource VP - New Dimensions consisted of Taiwan dollars. The Funds, except RiverSource VP - Cash Management Fund and RiverSource VP - Short Duration U.S. Government Fund, may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Funds and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Funds are subject to the credit risk that the other party will not complete its contract obligations. Forward sale commitments Certain Funds may enter into forward sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of forward sale commitments are not received until the contractual settlement date. During the time a forward sale commitment is outstanding, equivalent deliverable securities, or an offsetting forward purchase commitment deliverable on or before the sale commitment date, are used to satisfy the commitment. Unsettled forward sale commitments are valued at the current market value of the underlying securities, generally according to the procedures described under "Valuation of securities" above. The forward sale commitment is "marked-to-market" daily and the change in market value is recorded by the Fund as an unrealized gain or loss. If the forward sale commitment is closed through the acquisition of an offsetting purchase commitment, the Fund realizes a gain or loss. If the Fund delivers securities under the commitment, the Fund realizes a gain or a loss from the sale of the securities based upon the market price established at the date the commitment was entered into. Forward sale commitments outstanding at period end are listed in the "Notes to investments in securities." Total return swap transactions Certain Funds may enter into swap agreements to earn the total return on a specified security or index of fixed income securities. Under the terms of the swaps, the Funds either receive or pay the total return on a reference security or index applied to a notional principal amount. In return, the Funds agree to pay or receive from the counterparty a floating rate, which is reset periodically based on short-term interest rates, applied to the same notional amount. The notional amounts of swap contracts are not recorded in the financial statements. Swaps are valued daily, and the change in value is recorded as unrealized appreciation (depreciation) until the termination of the swap, at which time realized gain (loss) is recorded. Payments received or made are recorded as realized gains (losses). Total return swaps are subject to the risk that the counterparty will default on its obligation to pay net amounts due to the Funds. Guarantees and indemnifications Under each Fund's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to each Fund. In addition, certain of each Fund's contracts with its service providers contain general indemnification clauses. Each Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against each Fund cannot be determined and each Fund has no historical basis for predicting the likelihood of any such claims. Federal taxes Each Fund's policy is to comply with all sections of the Internal Revenue Code that apply to regulated investment companies and to distribute substantially all of its taxable income to the subaccounts. No provision for income or excise taxes is thus required. Each Fund is treated as a separate entity for federal income tax purposes. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of deferred losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, the timing and amount of market discount recognized as ordinary income, foreign tax credits and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. The effect on dividend distributions of certain book-to-tax differences is presented as "excess distributions" in the statement of changes in net assets. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) are recorded by the Funds. - -------------------------------------------------------------------------------- 104 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT On the statement of assets and liabilities, as a result of permanent book-to-tax differences, accumulated net realized gain (loss) and undistributed net investment income have been increased (decreased), resulting in net reclassification adjustments to paid-in capital by the following:
RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Management Core Bond Diversified Bond Fund Fund Fund Fund Accumulated net realized gain (loss) $ 752,049 $-- $(32,510) $(2,516,322) Undistributed net investment income 1,066,498 -- 32,510 2,516,322 ---------- --- ------- ----------- Additional paid-in capital reduction (increase) $1,818,547 $-- $ -- $ -- ---------- --- ------- ----------- RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Diversified Emerging Global Bond Global Inflation Equity Income Markets Fund Protected Securities Fund Fund Fund Accumulated net realized gain (loss) $ 1,946,851 $ 56,131 $(10,243,702) $(6,104) Undistributed net investment income (1,946,851) (56,131) 10,243,702 6,885 ---------- ------- ---------- ----- Additional paid-in capital reduction (increase) $ -- $ -- $ -- $ 781 ----------- ------- ------------ ------- RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Growth High Yield Income International Fund Bond Opportunities Opportunity Fund Fund Fund Accumulated net realized gain (loss) $ 3,839 $-- $-- $443,454 Undistributed net investment income (3,839) -- -- (387,813) ------- --- --- -------- Additional paid-in capital reduction (increase) $ -- $-- $-- $ 55,641 ------- --- --- -------- RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Mid Cap Equity Value Growth Value Fund Fund Fund Fund Accumulated net realized gain (loss) $ 403,097 $ 2,179 $ 907 $ 808 Undistributed net investment income (183,089) (2,179) 795,020 249 --------- ------- -------- ------ Additional paid-in capital reduction (increase) $ 220,008 $ -- $795,927 $1,057 --------- ------- -------- ------ RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - New S&P 500 Select Short Duration Dimensions Index Value U.S. Government Fund Fund Fund Fund Accumulated net realized gain (loss) $ 75,535 $ 31,339 $ 5,502 $(14,615) Undistributed net investment income (75,535) (31,339) (5,502) 14,615 -------- -------- ------- -------- Additional paid-in capital reduction (increase) $ -- $ -- $ -- $ -- -------- -------- ------- -------- RiverSource VP - RiverSource VP - RiverSource VP - Small Cap Small Cap Strategy Advantage Value Aggressive Fund Fund Fund Accumulated net realized gain (loss) $(613,287) $ 51,627 $(3,450,845) Undistributed net investment income 613,287 (54,395) 4,622,830 --------- -------- ----------- Additional paid-in capital reduction (increase) $ -- $ (2,768) $ 1,171,985 --------- -------- -----------
- -------------------------------------------------------------------------------- 105 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT The tax character of distributions paid for the years indicated is as follows:
Year ended Aug. 31, 2005 2004 RiverSource VP - Balanced Fund Distributions paid from: Ordinary income $61,685,753 $53,848,054 Long-term capital gain -- -- RiverSource VP - Cash Management Fund Distributions paid from: Ordinary income 13,366,319 $3,649,950 Long-term capital gain -- -- RiverSource VP - Core Bond Fund(a) Distributions paid from: Ordinary income 1,450,986 404,035 Long-term capital gain -- -- RiverSource VP - Diversified Bond Fund Distributions paid from: Ordinary income 66,121,267 60,644,287 Long-term capital gain -- -- RiverSource VP - Diversified Equity Income Fund Distributions paid from: Ordinary income 19,986,713 10,327,123 Long-term capital gain -- -- RiverSource VP - Emerging Markets Fund Distributions paid from: Ordinary income 692,060 313,397 Long-term capital gain 1,958,494 -- RiverSource VP - Global Bond Fund Distributions paid from: Ordinary income 23,132,048 21,683,991 Long-term capital gain -- -- RiverSource VP - Global Inflation Protected Securities Fund(b) Distributions paid from: Ordinary income 1,179,047 N/A Long-term capital gain -- N/A RiverSource VP - Growth Fund Distributions paid from: Ordinary income 1,085,812 689,607 Long-term capital gain -- -- RiverSource VP - High Yield Bond Fund Distributions paid from: Ordinary income 80,490,774 73,307,082 Long-term capital gain -- -- RiverSource VP - Income Opportunities Fund(c) Distributions paid from: Ordinary income 1,588,766 229,533 Long-term capital gain -- -- RiverSource VP - International Opportunity Fund Distributions paid from: Ordinary income 14,185,535 8,834,774 Long-term capital gain -- -- RiverSource VP - Large Cap Equity Fund Distributions paid from: Ordinary income 28,626,032 15,364,313 Long-term capital gain -- -- RiverSource VP - Large Cap Value Fund(a) Distributions paid from: Ordinary income 211,363 30,866 Long-term capital gain 1,069 --
- -------------------------------------------------------------------------------- 106 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2005 2004 RiverSource VP - Mid Cap Growth Fund Distributions paid from: Ordinary income $ -- $ -- Long-term capital gain -- -- RiverSource VP - Mid Cap Value Fund(d) Distributions paid from: Ordinary income 9,698 N/A Long-term capital gain -- N/A RiverSource VP - New Dimensions Fund Distributions paid from: Ordinary income 26,931,431 21,246,034 Long-term capital gain -- -- RiverSource VP - S&P 500 Index Fund Distributions paid from: Ordinary income 5,503,403 2,885,111 Long-term capital gain -- -- RiverSource VP - Select Value Fund(a) Distributions paid from: Ordinary income 120,939 15,818 Long-term capital gain 56 -- RiverSource VP - Short Duration U.S. Government Fund Distributions paid from: Ordinary income 13,288,036 13,187,954 Long-term capital gain 148,999 411,876 RiverSource VP - Small Cap Advantage Fund Distributions paid from: Ordinary income -- -- Long-term capital gain 9,460,720 -- RiverSource VP - Small Cap Value Fund Distributions paid from: Ordinary income 9,597,221 2,379,486 Long-term capital gain 13,206,755 119,483 RiverSource VP - Strategy Aggressive Fund Distributions paid from: Ordinary income -- -- Long-term capital gain -- --
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (d) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. At Aug. 31, 2005, the components of distributable earnings on a tax basis for each Fund are as follows:
Accumulated Unrealized Undistributed long-term appreciation Fund ordinary income gain (loss) (depreciation) RiverSource VP - Balanced Fund $14,357,747 $ 70,774,755 $133,566,771 RiverSource VP - Cash Management Fund 1,764,743 (1,797) -- RiverSource VP - Core Bond Fund 281,081 8,561 255,826 RiverSource VP - Diversified Bond Fund 5,584,010 (136,697,943) 4,751,747 RiverSource VP - Diversified Equity Income Fund 10,977,169 68,007,894 243,856,313 RiverSource VP - Emerging Markets Fund 9,896,782 3,128,668 17,802,819 RiverSource VP - Global Bond Fund 1,278,938 2,322,502 17,114,753 RiverSource VP - Global Inflation Protected Securities Fund 319,838 -- 764,437 RiverSource VP - Growth Fund 167,210 (115,755,420) 16,892,392 RiverSource VP - High Yield Bond Fund 4,690,679 (222,337,062) 14,600,380 RiverSource VP - Income Opportunities Fund 416,821 45,133 518,819 RiverSource VP - International Opportunity Fund 8,050,591 (690,331,815) 185,297,744 RiverSource VP - Large Cap Equity Fund 5,828,494 (416,160,189) 136,425,851 RiverSource VP - Large Cap Value Fund 258,522 172,350 557,289 RiverSource VP - Mid Cap Growth Fund -- 13,515,398 50,781,456 RiverSource VP - Mid Cap Value Fund 42,735 798 466,579
- -------------------------------------------------------------------------------- 107 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Accumulated Unrealized Undistributed long-term appreciation Fund ordinary income gain (loss) (depreciation) RiverSource VP - New Dimensions Fund $3,103,264 $ (254,908,325) $151,443,398 RiverSource VP - S&P 500 Index Fund 2,231,600 -- 31,384,339 RiverSource VP - Select Value Fund 218,369 91,649 1,487,949 RiverSource VP - Short Duration U.S. Government Fund 1,273,765 (7,170,145) (3,066,549) RiverSource VP - Small Cap Advantage Fund 7,295,152 22,110,008 27,791,452 RiverSource VP - Small Cap Value Fund 9,563,421 22,259,357 35,206,595 RiverSource VP - Strategy Aggressive Fund -- (1,337,919,255) 178,041,739
Dividends At Aug. 31, 2005, dividends declared for each Fund payable Sept. 1, 2005 are as follows: Fund Amount per share RiverSource VP - Balanced Fund $0.092 RiverSource VP - Cash Management Fund 0.003 RiverSource VP - Core Bond Fund 0.027 RiverSource VP - Diversified Bond Fund 0.033 RiverSource VP - Diversified Equity Income Fund 0.054 RiverSource VP - Emerging Markets Fund 0.016 RiverSource VP - Global Bond Fund 0.022 RiverSource VP - Global Inflation Protected Securities Fund 0.022 RiverSource VP - Growth Fund 0.003 RiverSource VP - High Yield Bond Fund 0.038 RiverSource VP - Income Opportunities Fund 0.051 RiverSource VP - International Opportunity Fund 0.027 RiverSource VP - Large Cap Equity Fund 0.051 RiverSource VP - Large Cap Value Fund 0.036 RiverSource VP - Mid Cap Value Fund 0.013 RiverSource VP - New Dimensions Fund 0.022 RiverSource VP - S&P 500 Index Fund 0.030 RiverSource VP - Select Value Fund 0.008 RiverSource VP - Short Duration U.S. Government Fund 0.024 Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared daily and distributed monthly, when available, for RiverSource VP - Cash Management Fund, RiverSource VP - Core Bond Fund, RiverSource VP - Diversified Bond Fund, RiverSource VP - Global Bond Fund, RiverSource VP - Global Inflation Protected Securities Fund, RiverSource VP - High Yield Bond Fund, RiverSource VP - Income Opportunities Fund and RiverSource VP - Short Duration U.S. Government Fund. Dividends from net investment income are declared and distributed quarterly, when available, for RiverSource VP - Balanced Fund, RiverSource VP - Diversified Equity Income Fund, RiverSource VP - Emerging Markets Fund, RiverSource VP - Growth Fund, RiverSource VP - International Opportunity Fund, RiverSource VP - Large Cap Equity Fund, RiverSource VP - Large Cap Value Fund, RiverSource VP - Mid Cap Growth Fund, RiverSource VP - Mid Cap Value Fund , RiverSource VP - New Dimensions Fund, RiverSource VP - S&P 500 Index Fund, RiverSource VP - Select Value Fund, RiverSource VP - Small Cap Advantage Fund, RiverSource VP - Small Cap Value Fund and RiverSource VP - Strategy Aggressive Fund. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. - -------------------------------------------------------------------------------- 108 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 2. EXPENSES The Funds have an Investment Management Services Agreement with RiverSource Investments, LLC (the Investment Manager) for managing investments, record keeping and other services that are based solely on the assets of each Fund. Prior to Oct. 1, 2005, investment management services were provided by Ameriprise Financial. The management fee is a percentage of each Fund's average daily net assets that declines annually as each Fund's assets increase. The percentage range for each Fund is as follows: Fund Percentage range RiverSource VP - Balanced Fund 0.630% to 0.550% RiverSource VP - Cash Management Fund 0.510% to 0.440% RiverSource VP - Core Bond Fund 0.630% to 0.555% RiverSource VP - Diversified Bond Fund 0.610% to 0.535% RiverSource VP - Diversified Equity Income Fund 0.560% to 0.470% RiverSource VP - Emerging Markets Fund 1.170% to 1.095% RiverSource VP - Global Bond Fund 0.840% to 0.780% RiverSource VP - Global Inflation Protected Securities Fund 0.490% to 0.415% RiverSource VP - Growth Fund 0.630% to 0.570% RiverSource VP - High Yield Bond Fund 0.620% to 0.545% RiverSource VP - Income Opportunities Fund 0.640% to 0.565% RiverSource VP - International Opportunity Fund 0.870% to 0.795% RiverSource VP - Large Cap Equity Fund 0.630% to 0.570% RiverSource VP - Large Cap Value Fund 0.630% to 0.570% RiverSource VP - Mid Cap Growth Fund 0.650% to 0.560% RiverSource VP - Mid Cap Value Fund 0.730% to 0.610% RiverSource VP - New Dimensions Fund 0.630% to 0.570% RiverSource VP - S&P 500 Index Fund 0.290% to 0.260% RiverSource VP - Select Value Fund 0.810% to 0.720% RiverSource VP - Short Duration U.S. Government Fund 0.610% to 0.535% RiverSource VP - Small Cap Advantage Fund 0.790% to 0.650% RiverSource VP - Small Cap Value Fund 1.020% to 0.920% RiverSource VP - Strategy Aggressive Fund 0.650% to 0.575% For the following Funds the fee may be adjusted upward or downward by a performance incentive adjustment of 0.08% for RiverSource VP - Balanced Fund and 0.12% for each remaining Fund. The adjustment is based on a comparison of the performance of each Fund to the stated index up to a maximum percentage of each Fund's average daily net assets after deducting 0.50% from the performance difference. In certain circumstances, the board may approve a change in the index. If the performance difference is less than 0.50%, the adjustment will be zero. The index name and the amount the fee was increased (decreased) for each Fund for the year ended Aug. 31, 2005 are as follows:
Increase Fund Index name (decrease) RiverSource VP - Balanced Fund Lipper Balanced Funds Index $ 702,269 RiverSource VP - Diversified Equity Income Fund Lipper Equity Income Funds Index 957,131 RiverSource VP - Emerging Markets Fund Lipper Emerging Markets Funds Index (52,859) RiverSource VP - Growth Fund Lipper Large-Cap Growth Funds Index 179,212 RiverSource VP - International Opportunity Fund Lipper International Large-Cap Core Funds Index (444,320) RiverSource VP - Large Cap Equity Fund Lipper Large-Cap Core Funds Index (592,373) RiverSource VP - Large Cap Value Fund Lipper Large-Cap Value Funds Index 196 RiverSource VP - Mid Cap Growth Fund Lipper Mid-Cap Growth Funds Index (181,465) RiverSource VP - Mid Cap Value Fund Lipper Mid-Cap Value Funds Index -- RiverSource VP - New Dimensions Fund(a) Lipper Large-Cap Growth Funds Index (1,900,920) RiverSource VP - Select Value Fund Lipper Multi-Cap Value Funds Index (1,689) RiverSource VP - Small Cap Advantage Fund Lipper Small-Cap Core Funds Index 19,577 RiverSource VP - Small Cap Value Fund Lipper Small-Cap Value Funds Index (117,658) RiverSource VP - Strategy Aggressive Fund Lipper Mid-Cap Growth Funds Index (516,976)
(a) Effective Oct. 31, 2005, the performance for RiverSource VP - New Dimensions Fund will be measured against the Lipper Large-Cap Core Funds Index. - -------------------------------------------------------------------------------- 109 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT The Investment Manager has a Subadvisory Agreement with Threadneedle International Limited, a direct wholly-owned subsidiary of Ameriprise Financial, to subadvise the assets of RiverSource VP - Emerging Markets Fund and RiverSource VP - International Opportunity Fund. The Investment Manager has a Subadvisory Agreement with Kenwood Capital Management LLC, an indirect partially owned subsidiary of Ameriprise Financial, to subadvise the assets of RiverSource VP - Small Cap Advantage Fund. The Investment Manager has a Subadvisory Agreement with GAMCO Asset Management, Inc., which does business under the name Gabelli Asset Management Company, to subadvise the assets of RiverSource VP - Select Value Fund. The Investment Manager has Subadvisory Agreements with Royce & Associates, LLC, a direct wholly-owned subsidiary of Legg Mason Inc., Goldman Sachs Asset Management, L.P., Barrow, Hanley, Mewhinney & Strauss, Inc., Donald Smith & Co., Inc. and Franklin Portfolio Associates LLC, each which subadvises a portion of the assets of RiverSource VP - Small Cap Value Fund. New investments in the Fund, net of any redemptions, are allocated in accordance with the Investment Manager's determination of the allocation that is in the best interests of the Fund's shareholders. Each subadviser's proportionate share of investments in the Fund will vary due to market fluctuations. In addition to paying its own management fee, brokerage commissions, taxes and costs of certain legal services, each Fund will reimburse the Investment Manager an amount equal to the cost of certain expenses incurred and paid by the Investment Manager in connection with each Fund's operations. The Funds also pay custodian fees to Ameriprise Trust Company (formerly American Express Trust Company), an affiliate of Ameriprise Financial. The reimbursement paid by RiverSource VP - Cash Management Fund will be limited to 0.25% of the Fund's average daily net assets. The Funds have an agreement with IDS Life for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, each Fund pays a fee at an annual rate up to 0.125% of each Fund's average daily net assets. The Funds have an Administrative Services Agreement with Ameriprise Financial. Under the current agreement, each Fund pays Ameriprise Financial a fee for administration and accounting services at a percentage of each Fund's average daily net assets that declines annually as each Fund's assets increase. The percentage range for each Fund is as follows: Fund Percentage range RiverSource VP - Balanced Fund 0.040% to 0.020% RiverSource VP - Cash Management Fund 0.030% to 0.020% RiverSource VP - Core Bond Fund 0.050% to 0.025% RiverSource VP - Diversified Bond Fund 0.050% to 0.025% RiverSource VP - Diversified Equity Income Fund 0.040% to 0.020% RiverSource VP - Emerging Markets Fund 0.100% to 0.050% RiverSource VP - Global Bond Fund 0.060% to 0.040% RiverSource VP - Global Inflation Protected Securities Fund 0.050% to 0.025% RiverSource VP - Growth Fund 0.050% to 0.030% RiverSource VP - High Yield Bond Fund 0.050% to 0.025% RiverSource VP - Income Opportunities Fund 0.050% to 0.025% RiverSource VP - International Opportunity Fund 0.060% to 0.035% RiverSource VP - Large Cap Equity Fund 0.050% to 0.030% RiverSource VP - Large Cap Value Fund 0.050% to 0.030% RiverSource VP - Mid Cap Growth Fund 0.060% to 0.030% RiverSource VP - Mid Cap Value Fund 0.050% to 0.020% RiverSource VP - New Dimensions Fund 0.050% to 0.030% RiverSource VP - S&P 500 Index Fund 0.080% to 0.065% RiverSource VP - Select Value Fund 0.060% to 0.035% RiverSource VP - Short Duration U.S. Government Fund 0.050% to 0.025% RiverSource VP - Small Cap Advantage Fund 0.060% to 0.035% RiverSource VP - Small Cap Value Fund 0.080% to 0.055% RiverSource VP - Strategy Aggressive Fund 0.060% to 0.035% - -------------------------------------------------------------------------------- 110 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Effective Oct. 1, 2005, the fee percentage of each Fund's average daily net assets declines annually as each Fund's assets increase as follows: Fund Percentage range RiverSource VP - Balanced Fund 0.060% to 0.030% RiverSource VP - Cash Management Fund 0.060% to 0.030% RiverSource VP - Core Bond Fund 0.070% to 0.040% RiverSource VP - Diversified Bond Fund 0.070% to 0.040% RiverSource VP - Diversified Equity Income Fund 0.060% to 0.030% RiverSource VP - Emerging Markets Fund 0.080% to 0.050% RiverSource VP - Global Bond Fund 0.080% to 0.050% RiverSource VP - Global Inflation Protected Securities Fund 0.070% to 0.040% RiverSource VP - Growth Fund 0.060% to 0.030% RiverSource VP - High Yield Bond Fund 0.070% to 0.040% RiverSource VP - Income Opportunities Fund 0.070% to 0.040% RiverSource VP - International Opportunity Fund 0.080% to 0.050% RiverSource VP - Large Cap Equity Fund 0.060% to 0.030% RiverSource VP - Large Cap Value Fund 0.060% to 0.030% RiverSource VP - Mid Cap Growth Fund 0.060% to 0.030% RiverSource VP - Mid Cap Value Fund 0.060% to 0.030% RiverSource VP - New Dimensions Fund 0.060% to 0.030% RiverSource VP - S&P 500 Index Fund 0.060% to 0.030% RiverSource VP - Select Value Fund 0.060% to 0.030% RiverSource VP - Short Duration U.S. Government Fund 0.070% to 0.040% RiverSource VP - Small Cap Advantage Fund 0.080% to 0.050% RiverSource VP - Small Cap Value Fund 0.080% to 0.050% RiverSource VP - Strategy Aggressive Fund 0.060% to 0.030% A minor portion of additional administrative service expenses paid by the Funds are consultants' fees and fund office expenses. Under this agreement, the Funds also pay taxes, audit and certain legal fees, registration fees for shares, compensation of board members, corporate filing fees and any other expenses properly payable by the Funds and approved by the board. Under a Deferred Compensation Plan (the Plan), non-interested board members may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of each Fund or other RiverSource funds. Each Fund's liability for these amounts is adjusted for market value changes and remains in each Fund until distributed in accordance with the Plan. For the year ended Aug. 31, 2005, Ameriprise Financial and its affiliates waived certain fees and expenses to 0.95% for RiverSource VP - Core Bond Fund, 0.75% for RiverSource VP - Global Inflation Protected Securities Fund, 0.99% for RiverSource VP - Income Opportunities Fund, 1.05% for RiverSource VP - Large Cap Value Fund, 1.08% for RiverSource VP - Mid Cap Value Fund, 0.50% for RiverSource VP - S&P 500 Index Fund and 1.15% for RiverSource VP - Select Value Fund. In addition, Ameriprise Financial and its affiliates have agreed to waive certain fees and expenses until Aug. 31, 2006. Under this agreement, through Sept. 30, 2005, net expenses will not exceed the following percentage of the Fund's average daily net assets: Fund Percentage RiverSource VP - Core Bond Fund 0.950% RiverSource VP - Emerging Markets Fund 1.750% RiverSource VP - Global Inflation Protected Securities Fund 0.750% RiverSource VP - Income Opportunities Fund 0.990% RiverSource VP - Large Cap Value Fund 1.050% RiverSource VP - Mid Cap Growth Fund 1.100% RiverSource VP - Mid Cap Value Fund 1.080% RiverSource VP - S&P 500 Index Fund 0.495% RiverSource VP - Select Value Fund 1.150% RiverSource VP - Small Cap Value Fund 1.300% Beginning Oct. 1, 2005, net expenses, before giving effect to any performance incentive adjustment, will not exceed the percentage listed above of each Fund's average daily net assets. - -------------------------------------------------------------------------------- 111 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT During the year ended Aug. 31, 2005, the Fund's custodian fees were reduced as a result of earnings credits from overnight cash balances as follows: Fund Reduction RiverSource VP - Balanced Fund $2,863 RiverSource VP - Cash Management Fund 1,574 RiverSource VP - Core Bond Fund 5,873 RiverSource VP - Diversified Bond Fund 3,850 RiverSource VP - Diversified Equity Income Fund 810 RiverSource VP - Emerging Markets Fund 3,983 RiverSource VP - Global Bond Fund 1,347 RiverSource VP - Global Inflation Protected Securities Fund 3,486 RiverSource VP - Growth Fund 3,312 RiverSource VP - High Yield Bond Fund 1,913 RiverSource VP - Income Opportunities Fund 7,252 RiverSource VP - International Opportunity Fund 2,124 RiverSource VP - Large Cap Equity Fund 1,170 RiverSource VP - Large Cap Value Fund 5,757 RiverSource VP - Mid Cap Growth Fund 3,943 RiverSource VP - Mid Cap Value Fund 300 RiverSource VP - New Dimensions Fund 986 RiverSource VP - S&P 500 Index Fund 6,515 RiverSource VP - Short Duration U.S. Government Fund 1,429 RiverSource VP - Small Cap Advantage Fund 146 RiverSource VP - Strategy Aggressive Fund 1,129 3. SECURITIES TRANSACTIONS For the year ended Aug. 31, 2005, cost of purchases and proceeds from sales of securities aggregated $2,966,959,422 and $3,046,173,275, respectively, for RiverSource VP - Cash Management Fund. Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated for each Fund are as follows:
Fund Purchases Proceeds RiverSource VP - Balanced Fund $3,287,041,369 $3,625,995,701 RiverSource VP - Core Bond Fund 162,004,337 142,008,684 RiverSource VP - Diversified Bond Fund 4,944,953,620 4,782,330,255 RiverSource VP - Diversified Equity Income Fund 878,821,385 307,577,543 RiverSource VP - Emerging Markets Fund 225,580,079 115,651,532 RiverSource VP - Global Bond Fund 510,125,049 366,465,035 RiverSource VP - Global Inflation Protected Securities Fund(a) 119,957,877 11,103,118 RiverSource VP - Growth Fund 512,324,387 429,268,589 RiverSource VP - High Yield Bond Fund 1,292,139,337 1,212,002,554 RiverSource VP - Income Opportunities Fund 49,447,324 22,275,322 RiverSource VP - International Opportunity Fund 993,892,595 986,099,808 RiverSource VP - Large Cap Equity Fund 3,247,824,632 3,580,844,130 RiverSource VP - Large Cap Value Fund 11,761,664 5,516,396 RiverSource VP - Mid Cap Growth Fund 81,545,724 102,160,074 RiverSource VP - Mid Cap Value Fund(b) 4,775,207 314,790 RiverSource VP - New Dimensions Fund 2,253,626,466 3,050,217,860 RiverSource VP - S&P 500 Index Fund 71,053,084 14,760,602 RiverSource VP - Select Value Fund 13,012,058 4,020,511 RiverSource VP - Short Duration U.S. Government Fund 818,914,624 852,115,071 RiverSource VP - Small Cap Advantage Fund 246,130,650 239,910,914 RiverSource VP - Small Cap Value Fund 282,021,673 177,907,115 RiverSource VP - Strategy Aggressive Fund 207,961,693 454,608,957
(a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. - -------------------------------------------------------------------------------- 112 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Net realized gains and losses on investment sales are determined on an identified cost basis. Brokerage clearing fees paid to brokers affiliated with Ameriprise Financial for the year ended Aug. 31, 2005 are as follows: Fund Amount paid RiverSource VP - Balanced Fund $ 3,299 RiverSource VP - Diversified Equity Income Fund 1,052 RiverSource VP - Growth Fund 714 RiverSource VP - Large Cap Equity Fund 14,132 RiverSource VP - New Dimensions Fund 11,952 Brokerage commissions paid to brokers affiliated with the subadvisers for RiverSource VP - Select Value Fund and RiverSource VP - Small Cap Value Fund were $3,655 and $754, respectively, for the year ended Aug. 31, 2005. 4. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the years indicated are as follows:
Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Fund Fund Sold 2,282,339 278,345,632 2,692,666 Issued for reinvested distributions 4,179,520 12,099,139 137,378 Redeemed (33,801,683) (376,052,554) (618,126) ----------- ------------ -------- Net increase (decrease) (27,339,824) (85,607,783) 2,211,918 ----------- ----------- --------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Balanced Cash Core Fund Management Bond Fund Fund(a) Sold 2,270,005 407,892,748 1,167,565 Fund merger 26,869,054 46,106,543 N/A Issued for reinvested distributions 3,807,992 3,354,489 33,416 Redeemed (30,822,612) (552,221,480) (150,706) ----------- ------------ -------- Net increase (decrease) 2,124,439 (94,867,700) 1,050,275 --------- ----------- --------- (a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Fund Fund Fund Sold 25,108,316 46,061,546 10,263,732 Issued for reinvested distributions 6,211,707 1,430,499 228,513 Redeemed (19,891,051) (1,515,634) (576,416) ----------- ---------- -------- Net increase (decrease) 11,428,972 45,976,411 9,915,829 ---------- ---------- --------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Diversified Diversified Emerging Bond Equity Income Markets Fund Fund Fund Sold 11,630,729 37,052,964 3,182,131 Fund merger 7,879,202 1,133,932 N/A Issued for reinvested distributions 5,685,611 698,518 25,814 Redeemed (35,168,272) (1,803,706) (448,306) ----------- ---------- -------- Net increase (decrease) (9,972,730) 37,081,708 2,759,639 ---------- ---------- ---------
- -------------------------------------------------------------------------------- 113 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Fund Fund(a) Sold 14,405,822 11,437,594 16,903,922 Issued for reinvested distributions 2,128,628 92,952 183,638 Redeemed (2,121,377) (612,356) (3,733,894) ---------- -------- ---------- Net increase (decrease) 14,413,073 10,918,190 13,353,666 ---------- ---------- ---------- (a) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Global Global Inflation Growth Bond Protected Securities Fund Fund Fund Sold 8,683,374 N/A 8,891,498 Issued for reinvested distributions 1,907,183 N/A 83,497 Redeemed (2,842,102) N/A (4,039,515) ---------- ---- ---------- Net increase (decrease) 7,748,455 N/A 4,935,480 --------- ---- --------- Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Fund Fund Fund Sold 21,655,621 3,565,312 10,041,363 Issued for reinvested distributions 11,919,547 140,682 1,545,947 Redeemed (20,228,641) (934,015) (11,718,071) ----------- -------- ----------- Net increase (decrease) 13,346,527 2,771,979 (130,761) ---------- --------- -------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - High Yield Income International Bond Opportunities Opportunity Fund Fund(a) Fund Sold 42,800,480 4,125 11,006,483 Fund merger N/A N/A 21,939,684 Issued for reinvested distributions 11,120,215 15,146 1,079,430 Redeemed (18,357,854) (2,993) (18,496,473) ----------- ------ ----------- Net increase (decrease) 35,562,841 16,278 15,529,124 ---------- ------ ---------- (a) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Fund Fund Fund Sold 9,638,209 691,507 1,840,161 Issued for reinvested distributions 1,352,452 17,147 -- Redeemed (25,298,441) (88,533) (3,566,894) ----------- ------- ---------- Net increase (decrease) (14,307,780) 620,121 (1,726,733) ----------- ------- ----------
- -------------------------------------------------------------------------------- 114 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Large Cap Large Cap Mid Cap Equity Value Growth Fund Fund(a) Fund Sold 3,370,740 435,972 6,310,689 Fund merger 34,368,282 N/A N/A Issued for reinvested distributions 678,836 1,370 -- Redeemed (17,070,590) (9,197) (935,350) ----------- ------ -------- Net increase (decrease) 21,347,268 428,145 5,375,339 ---------- ------- --------- (a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Fund(a) Fund Fund Sold 428,140 1,159,438 8,702,124 Issued for reinvested distributions 171 1,951,230 631,315 Redeemed (5,284) (62,428,710) (2,660,665) ------ ----------- ---------- Net increase (decrease) 423,027 (59,318,042) 6,672,774 ------- ----------- --------- (a) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Mid Cap New S&P 500 Value Dimensions Index Fund Fund Fund Sold N/A 9,122,276 14,172,187 Issued for reinvested distributions N/A 1,368,805 337,998 Redeemed N/A (26,509,122) (1,851,687) ---- ----------- ---------- Net increase (decrease) N/A (16,018,041) 12,658,498 ---- ----------- ---------- Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Fund Fund Fund Sold 1,230,317 5,228,726 1,725,783 Issued for reinvested distributions 10,913 1,302,984 666,902 Redeemed (55,353) (8,014,535) (1,369,479) ------- ---------- ---------- Net increase (decrease) 1,185,877 (1,482,825) 1,023,206 --------- ---------- --------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - RiverSource VP - Select Short Duration Small Cap Value U.S. Government Advantage Fund(a) Fund Fund Sold 581,840 8,475,468 5,947,797 Fund merger N/A 2,394,508 N/A Issued for reinvested distributions 342 1,274,589 -- Redeemed (17,212) (8,983,052) (419,580) ------- ---------- -------- Net increase (decrease) 564,970 3,161,513 5,528,217 ------- --------- ---------
(a) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. - -------------------------------------------------------------------------------- 115 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
Year ended Aug. 31, 2005 RiverSource VP - RiverSource VP- Small Cap Strategy Value Aggressive Fund Fund Sold 9,958,388 375,667 Issued for reinvested distributions 1,666,706 -- Redeemed (593,056) (32,505,903) -------- ----------- Net increase (decrease) 11,032,038 (32,130,236) ---------- ----------- Year ended Aug. 31, 2004 RiverSource VP - RiverSource VP - Small Cap Strategy Value Aggressive Fund Fund Sold 6,391,238 2,637,965 Issued for reinvested distributions 201,350 -- Redeemed (868,840) (26,077,460) -------- ----------- Net increase (decrease) 5,723,748 (23,439,495) --------- -----------
5. FORWARD FOREIGN CURRENCY CONTRACTS At Aug. 31, 2005, RiverSource VP - Global Bond Fund has entered into forward foreign currency exchange contracts that obligate the Fund to deliver currencies at specified future dates. The unrealized appreciation and/or depreciation on these contracts is included in the accompanying financial statements. See "Summary of significant accounting policies." The terms of the open contracts are as follows:
RiverSource VP - Global Bond Fund Currency to Currency to Unrealized Unrealized Exchange date be delivered be received appreciation depreciation Sept. 14, 2005 14,081,448 1,556,000,000 $ -- $ 4,422 U.S. Dollar Japanese Yen Sept. 15, 2005 9,220,000 11,483,694 103,303 -- European Monetary Unit U.S. Dollar Sept. 29, 2005 34,446,000 1,424,623 -- 23,132 Czech Koruna U.S. Dollar -------- ------- Total $103,303 $27,554 -------- -------
6. LENDING OF PORTFOLIO SECURITIES Presented below is information regarding securities on loan at Aug. 31, 2005.
RiverSource VP - RiverSource VP - RiverSource VP - Balanced Diversified Diversified Fund Bond Equity Income Fund Fund Value of securities on loan to brokers $30,653,472 $30,193,200 $31,393,856 ----------- ----------- ----------- Collateral received for securities loaned: Cash $31,055,150 $30,678,750 $31,891,100 U.S. government securities, at value -- -- -- ----------- ----------- ----------- Total collateral received for securities loaned $31,055,150 $30,678,750 $31,891,100 ----------- ----------- -----------
RiverSource VP - RiverSource VP - RiverSource VP - RiverSource VP - Large Cap New Small Cap Strategy Equity Dimensions Advantage Aggressive Fund Fund Fund Fund Value of securities on loan to brokers $83,948,719 $32,556,000 $2,072,775 $17,417,130 ----------- ----------- ---------- ----------- Collateral received for securities loaned: Cash $85,758,400 $32,850,000 $2,103,400 $17,617,900 U.S. government securities, at value -- -- -- -- ----------- ----------- ---------- ----------- Total collateral received for securities loaned $85,758,400 $32,850,000 $2,103,400 $17,617,900 ----------- ----------- ---------- -----------
- -------------------------------------------------------------------------------- 116 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Cash collateral received is invested in short-term securities, which are included in the short-term section of the "Investments in securities." Income from securities lending for the year ended Aug. 31, 2005 is as follows: Fund Amount RiverSource VP - Balanced Fund $263,715 RiverSource VP - Diversified Bond Fund 154,464 RiverSource VP - Diversified Equity Income Fund 152,678 RiverSource VP - Global Bond Fund 24,785 RiverSource VP - Growth Fund 28,779 RiverSource VP - International Opportunity Fund 642,537 RiverSource VP - Large Cap Equity Fund 609,965 RiverSource VP - New Dimensions Fund 87,797 RiverSource VP - Small Cap Advantage Fund 34,245 RiverSource VP - Strategy Aggressive Fund 78,917 The risks to each Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 7. FUTURES CONTRACTS At Aug. 31, 2005, RiverSource VP - Balanced Fund's investments in securities included securities valued at $867,399 that were pledged as collateral to cover initial margin deposits on 122 open purchase interest rate futures contracts and 1,062 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $14,399,813 with a net unrealized gain of $205,387. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $117,663,832 with a net unrealized loss of $701,493. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Core Bond Fund's investments in securities included securities valued at $30,979 that were pledged as collateral to cover initial margin deposits on 10 open purchase interest rate futures contracts and 52 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $1,180,313 with a net unrealized gain of $16,835. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $5,700,547 with a net unrealized loss of $38,021. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Diversified Bond Fund's investments in securities included securities valued at $1,287,026 that were pledged as collateral to cover initial margin deposits on 228 open purchase interest rate futures contracts and 1,510 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $26,911,125 with a net unrealized gain of $383,838. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $168,036,053 with a net unrealized loss of $990,992. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Global Bond Fund's investments in securities included securities valued at $577,933 that were pledged as collateral to cover initial margin deposits on 44 open purchase interest rate futures contracts denominated in euros and 238 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts denominated in euros at Aug. 31, 2005 was $6,727,804 with a net unrealized gain of $71,996. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $26,499,423 with a net unrealized loss of $198,000. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - S&P 500 Index Fund's investments in securities included securities valued at $674,251 that were pledged as collateral to cover initial margin deposits on 83 open purchase stock index futures contracts. The notional market value of the open purchase stock index futures contracts at Aug. 31, 2005 was $5,068,810 with a net unrealized loss of $19,535. See "Summary of significant accounting policies" and "Notes to investments in securities." At Aug. 31, 2005, RiverSource VP - Short Duration U.S. Government Fund's investments in securities included securities valued at $148,084 that were pledged as collateral to cover initial margin deposits on 94 open purchase interest rate futures contracts and 98 open sale interest rate futures contracts. The notional market value of the open purchase interest rate futures contracts at Aug. 31, 2005 was $19,466,813 with a net unrealized gain of $68,655. The notional market value of the open sale interest rate futures contracts at Aug. 31, 2005 was $10,624,344 with a net unrealized loss of $41,751. See "Summary of significant accounting policies" and "Notes to investments in securities." - -------------------------------------------------------------------------------- 117 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 8. OPTIONS CONTRACTS WRITTEN Contracts and premiums associated with options contracts written by RiverSource VP - Growth Fund during the year ended Aug. 31, 2005 are as follows:
Calls Puts Contracts Premiums Contracts Premiums Balance Aug. 31, 2004 -- $ -- -- $ -- Opened 72 81,501 920 882,640 Closed (72) (81,501) (920) (882,640) --- ------- ---- -------- Balance Aug. 31, 2005 -- $ -- -- $ -- --- -------- ---- ---------
See "Summary of significant accounting policies." Contracts and premiums associated with options contracts written by RiverSource VP - New Dimensions Fund during the year ended Aug. 31, 2005 are as follows: Calls Contracts Premiums Balance Aug. 31, 2004 -- $ -- Opened 19,999 2,726,429 Closed (16,818) (2,045,353) Exercised (1,981) (594,080) Expired (1,200) (86,996) ------- ----------- Balance Aug. 31, 2005 -- $ -- ------- ----------- See "Summary of significant accounting policies." Contracts and premiums associated with options contracts written by RiverSource VP - Short Duration U.S. Government Fund during the year ended Aug. 31, 2005 are as follows: Puts Contracts Premiums Balance Aug. 31, 2004 75 $ 41,887 Expired (75) (41,887) --- -------- Balance Aug. 31, 2005 -- $ -- --- -------- See "Summary of significant accounting policies." - -------------------------------------------------------------------------------- 118 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 9. SWAP CONTRACTS RiverSource VP - Balanced Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $3,700,000 $ 80,430 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 3,500,000 75,028 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 3,300,000 71,309 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 3,600,000 107,058 ---------- --------- ------- Total $333,825 --------
RiverSource VP - Core Bond Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $200,000 $ 4,348 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 150,000 3,216 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 150,000 3,241 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 225,000 6,691 -------- ------- ----- Total $17,496 -------
- -------------------------------------------------------------------------------- 119 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Diversified Bond Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $7,300,000 $158,687 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 6,600,000 141,482 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 5,600,000 121,009 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 7,500,000 223,037 -------- --------- ------- Total $644,215 --------
RiverSource VP - Global Bond Fund At Aug. 31, 2005, the Fund had the following open total return swap contracts:
Unrealized Termination Notional appreciation date principal (depreciation) Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.55%. Counterparty: Citigroup 09/01/05 $2,200,000 $ 47,823 Receive total return on Lehman Brothers AAA 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.20%. Counterparty: Citigroup 10/01/05 1,000,000 21,437 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.40%. Counterparty: Citigroup 10/01/05 2,725,000 58,884 Receive total return on Lehman Brothers Aaa 8.5+ Commercial Mortgage-Backed Securities Index and pay a floating rate based on 1-month LIBOR less 0.30%. Counterparty: Citigroup 11/01/05 2,350,000 69,885 -------- --------- ------ Total $198,029 --------
- -------------------------------------------------------------------------------- 120 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 10. CAPITAL LOSS CARRY-OVER For federal income tax purposes, capital loss carry-overs at Aug. 31, 2005 are as follows: Fund Carry-over RiverSource VP - Balanced Fund(a) $ 71,249,204 RiverSource VP - Cash Management Fund 1,797 RiverSource VP - Diversified Bond Fund 136,697,943 RiverSource VP - Growth Fund 115,755,420 RiverSource VP - High Yield Bond Fund 222,337,062 RiverSource VP - International Opportunity Fund 690,331,815 RiverSource VP - Large Cap Equity Fund 416,160,189 RiverSource VP - New Dimensions Fund 254,908,325 RiverSource VP - Short Duration U.S. Government Fund 7,170,145 RiverSource VP - Strategy Aggressive Fund 1,337,919,255 (a) As a result of the merger on July 9, 2004, the Fund acquired capital loss carry-overs, which are limited by the Internal Revenue Code Section 382, and unrealized capital gains. At the end of the most recent fiscal year, if the capital loss carry-overs are not offset by subsequent capital gains, they will expire as follows:
Fund 2007 2008 2009 RiverSource VP - Balanced Fund $ -- $11,355,730 $ 59,893,474 RiverSource VP - Cash Management Fund -- 1,797 -- RiverSource VP - Diversified Bond Fund 5,732,021 53,324,465 47,894,894 RiverSource VP - Growth Fund -- -- -- RiverSource VP - High Yield Bond Fund -- -- 15,326,726 RiverSource VP - International Opportunity Fund -- 26,384,784 18,436,163 RiverSource VP - Large Cap Equity Fund -- -- 117,244,575 RiverSource VP - New Dimensions Fund -- -- -- RiverSource VP - Short Duration U.S. Government Fund -- -- -- RiverSource VP - Strategy Aggressive Fund -- -- 118,368,309
Fund 2010 2011 2012 2013 2014 RiverSource VP - Balanced Fund $ -- $ -- $ -- $ -- $ -- RiverSource VP - Cash Management Fund -- -- -- -- -- RiverSource VP - Diversified Bond Fund 9,863,475 15,651,825 4,231,263 -- -- RiverSource VP - Growth Fund 36,012,947 79,742,473 -- -- -- RiverSource VP - High Yield Bond Fund 100,694,093 106,316,243 -- -- -- RiverSource VP - International Opportunity Fund 533,046,310 90,583,080 21,881,478 -- -- RiverSource VP - Large Cap Equity Fund 12,004,786 286,910,828 -- -- -- RiverSource VP - New Dimensions Fund 104,527,778 150,380,547 -- -- -- RiverSource VP - Short Duration U.S. Government Fund -- 68,452 -- 4,186,493 2,915,200 RiverSource VP - Strategy Aggressive Fund 869,472,336 310,534,170 39,544,440 -- --
The Funds, in connection with the mergers as described in Note 11, acquired the following capital loss carry-over: Fund Carry-over RiverSource VP - Balanced Fund $ 93,466,496 RiverSource VP - Cash Management Fund -- RiverSource VP - Diversified Bond Fund 1,887,673 RiverSource VP - Diversified Equity Income Fund 203,410 RiverSource VP - International Opportunity Fund 65,239,405 RiverSource VP - Large Cap Equity Fund 219,522,945 RiverSource VP - Short Duration U.S. Government Fund 105,388 In addition to the acquired capital loss carry-overs, the Funds also acquired unrealized capital gains as a result of the mergers. The yearly utilization of the acquired capital losses as well as the utilization of the acquired unrealized losses is limited by the Internal Revenue Code. It is unlikely the board will authorize a distribution of any net realized capital gains until the available capital loss carry-overs have been offset or expire. - -------------------------------------------------------------------------------- 121 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 11. FUND MERGERS RiverSource VP - Balanced Fund At the close of business on July 9, 2004, RiverSource VP - Balanced Fund acquired the assets and assumed the identified liabilities of IDS Life Series Managed Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Balanced Fund immediately before the acquisition were $2,327,723,407 and the combined net assets immediately after the acquisition were $2,705,102,673. The merger was accomplished by a tax-free exchange of 28,120,071 shares of IDS Life Series Managed Portfolio valued at $377,379,266. In exchange for the IDS Life Series Managed Portfolio shares and net assets, RiverSource VP - Balanced Fund issued 26,869,054 shares. IDS Life Series Managed Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $377,379,266, which includes $463,274,174 of capital stock, $8,315,086 of unrealized appreciation, ($94,202,895) of accumulated net realized loss and ($7,099) of temporary book-to-tax differences. RiverSource VP - Cash Management Fund At the close of business on July 9, 2004, RiverSource VP - Cash Management Fund acquired the assets and assumed the identified liabilities of IDS Life Series Money Market Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Cash Management Fund immediately before the acquisition were $715,812,600 and the combined net assets immediately after the acquisition were $761,902,594. The merger was accomplished by a tax-free exchange of 46,093,550 shares of IDS Life Series Money Market Portfolio valued at $46,089,994. In exchange for the IDS Life Series Money Market Portfolio shares and net assets, RiverSource VP - Cash Management Fund issued 46,106,543 shares. IDS Life Series Money Market Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $46,089,994, which includes $46,089,994 of capital stock. RiverSource VP - Diversified Bond Fund At the close of business on July 9, 2004, RiverSource VP - Diversified Bond Fund acquired the assets and assumed the identified liabilities of IDS Life Series Income Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Diversified Bond Fund immediately before the acquisition were $1,605,166,947 and the combined net assets immediately after the acquisition were $1,687,687,627. The merger was accomplished by a tax-free exchange of 8,455,589 shares of IDS Life Series Income Portfolio valued at $82,520,680. In exchange for the IDS Life Series Income Portfolio shares and net assets, RiverSource VP - Diversified Bond Fund issued 7,879,202 shares. IDS Life Series Income Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $82,520,680, which includes $84,752,461 of capital stock, ($282,284) of unrealized depreciation and ($1,949,497) of accumulated net realized loss. RiverSource VP - Diversified Equity Income Fund At the close of business on July 9, 2004, RiverSource VP - Diversified Equity Income Fund acquired the assets and assumed the identified liabilities of IDS Life Series Equity Income Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Diversified Equity Income Fund immediately before the acquisition were $784,736,631 and the combined net assets immediately after the acquisition were $797,507,627. The merger was accomplished by a tax-free exchange of 1,171,233 shares of IDS Life Series Equity Income Portfolio valued at $12,770,996. In exchange for the IDS Life Series Equity Income Portfolio shares and net assets, RiverSource VP - Diversified Equity Income Fund issued 1,133,932 shares. - -------------------------------------------------------------------------------- 122 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT IDS Life Series Equity Income Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $12,770,996, which includes $11,141,310 of capital stock, $1,942,850 of unrealized appreciation and ($313,164) of accumulated net realized loss. RiverSource VP - International Opportunity Fund At the close of business on July 9, 2004, RiverSource VP - International Opportunity Fund acquired the assets and assumed the identified liabilities of IDS Life Series International Equity Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - International Opportunity Fund immediately before the acquisition were $823,057,521 and the combined net assets immediately after the acquisition were $1,008,727,812. The merger was accomplished by a tax-free exchange of 16,165,428 shares of IDS Life Series International Equity Portfolio valued at $185,670,291. In exchange for the IDS Life Series International Equity Portfolio shares and net assets, RiverSource VP - International Opportunity Fund issued 21,939,684 shares. IDS Life Series International Equity Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $185,670,291, which includes $230,940,962 of capital stock, $20,280,571of unrealized appreciation, ($65,518,971) of accumulated net realized loss and ($32,271) of temporary book-to-tax differences. RiverSource VP - Large Cap Equity Fund At the close of business on July 9, 2004, RiverSource VP - Large Cap Equity Fund acquired the assets and assumed the identified liabilities of AXP VP - Blue Chip Advantage Fund, AXP VP - Stock Fund and IDS Life Series Equity Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Large Cap Equity Fund immediately before the acquisition were $1,956,841,848 and the combined net assets immediately after the acquisition were $2,635,350,043. The merger was accomplished by a tax-free exchange of the following: Shares Value AXP VP - Blue Chip Advantage Fund 9,018,701 $ 70,580,460 AXP VP - Stock Fund 1,802,859 15,558,284 IDS Life Series Equity Portfolio 41,391,258 592,369,451 In exchange for the AXP VP - Blue Chip Advantage Fund, AXP VP - Stock Fund and IDS Life Series Equity Portfolio shares and net assets, RiverSource VP - Large Cap Equity Fund issued 34,368,282 shares. AXP VP - Blue Chip Advantage Fund's, AXP VP - Stock Fund's and IDS Life Series Equity Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were as follows, which include the following amounts of capital stock, unrealized appreciation, accumulated net realized loss and temporary book-to tax differences.
Total Capital Unrealized Accumulated Temporary net assets stock appreciation net realized loss book-to-tax differences AXP VP - Blue Chip Advantage Fund $ 70,580,460 $ 91,818,264 $ 525,481 $ (21,763,285) $ -- AXP VP - Stock Fund 15,558,284 15,459,338 150,180 (51,233) (1) IDS Life Series Equity Portfolio 592,369,451 773,667,893 18,050,167 (199,348,293) (316)
RiverSource VP - Short Duration U.S. Government Fund At the close of business on July 9, 2004, RiverSource VP - Short Duration U.S. Government Fund acquired the assets and assumed the identified liabilities of IDS Life Series Government Securities Portfolio. This reorganization was completed after shareholders approved the plan on June 9, 2004. The aggregate net assets of RiverSource VP - Short Duration U.S. Government Fund immediately before the acquisition were $472,541,031 and the combined net assets immediately after the acquisition were $497,231,191. The merger was accomplished by a tax-free exchange of 2,399,885 shares of IDS Life Series Government Securities Portfolio valued at $24,690,160. In exchange for the IDS Life Series Government Securities Portfolio shares and net assets, RiverSource VP - Short Duration U.S. Government Fund issued 2,394,508 shares. IDS Life Series Government Securities Portfolio's net assets after adjustments for any permanent book-to-tax differences at the merger date were $24,690,160, which includes $24,504,312 of capital stock, $292,495 of unrealized appreciation and ($106,647) of accumulated net realized loss. - -------------------------------------------------------------------------------- 123 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT 12. BANK BORROWINGS Each Fund has a revolving credit agreement with a syndicate of banks headed by The Bank of New York, whereby each Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The agreement went into effect Sept. 21, 2004. Each Fund must maintain asset coverage for borrowings of at least 300%. The agreement, which enables each Fund to participate with other RiverSource funds, permits borrowings up to $500 million, collectively. Interest is charged to each Fund based on its borrowings at a rate equal to either the higher of the Federal Funds Effective Rate plus 0.50% or the Prime Lending Rate. Borrowings are payable within 60 days after such loan is executed. Each Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.09% per annum. Prior to this agreement, each Fund had a revolving credit agreement that permitted borrowings up to $500 million with Deutsche Bank. Each Fund had no borrowings outstanding during the year ended Aug. 31, 2005. Effective Sept. 20, 2005, each Fund entered into a new revolving credit agreement with a syndicate of banks headed by JPMorgan Chase Bank, N.A., whereby each Fund is permitted to have bank borrowings for temporary or emergency purposes, including funding shareholder redemptions. 13. SUBSEQUENT EVENT Shareholders will be asked to approve a merger of RiverSource VP -New Dimensions Fund into RiverSource VP - Large Cap Equity Fund and RiverSource VP - Strategy Aggressive Fund into RiverSource VP - Mid Cap Growth Fund at a shareholder meeting on Feb. 15, 2006. This approval is not guaranteed. 14. FINANCIAL HIGHLIGHTS The tables below show certain important financial information for evaluating each Fund's results.
RiverSource VP - Balanced Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $14.17 $13.00 $12.32 $15.30 $20.81 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .35 .31 .31 .33 .44 Net gains (losses) (both realized and unrealized) 1.02 1.17 .82 (1.88) (4.32) ------ ------ ------ ------ ------ Total from investment operations 1.37 1.48 1.13 (1.55) (3.88) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.36) (.31) (.31) (.34) (.39) Distributions from realized gains -- -- (.14) (1.09) (1.24) ------ ------ ------ ------ ------ Total distributions (.36) (.31) (.45) (1.43) (1.63) ------ ------ ------ ------ ------ Net asset value, end of period $15.18 $14.17 $13.00 $12.32 $15.30 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $2,437 $2,664 $2,416 $2,709 $3,759 Ratio of expenses to average daily net assets(b) .82% .78% .80% .77% .76% Ratio of net investment income (loss) to average daily net assets 2.34% 2.16% 2.48% 2.31% 2.46% Portfolio turnover rate (excluding short-term securities) 131% 133% 119% 103% 63% Total return(c) 9.68% 11.39% 9.40% (10.91%) (19.37%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 124 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Cash Management Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- Income from investment operations: Net investment income (loss) .02 -- .01 .02 .05 ----- ----- ----- ----- ----- Less distributions: Dividends from net investment income (.02) -- (.01) (.02) (.05) ----- ----- ----- ----- ----- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ----- ----- ----- ----- ----- Ratios/supplemental data Net assets, end of period (in millions) $688 $773 $868 $1,123 $1,063 Ratio of expenses to average daily net assets(b) .70% .69% .70% .69% .68% Ratio of net investment income (loss) to average daily net assets 1.88% .47% .72% 1.61% 4.76% Total return(c) 1.92% .48% .72% 1.59% 4.94%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Core Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $10.01 $ 9.98 ------ ------ Income from investment operations: Net investment income (loss) .31 .14 Net gains (losses) (both realized and unrealized) .04 .03 ------ ------ Total from investment operations .35 .17 ------ ------ Less distributions: Dividends from net investment income (.31) (.14) ------ ------ Net asset value, end of period $10.05 $10.01 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $58 $36 Ratio of expenses to average daily net assets(c),(d) .95% .95%(e) Ratio of net investment income (loss) to average daily net assets 3.10% 2.33%(e) Portfolio turnover rate (excluding short-term securities) 339% 221% Total return(f) 3.64% 1.67%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.01% and 1.13% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. - -------------------------------------------------------------------------------- 125 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Diversified Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.62 $10.40 $10.38 $10.61 $10.29 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .39 .38 .44 .56 .70 Net gains (losses) (both realized and unrealized) .06 .22 .02 (.23) .30 ------ ------ ------ ------ ------ Total from investment operations .45 .60 .46 .33 1.00 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.41) (.38) (.44) (.56) (.68) ------ ------ ------ ------ ------ Net asset value, end of period $10.66 $10.62 $10.40 $10.38 $10.61 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,824 $1,696 $1,765 $1,814 $1,626 Ratio of expenses to average daily net assets(b) .82% .81% .81% .80% .80% Ratio of net investment income (loss) to average daily net assets 3.65% 3.60% 4.23% 5.41% 6.72% Portfolio turnover rate (excluding short-term securities) 293% 295% 251% 167% 122% Total return(c) 4.27% 5.84% 4.50% 3.20% 10.07%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Diversified Equity Income Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $11.17 $ 9.65 $8.41 $10.20 $10.05 ------ ------ ----- ------ ------ Income from investment operations: Net investment income (loss) .20 .17 .17 .13 .11 Net gains (losses) (both realized and unrealized) 2.65 1.51 1.24 (1.75) .15 ------ ------ ----- ------ ------ Total from investment operations 2.85 1.68 1.41 (1.62) .26 ------ ------ ----- ------ ------ Less distributions: Dividends from net investment income (.19) (.16) (.17) (.13) (.11) Distributions from realized gains -- -- -- (.04) -- ------ ------ ----- ------ ------ Total distributions (.19) (.16) (.17) (.17) (.11) ------ ------ ----- ------ ------ Net asset value, end of period $13.83 $11.17 $9.65 $ 8.41 $10.20 ------ ------ ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,679 $843 $370 $267 $106 Ratio of expenses to average daily net assets(b) .84% .86% .76% .87% .91%(c) Ratio of net investment income (loss) to average daily net assets 1.66% 1.77% 2.13% 1.59% 1.49% Portfolio turnover rate (excluding short-term securities) 25% 19% 39% 35% 68% Total return(d) 25.59% 17.53% 17.00% (16.16%) 2.56%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.17% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 126 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Emerging Markets Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 9.80 $8.44 $7.04 $6.68 $ 9.61 ------ ----- ----- ----- ------ Income from investment operations: Net investment income (loss) .06 .09 .04 .02 .01 Net gains (losses) (both realized and unrealized) 3.72 1.39 1.38 .34 (2.94) ------ ----- ----- ----- ------ Total from investment operations 3.78 1.48 1.42 .36 (2.93) ------ ----- ----- ----- ------ Less distributions: Dividends from net investment income (.06) (.12) (.02) -- -- Distributions from realized gains (.38) -- -- -- -- ------ ----- ----- ----- ------ Total distributions (.44) (.12) (.02) -- -- ------ ----- ----- ----- ------ Net asset value, end of period $13.14 $9.80 $8.44 $7.04 $ 6.68 ------ ----- ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $192 $46 $16 $10 $6 Ratio of expenses to average daily net assets(b) 1.55% 1.61%(c) 1.75%(c) 1.68%(c) 1.75%(c) Ratio of net investment income (loss) to average daily net assets .58% .65% .67% .31% .20% Portfolio turnover rate (excluding short-term securities) 120% 117% 191% 215% 203% Total return(d) 39.60% 17.63% 20.25% 5.45% (30.49%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.67%, 2.04%, 2.36% and 3.49% for the years ended Aug. 31, 2004, 2003, 2002 and 2001, respectively. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Global Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.82 $10.40 $10.02 $ 9.76 $9.34 ------ ------ ------ ------ ----- Income from investment operations: Net investment income (loss) .34 .35 .34 .38 .43 Net gains (losses) (both realized and unrealized) .39 .73 .61 .36 .23 ------ ------ ------ ------ ----- Total from investment operations .73 1.08 .95 .74 .66 ------ ------ ------ ------ ----- Less distributions: Dividends from net investment income (.53) (.66) (.57) (.48) (.24) ------ ------ ------ ------ ----- Net asset value, end of period $11.02 $10.82 $10.40 $10.02 $9.76 ------ ------ ------ ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $575 $409 $312 $233 $191 Ratio of expenses to average daily net assets(b) 1.08% 1.08% 1.09% 1.08% 1.07% Ratio of net investment income (loss) to average daily net assets 2.63% 2.76% 3.08% 3.92% 4.54% Portfolio turnover rate (excluding short-term securities) 79% 105% 102% 46% 34% Total return(c) 6.75% 10.57% 9.56% 7.83% 7.14%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 127 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Global Inflation Protected Securities Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005(b) Net asset value, beginning of period $10.00 ------ Income from investment operations: Net investment income (loss) .32 Net gains (losses) (both realized and unrealized) .19 ------ Total from investment operations .51 ------ Less distributions: Dividends from net investment income (.32) ------ Net asset value, end of period $10.19 ------ Ratios/supplemental data Net assets, end of period (in millions) $116 Ratio of expenses to average daily net assets(c),(d) .75%(e) Ratio of net investment income (loss) to average daily net assets 3.42%(e) Portfolio turnover rate (excluding short-term securities) 29% Total return(f) 5.22%(g) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Sept. 13, 2004 (date the Fund became available) to Aug. 31, 2005. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.87% for the period ended Aug. 31, 2005. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - Growth Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $5.69 $5.45 $5.00 $ 6.48 $13.46 ----- ----- ----- ------ ------ Income from investment operations: Net investment income (loss) .03 .02 .01 -- (.01) Net gains (losses) (both realized and unrealized) .91 .24 .45 (1.48) (6.97) ----- ----- ----- ------ ------ Total from investment operations .94 .26 .46 (1.48) (6.98) ----- ----- ----- ------ ------ Less distributions: Dividends from net investment income (.02) (.02) (.01) -- -- ----- ----- ----- ------ ------ Net asset value, end of period $6.61 $5.69 $5.45 $ 5.00 $ 6.48 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $392 $261 $223 $144 $177 Ratio of expenses to average daily net assets(b) .92% .85% .99% .81% .90%(c) Ratio of net investment income (loss) to average daily net assets .42% .27% .20% --% (.19%) Portfolio turnover rate (excluding short-term securities) 154% 192% 199% 272% 41% Total return(d) 16.74% 4.64% 9.29% (22.80%) (51.87%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.91% for the year ended Aug 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 128 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - High Yield Bond Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $6.60 $6.22 $5.66 $ 6.83 $7.76 ----- ----- ----- ------ ----- Income from investment operations: Net investment income (loss) .44 .47 .48 .56 .79 Net gains (losses) (both realized and unrealized) .16 .38 .54 (1.17) (.95) ----- ----- ----- ------ ----- Total from investment operations .60 .85 1.02 (.61) (.16) ----- ----- ----- ------ ----- Less distributions: Dividends from net investment income (.44) (.47) (.46) (.56) (.77) ----- ----- ----- ------ ----- Net asset value, end of period $6.76 $6.60 $6.22 $ 5.66 $6.83 ----- ----- ----- ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $1,246 $1,130 $843 $577 $609 Ratio of expenses to average daily net assets(b) .83% .82% .83% .83% .82% Ratio of net investment income (loss) to average daily net assets 6.58% 7.30% 8.31% 8.91% 11.04% Portfolio turnover rate (excluding short-term securities) 106% 139% 141% 135% 86% Total return(c) 9.31% 14.03% 18.81% (9.33%) (1.89%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Income Opportunities Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $10.29 $ 9.93 ------ ------ Income from investment operations: Net investment income (loss) .59 .15 Net gains (losses) (both realized and unrealized) .18 .36 ------ ------ Total from investment operations .77 .51 ------ ------ Less distributions: Dividends from net investment income (.59) (.15) Distributions from realized gains (.08) -- ------ ------ Total distributions (.67) (.15) ------ ------ Net asset value, end of period $10.39 $10.29 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $45 $16 Ratio of expenses to average daily net assets(c),(d) .99 .99%(e) Ratio of net investment income (loss) to average daily net assets 5.69% 6.03%(e) Portfolio turnover rate (excluding short-term securities) 93% 36% Total return(f) 7.73% 5.17%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from June 1, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.03% and 1.55% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. - -------------------------------------------------------------------------------- 129 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - International Opportunity Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $ 8.23 $7.19 $7.00 $ 8.39 $16.98 ------ ----- ----- ------ ------ Income from investment operations: Net investment income (loss) .11 .08 .08 .07 .03 Net gains (losses) (both realized and unrealized) 1.80 1.05 .16 (1.35) (5.57) ------ ----- ----- ------ ------ Total from investment operations 1.91 1.13 .24 (1.28) (5.54) ------ ----- ----- ------ ------ Less distributions: Dividends from net investment income (.12) (.09) (.05) (.07) (.03) Distributions from realized gains -- -- -- (.01) (2.97) Excess distributions from net investment income -- -- -- (.03) (.05) ------ ----- ----- ------ ------ Total distributions (.12) (.09) (.05) (.11) (3.05) ------ ----- ----- ------ ------ Net asset value, end of period $10.02 $8.23 $7.19 $ 7.00 $ 8.39 ------ ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $1,184 $974 $738 $873 $1,310 Ratio of expenses to average daily net assets(b) 1.04% .98% 1.06% 1.07% 1.04% Ratio of net investment income (loss) to average daily net assets 1.19% .99% 1.19% .83% .31% Portfolio turnover rate (excluding short-term securities) 90% 142% 102% 140% 278% Total return(c) 23.29% 15.77% 3.48% (15.38%) (36.90%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Large Cap Equity Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $19.32 $18.04 $16.48 $20.87 $ 37.21 Income from investment operations: Net investment income (loss) .24 .14 .10 .10 .05 Net gains (losses) (both realized and unrealized) 2.15 1.28 1.56 (2.83) (12.96) ------ ------ ------ ------ ------- Total from investment operations 2.39 1.42 1.66 (2.73) (12.91) ------ ------ ------ ------ ------- Less distributions: Dividends from net investment income (.23) (.14) (.10) (.09) (.04) Distributions from realized gains -- -- -- (1.57) (3.39) ------ ------ ------ ------ ------- Total distributions (.23) (.14) (.10) (1.66) (3.43) ------ ------ ------ ------ ------- Net asset value, end of period $21.48 $19.32 $18.04 $16.48 $ 20.87 ------ ------ ------ ------ ------- Ratios/supplemental data Net assets, end of period (in millions) $2,510 $2,535 $1,982 $2,227 $3,270 Ratio of expenses to average daily net assets(b) .80% .85% .85% .80% .78% Ratio of net investment income (loss) to average daily net assets 1.13% .72% .62% .52% .13% Portfolio turnover rate (excluding short-term securities) 132% 114% 115% 146% 62% Total return(c) 12.42% 7.87% 10.16% (14.08%) (36.48%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 130 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Large Cap Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $10.00 $ 9.99 ------ ------ Income from investment operations: Net investment income (loss) .14 .05 Net gains (losses) (both realized and unrealized) 1.06 .02 ------ ------ Total from investment operations 1.20 .07 ------ ------ Less distributions: Dividends from net investment income (.14) (.06) Distributions from realized gains (.07) -- ------ ------ Total distributions (.21) (.06) ------ ------ Net asset value, end of period $10.99 $10.00 ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $15 $7 Ratio of expenses to average daily net assets(c),(d) 1.05% 1.05%(e) Ratio of net investment income (loss) to average daily net assets 1.37% 1.03%(e) Portfolio turnover rate (excluding short-term securities) 52% 24% Total return(f) 12.04% .69%(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 2.55% and 2.85% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - Mid Cap Growth Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001(b) Net asset value, beginning of period $10.11 $10.09 $ 8.54 $ 9.57 $10.27 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) (.04) (.05) (.05) (.04) (.01) Net gains (losses) (both realized and unrealized) 2.36 .07 1.60 (.99) (.69) ------ ------ ------ ------ ------ Total from investment operations 2.32 .02 1.55 (1.03) (.70) ------ ------ ------ ------ ------ Net asset value, end of period $12.43 $10.11 $10.09 $ 8.54 $ 9.57 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $255 $225 $170 $72 $14 Ratio of expenses to average daily net assets(c) .82% .85% 1.06% 1.10%(d) 1.10%(d),(e) Ratio of net investment income (loss) to average daily net assets (.32%) (.49%) (.71%) (.76%) (.45%)(e) Portfolio turnover rate (excluding short-term securities) 34% 25% 19% 20% 19% Total return(f) 23.03% .13% 18.20% (10.77%) (6.82%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 1, 2001 (date the Fund became available) to Aug. 31, 2001. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.39% and 2.99% for the periods ended Aug. 31, 2002 and 2001, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. - -------------------------------------------------------------------------------- 131 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT RiverSource VP - Mid Cap Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005(b) Net asset value, beginning of period $10.15 ------ Income from investment operations: Net investment income (loss) .01 Net gains (losses) (both realized and unrealized) 1.28 ------ Total from investment operations 1.29 ------ Less distributions: Dividends from net investment income (.02) ------ Net asset value, end of period $11.42 ------ Ratios/supplemental data Net assets, end of period (in millions) $7 Ratio of expenses to average daily net assets(c),(d) 1.08%(e) Ratio of net investment income (loss) to average daily net assets .62%(e) Portfolio turnover rate (excluding short-term securities) 7% Total return(f) 12.70%(g) (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from May 2, 2005 (date the Fund became available) to Aug. 31, 2005. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 2.97% for the period ended Aug. 31, 2005. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - New Dimensions Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $14.52 $14.29 $13.06 $15.49 $25.03 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .15 .10 .08 .07 .02 Net gains (losses) (both realized and unrealized) .91 .23 1.23 (2.42) (8.01) ------ ------ ------ ------ ------ Total from investment operations 1.06 .33 1.31 (2.35) (7.99) ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.15) (.10) (.08) (.07) (.02) Distributions from realized gains -- -- -- (.01) (1.53) ------ ------ ------ ------ ------ Total distributions (.15) (.10) (.08) (.08) (1.55) ------ ------ ------ ------ ------ Net asset value, end of period $15.43 $14.52 $14.29 $13.06 $15.49 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $2,200 $2,932 $3,115 $3,045 $3,892 Ratio of expenses to average daily net assets(b) .75% .72% .82% .79% .79% Ratio of net investment income (loss) to average daily net assets 1.01% .66% .64% .47% .12% Portfolio turnover rate (excluding short-term securities) 89% 55% 23% 27% 27% Total return(c) 7.28% 2.29% 10.11% (15.17%) (33.05%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credit on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 132 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - S&P 500 Index Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $7.54 $6.88 $6.24 $ 7.71 $10.38 ----- ----- ----- ------ ------ Income from investment operations: Net investment income (loss) .13 .09 .08 .07 .06 Net gains (losses) (both realized and unrealized) .76 .66 .64 (1.47) (2.65) ----- ----- ----- ------ ------ Total from investment operations .89 .75 .72 (1.40) (2.59) ----- ----- ----- ------ ------ Less distributions: Dividends from net investment income (.13) (.09) (.08) (.07) (.06) Distributions from realized gains -- -- -- -- (.02) ----- ----- ----- ------ ------ Total distributions (.13) (.09) (.08) (.07) (.08) ----- ----- ----- ------ ------ Net asset value, end of period $8.30 $7.54 $6.88 $ 6.24 $ 7.71 ----- ----- ----- ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $367 $283 $171 $99 $56 Ratio of expenses to average daily net assets(b),(c) .50% .49% .50% .50% .49% Ratio of net investment income (loss) to average daily net assets 1.65% 1.21% 1.31% 1.01% .85% Portfolio turnover rate (excluding short-term securities) 5% --% 5% 72% 137% Total return(d) 11.98% 10.84% 11.51% (18.29%) (24.96%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 0.56%, 0.57%, 0.64%, 0.82% and 1.31% for the years ended Aug. 31, 2005, 2004, 2003, 2002 and 2001, respectively. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Select Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004(b) Net asset value, beginning of period $ 9.95 $9.98 ------ ----- Income from investment operations: Net investment income (loss) .05 .02 Net gains (losses) (both realized and unrealized) 1.55 (.03) ------ ----- Total from investment operations 1.60 (.01) ------ ----- Less distributions: Dividends from net investment income (.05) (.02) Distributions from realized gains (.05) -- ------ ----- Total distributions (.10) (.02) ------ ----- Net asset value, end of period $11.45 $9.95 ------ ----- Ratios/supplemental data Net assets, end of period (in millions) $23 $9 Ratio of expenses to average daily net assets(c),(d) 1.15% 1.15%(e) Ratio of net investment income (loss) to average daily net assets .45% .50%(e) Portfolio turnover rate (excluding short-term securities) 31% 13% Total return(f) 16.18% (.11%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Feb. 4, 2004 (date the Fund became available) to Aug. 31, 2004. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratios of expenses would have been 1.17% and 1.97% for the periods ended Aug. 31, 2005 and 2004, respectively. (e) Adjusted to an annual basis. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized. - -------------------------------------------------------------------------------- 133 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Short Duration U.S. Government Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $10.34 $10.46 $10.55 $10.34 $ 9.95 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) .27 .25 .27 .34 .52 Net gains (losses) (both realized and unrealized) (.13) (.07) (.05) .23 .39 ------ ------ ------ ------ ------ Total from investment operations .14 .18 .22 .57 .91 ------ ------ ------ ------ ------ Less distributions: Dividends from net investment income (.27) (.25) (.27) (.34) (.52) Distributions from realized gains -- (.05) (.04) (.02) -- ------ ------ ------ ------ ------ Total distributions (.27) (.30) (.31) (.36) (.52) ------ ------ ------ ------ ------ Net asset value, end of period $10.21 $10.34 $10.46 $10.55 $10.34 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $484 $506 $479 $276 $106 Ratio of expenses to average daily net assets(b) .83% .82% .82% .83% .84%(c) Ratio of net investment income (loss) to average daily net assets 2.67% 2.36% 2.47% 3.24% 4.94% Portfolio turnover rate (excluding short-term securities) 171% 135% 179% 292% 95% Total return(d) 1.43% 1.70% 2.06% 5.42% 9.29%
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 0.87% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges.
RiverSource VP - Small Cap Advantage Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $12.64 $11.25 $ 8.79 $10.13 $12.58 ------ ------ ------ ------ ------ Income from investment operations: Net investment income (loss) (.04) (.05) (.02) (.02) (.01) Net gains (losses) (both realized and unrealized) 3.14 1.44 2.48 (1.32) (2.09) ------ ------ ------ ------ ------ Total from investment operations 3.10 1.39 2.46 (1.34) (2.10) ------ ------ ------ ------ ------ Less distributions: Distributions from realized gains (.63) -- -- -- (.35) ------ ------ ------ ------ ------ Net asset value, end of period $15.11 $12.64 $11.25 $ 8.79 $10.13 ------ ------ ------ ------ ------ Ratios/supplemental data Net assets, end of period (in millions) $235 $184 $102 $59 $49 Ratio of expenses to average daily net assets(b) 1.07% 1.10% 1.19% 1.11% 1.16%(c) Ratio of net investment income (loss) to average daily net assets (.28%) (.42%) (.20%) (.21%) (.08%) Portfolio turnover rate (excluding short-term securities) 112% 104% 124% 156% 152% Total return(d) 24.88% 12.40% 27.96% (13.28%) (16.68%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 1.26% for the year ended Aug. 31, 2001. (d) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 134 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT
RiverSource VP - Small Cap Value Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001(b) Net asset value, beginning of period $13.10 $11.39 $9.52 $9.84 $10.01 ------ ------ ----- ----- ------ Income from investment operations: Net investment income (loss) .02 (.02) (.03) (.03) (.01) Net gains (losses) (both realized and unrealized) 2.53 1.92 1.95 (.29) (.16) ------ ------ ----- ----- ------ Total from investment operations 2.55 1.90 1.92 (.32) (.17) ------ ------ ----- ----- ------ Less distributions: Dividends from net investment income (.01) -- (.01) -- -- Distributions from realized gains (1.18) (.19) (.04) -- -- ------ ------ ----- ----- ------ Total distributions (1.19) (.19) (.05) -- -- ------ ------ ----- ----- ------ Net asset value, end of period $14.46 $13.10 $11.39 $9.52 $9.84 ------ ------ ----- ----- ------ Ratios/supplemental data Net assets, end of period (in millions) $412 $229 $134 $63 $5 Ratio of expenses to average daily net assets(c) 1.28% 1.27% 1.55% 1.48% 1.50%(d),(e) Ratio of net investment income (loss) to average daily net assets .12% (.20%) (.43%) (.67%) (1.15%)(d) Portfolio turnover rate (excluding short-term securities) 65% 84% 87% 12% --% Total return(f) 20.02% 16.78% 20.24% (3.19%) (1.77%)(g)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) For the period from Aug. 14, 2001 (date the Fund became available) to Aug. 31, 2001. (c) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (d) Adjusted to an annual basis. (e) Ameriprise Financial and its affiliates waived/reimbursed the Fund for certain expenses. Had they not done so, the annual ratio of expenses would have been 6.86% for the period ended Aug. 31, 2001. (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. (g) Not annualized.
RiverSource VP - Strategy Aggressive Fund Per share income and capital changes(a) Fiscal period ended Aug. 31, 2005 2004 2003 2002 2001 Net asset value, beginning of period $6.80 $6.99 $5.72 $ 8.29 $ 27.82 ----- ----- ----- ------ ------- Income from investment operations: Net investment income (loss) (.04) (.03) (.03) (.04) .01 Net gains (losses) (both realized and unrealized) 1.51 (.16) 1.30 (2.53) (13.01) ----- ----- ----- ------ ------- Total from investment operations 1.47 (.19) 1.27 (2.57) (13.00) ----- ----- ----- ------ ------- Less distributions: Dividends from net investment income -- -- -- -- (.02) Distributions from realized gains -- -- -- -- (6.51) ----- ----- ----- ------ ------- Total distributions -- -- -- -- (6.53) ----- ----- ----- ------ ------- Net asset value, end of period $8.27 $6.80 $6.99 $ 5.72 $ 8.29 ----- ----- ----- ------ ------- Ratios/supplemental data Net assets, end of period (in millions) $687 $783 $969 $991 $1,815 Ratio of expenses to average daily net assets(b) .78% .72% .83% .81% .78% Ratio of net investment income (loss) to average daily net assets (.33%) (.43%) (.54%) (.50%) .10% Portfolio turnover rate (excluding short-term securities) 28% 53% 27% 180% 166% Total return(c) 21.58% (2.67%) 22.16% (30.97%) (53.61%)
(a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances. (c) Total return does not reflect payment of the expenses that apply to the variable accounts or any annuity charges. - -------------------------------------------------------------------------------- 135 RIVERSOURCE VARIABLE PORTFOLIO FUNDS-- ANNUAL REPORT Investments in Securities RiverSource VP - Balanced Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (63.2%) Issuer Shares Value(a) Aerospace & Defense (2.8%) Boeing 98,124 $6,576,270 Empresa Brasileira de Aeronautica ADR 218,511(c) 7,835,804 General Dynamics 40,709 4,664,844 Goodrich 75,883 3,476,959 Honeywell Intl 301,913 11,557,230 Lockheed Martin 169,433 10,545,510 Northrop Grumman 258,556 14,502,407 United Technologies 205,255 10,262,750 Total 69,421,774 Auto Components (0.1%) Lear 36,332 1,369,716 Automobiles (0.1%) General Motors 57,260(o) 1,957,719 Beverages (0.8%) Coca-Cola 57,695 2,538,580 Coca-Cola Enterprises 135,284 3,023,597 PepsiCo 273,201 14,985,075 Total 20,547,252 Biotechnology (0.1%) Biogen Idec 45,902(b) 1,934,769 Building Products (0.3%) American Standard Companies 88,200 4,021,920 Masco 143,407 4,399,727 Total 8,421,647 Capital Markets (3.0%) Bank of New York 343,625 10,504,616 E*TRADE Financial 109,352(b) 1,749,632 Franklin Resources 75,747 6,093,089 Investors Financial Services 184,918 6,494,320 Legg Mason 36,014 3,764,543 Lehman Brothers Holdings 90,350 9,546,381 Merrill Lynch & Co 173,892 9,939,667 Morgan Stanley 371,627 18,904,665 State Street 111,490 5,388,312 Total 72,385,225 Chemicals (1.2%) Dow Chemical 494,072 21,343,911 Eastman Chemical 58,877 2,824,330 Lyondell Chemical 148,999 3,844,174 RPM Intl 87,432 1,656,836 Total 29,669,251 Commercial Banks (4.9%) Bank of America 1,192,451 51,311,166 Commerce Bancorp 111,322(o) 3,753,778 PNC Financial Services Group 144,244 8,110,840 Regions Financial 74,465 2,436,495 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) US Bancorp 513,174 $14,994,944 Wachovia 337,537 16,748,586 Wells Fargo & Co 380,351 22,676,527 Total 120,032,336 Commercial Services & Supplies (0.4%) Avery Dennison 64,885 3,467,454 Cendant 249,598 5,076,824 Total 8,544,278 Communications Equipment (0.8%) Cisco Systems 388,576(b) 6,846,709 Corning 81,610(b) 1,628,936 Motorola 209,939 4,593,465 Nokia ADR 463,885(c) 7,315,466 Total 20,384,576 Computers & Peripherals (1.9%) Dell 279,700(b) 9,957,320 EMC 437,615(b) 5,627,729 Hewlett-Packard 558,544 15,505,181 Intl Business Machines 187,335 15,102,948 Total 46,193,178 Consumer Finance (0.9%) Capital One Financial 143,041 11,763,692 First Marblehead 50,837(b,o) 1,470,714 MBNA 370,621 9,339,649 Total 22,574,055 Containers & Packaging (0.3%) Temple-Inland 183,872 7,077,233 Diversified Financial Services (3.3%) Citigroup 1,184,765 51,857,164 Contax Participacoes ADR 26,800(b,c) 17,447 JPMorgan Chase & Co 852,211 28,881,431 Total 80,756,042 Diversified Telecommunication Services (3.9%) ALLTEL 40,993 2,541,156 BellSouth 602,336 15,835,413 Chunghwa Telecom ADR 306,262(c) 5,895,544 Citizens Communications 125,241 1,708,287 MCI 441,573 11,321,932 SBC Communications 891,391 21,464,694 Sprint Nextel 761,978 19,758,090 Tele Norte Leste Participacoes ADR 37,100(c) 557,984 Telewest Global 111,724(b,c) 2,480,273 Verizon Communications 416,059 13,609,290 Total 95,172,663 Electric Utilities (2.0%) Entergy 136,829 10,249,860 Exelon 266,322 14,352,092 FPL Group 120,810 5,205,703 Common Stocks (continued) Issuer Shares Value(a) Electric Utilities (cont.) PPL 173,954 $5,559,570 Southern 272,295 9,366,948 Xcel Energy 158,324 3,046,154 Total 47,780,327 Electronic Equipment & Instruments (0.1%) Flextronics Intl 277,799(b,c) 3,628,055 Energy Equipment & Services (1.2%) Cooper Cameron 59,549(b) 4,296,460 Halliburton 133,571 8,277,395 Schlumberger 34,583 2,982,092 Transocean 101,757(b) 6,007,733 Weatherford Intl 99,232(b) 6,718,999 Total 28,282,679 Food & Staples Retailing (0.6%) CVS 132,731 3,898,309 Wal-Mart Stores 229,040 10,297,639 Total 14,195,948 Food Products (0.6%) General Mills 161,819 7,463,093 Kellogg 152,613 6,917,947 Total 14,381,040 Gas Utilities (0.2%) ONEOK 156,507 5,321,238 Health Care Equipment & Supplies (0.7%) Baxter Intl 207,049 8,350,286 Boston Scientific 57,184(b) 1,537,106 Guidant 59,383 4,194,815 Hospira 89,099(b) 3,549,704 Total 17,631,911 Health Care Providers & Services (0.8%) Cardinal Health 73,673 4,391,648 CIGNA 54,005 6,227,856 HCA 137,905 6,798,716 Medco Health Solutions 51,154(b) 2,520,358 Total 19,938,578 Hotels, Restaurants & Leisure (0.3%) McDonald's 189,175(b) 6,138,729 Household Durables (0.1%) Leggett & Platt 68,331 1,654,294 Tempur-Pedic Intl 45,158(b) 725,689 Total 2,379,983 Household Products (1.3%) Colgate-Palmolive 148,129 7,776,773 Procter & Gamble 237,015 13,149,592 Spectrum Brands 372,393(b) 10,482,863 Total 31,409,228 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 136 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Common Stocks (continued) Issuer Shares Value(a) Industrial Conglomerates (1.3%) General Electric 384,450 $12,921,365 Tyco Intl 652,022(c) 18,145,772 Total 31,067,137 Insurance (3.5%) ACE 400,141(c) 17,770,262 AFLAC 40,479 1,749,502 Allstate 65,413 3,676,865 American Intl Group 565,400 33,471,679 Assurant 67,642 2,525,076 Chubb 138,877 12,076,744 Endurance Specialty Holdings 94,684(c) 3,474,903 First American 86,796 3,611,582 Hartford Financial Services Group 97,882 7,150,280 Total 85,506,893 Internet Software & Services (0.1%) Google Cl A 4,327(b) 1,237,522 IT Services (0.5%) Accenture Cl A 103,481(b,c) 2,524,936 Affiliated Computer Services Cl A 172,531(b) 8,962,986 Total 11,487,922 Leisure Equipment & Products (0.1%) Mattel 165,216 2,978,844 Machinery (0.6%) Caterpillar 101,610 5,638,340 Illinois Tool Works 33,772 2,846,304 Ingersoll-Rand Cl A 38,202(c) 3,041,643 ITT Inds 28,160 3,072,819 Total 14,599,106 Media (4.3%) Comcast Cl A 241,454(b) 7,424,711 Comcast Special Cl A 336,241(b) 10,147,753 EchoStar Communications Cl A 103,514 3,098,174 Liberty Global Cl A 113,964(b) 5,783,673 Liberty Media Cl A 1,544,542(b) 12,835,144 News Corp Cl A 143,150 2,320,462 NTL 231,856(b) 14,810,961 Time Warner 575,387 10,310,935 Tribune 186,779 7,017,287 Viacom Cl B 485,909 16,516,047 Vivendi Universal ADR 159,143(c) 5,020,962 Walt Disney 372,512 9,383,577 Total 104,669,686 Metals & Mining (0.3%) Alcan 101,512(c) 3,354,972 Alcoa 130,755 3,502,926 Total 6,857,898 Multi-Utilities & Unregulated Power (0.6%) Dominion Resources 199,874 15,286,364 Common Stocks (continued) Issuer Shares Value(a) Multiline Retail (0.6%) Federated Dept Stores 51,646 $3,562,541 JC Penney 79,732 3,877,367 Target 147,465 7,926,244 Total 15,366,152 Office Electronics (0.1%) Xerox 116,381(b) 1,560,669 Oil & Gas (7.9%) Anadarko Petroleum 233,547 21,222,416 BP ADR 226,360(c) 15,478,497 Chevron 492,395 30,233,053 ConocoPhillips 603,596 39,801,120 Devon Energy 122,189 7,425,426 Exxon Mobil 1,118,320 66,987,367 Newfield Exploration 166,397(b) 7,857,266 Royal Dutch Shell Cl A ADR 69,710(c) 4,528,362 Total 193,533,507 Paper & Forest Products (0.7%) Bowater 162,164 5,031,949 Intl Paper 240,538 7,420,597 Weyerhaeuser 78,079 5,076,697 Total 17,529,243 Personal Products (0.8%) Avon Products 304,519 9,994,313 Gillette 155,665 8,385,674 Total 18,379,987 Pharmaceuticals (2.3%) Bristol-Myers Squibb 185,597 4,541,559 GlaxoSmithKline ADR 46,995(c) 2,289,596 Johnson & Johnson 77,820 4,933,010 Merck & Co 193,246 5,455,335 Novartis ADR 116,774(c) 5,692,733 Pfizer 877,334 22,345,696 Schering-Plough 296,728 6,352,946 Wyeth 92,454 4,233,469 Total 55,844,344 Real Estate Investment Trust (0.7%) Apartment Investment & Management Cl A 102,005 4,070,000 Equity Office Properties Trust 319,995(o) 10,655,833 HomeBanc 179,813 1,433,110 Total 16,158,943 Semiconductors & Semiconductor Equipment (1.3%) Broadcom Cl A 68,947(b) 2,999,195 Credence Systems 148,143(b) 1,314,028 Cypress Semiconductor 507,833(b) 7,937,430 Freescale Semiconductor Cl A 113,983(b) 2,721,914 Freescale Semiconductor Cl B 37,409(b) 900,809 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (cont.) Intel 271,038 $6,971,097 MEMC Electronic Materials 332,649(b) 5,608,462 Texas Instruments 96,183 3,143,260 Total 31,596,195 Software (0.8%) Cadence Design Systems 379,465(b) 6,075,235 Microsoft 351,985 9,644,388 Siebel Systems 184,310 1,520,558 Symantec 67,586(b) 1,417,954 TIBCO Software 109,415(b) 835,931 Total 19,494,066 Specialty Retail (0.4%) Gap 118,349 2,249,814 Home Depot 203,714 8,213,749 Total 10,463,563 Thrifts & Mortgage Finance (2.0%) Countrywide Financial 507,733 17,156,298 Fannie Mae 344,500 17,583,280 Freddie Mac 192,062 11,596,704 Washington Mutual 75,557 3,141,660 Total 49,477,942 Tobacco (1.4%) Altria Group 479,697 33,914,578 Wireless Telecommunication Services (0.2%) Vodafone Group ADR 218,522(c) 5,954,725 Total Common Stocks (Cost: $1,324,957,472) $1,540,494,716 Preferred Stocks & Other (--%) Issuer Shares Value(a) Mexico Value Recovery Series D Rights 2,000,000(b,c) $55,000 Mexico Value Recovery Series E Rights 2,000,000(b,c) 51,000 Paxson Communications 13.25% Pay-in-kind --(e) 1,160 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 2(b,e,l) 16 Xerox 6.25% Cv 5,390 630,630 Total Preferred Stocks & Other (Cost: $540,971) $737,806 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 137 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (36.4%) Issuer Coupon Principal Value(a) rate amount Sovereign (0.7%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 6,661,000(c) $8,622,596 United Kingdom Treasury (British Pound) 12-07-06 7.50 3,124,000(c) 5,861,554 United Mexican States 09-27-34 6.75 1,684,000(c) 1,825,456 Total 16,309,606 U.S. Government Obligations & Agencies (8.8%) Federal Farm Credit Bank 10-10-08 4.25 3,480,000 3,499,902 Federal Home Loan Bank 05-22-06 2.88 7,120,000 7,067,241 08-11-06 3.25 19,400,000 19,259,156 04-18-08 4.13 1,240,000 1,242,634 Federal Home Loan Mtge Corp 09-15-06 3.63 7,265,000 7,239,580 06-15-08 3.88 18,465,000 18,371,198 10-15-08 5.13 5,800,000 5,976,163 03-18-09 3.76 2,790,000 2,756,417 07-15-09 4.25 800,000 803,487 07-12-10 4.13 22,646,000 22,605,215 Federal Natl Mtge Assn 05-15-08 6.00 13,985,000 14,672,545 U.S. Treasury 02-15-07 2.25 5,000,000 4,889,845 08-15-10 4.13 65,000 65,757 05-15-15 4.13 19,480,000 19,605,549 08-15-15 4.25 13,775,000 14,035,430 08-15-23 6.25 32,588,000(n) 40,381,127 02-15-26 6.00 16,650,000 20,418,361 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 8,912,750(s) 8,902,131 Total 211,791,738 Asset-Backed (1.6%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 5,183,061(d,m) 5,177,698 Aesop Funding II LLC Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 800,000(d) 783,729 AmeriCredit Automobile Receivables Trust Series 2002-C Cl A4 (FSA) 02-12-09 3.55 1,500,000(g) 1,493,048 Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 1,500,000(g) 1,483,359 Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 3,000,000(g) 2,986,407 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 2,200,000(d,g) 2,185,305 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 1,000,000 974,882 Series 2005-1 Cl A4 07-15-09 4.05 2,400,000 2,403,648 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08% $1,750,000 $1,738,275 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 850,000 852,350 Citibank Credit Card Issuance Trust Series 2003-A3 Cl A3 03-10-10 3.10 2,450,000 2,385,923 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 1,200,000 1,187,664 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 1,450,000(g) 1,434,877 Metris Master Trust Series 2001-2 Cl C 11-20-09 5.51 675,000(d,m) 675,000 Series 2004-2 Cl D 10-20-10 6.86 450,000(d,m) 456,750 Series 2004-2 Cl M 10-20-10 4.00 800,000(m) 800,760 Series 2005-1A Cl D 03-21-11 5.51 400,000(d,m) 399,998 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 1,300,000 1,280,804 Nissan Auto Lease Trust Series 2004-A Cl A3 08-15-07 2.90 1,000,000 989,640 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 1,900,000 1,880,373 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 925,000 920,807 Residential Asset Securities Series 2002-KS1 Cl AI4 (AMBAC) 11-25-29 5.86 314,367(g) 313,682 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 2,700,000(g) 2,686,392 WFS Financial Owner Trust Series 2004-3 Cl A3 03-17-09 3.30 1,350,000 1,337,089 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 2,750,000 2,722,115 Total 39,550,575 Commercial Mortgage-Backed(f) (4.1%) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 1,250,000 1,284,661 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 3.74 2,000,000(d,m) 2,000,355 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89% $1,308,547 $1,322,439 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 3,180,769 3,114,578 Series 2004-T16 Cl A3 02-13-46 4.03 960,000 946,585 Series 2005-PWR8 Cl A1 06-11-41 4.21 2,448,130 2,441,862 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 3,322,914(d) 3,330,070 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 1,700,000 1,793,535 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 4,202,692(d) 4,187,795 Commercial Mtge Pass-Through Ctfs Series 2004-CNL Cl A1 09-15-14 3.79 1,660,000(d,m) 1,652,563 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 1,890,234 1,892,931 Series 2004-C1 Cl A2 01-15-37 3.52 1,550,000 1,515,748 Federal Natl Mtge Assn 08-25-12 4.72 320,000 323,277 Federal Natl Mtge Assn #385717 11-01-12 4.84 1,157,780 1,176,848 Federal Natl Mtge Assn #386599 11-01-10 4.47 580,668 578,288 Federal Natl Mtge Assn #555316 02-01-13 4.87 1,730,709 1,768,955 GE Capital Commercial Mtge Series 2004-C2 Cl A2 03-10-40 4.12 2,050,000 2,021,710 Series 2005-C3 Cl A1 07-10-45 4.59 1,630,000 1,642,192 Series 2005-C3 Cl A2 07-10-45 4.85 1,220,000 1,240,327 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 2,650,000(d) 2,676,155 General Electric Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 1,394,578 1,432,507 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 1,700,000 1,696,444 Series 2005-C1 Cl A1 05-10-43 4.21 1,276,158 1,272,195 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 138 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Greenwich Capital Commercial Funding Series 2004-GG1 Cl A5 06-10-36 4.88% $775,000 $789,092 Series 2005-GG3 Cl A1 08-10-42 3.92 1,144,279 1,136,155 Series 2005-GG3 Cl A3 08-10-42 4.57 2,500,000 2,501,458 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 1,500,000 1,529,135 Series 2005-GG4 Cl A1 07-10-39 4.37 2,130,849 2,132,127 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 1,144,257 1,144,696 Series 2003-CB6 Cl A2 07-12-37 5.26 1,400,000 1,458,934 Series 2003-LN1 Cl A1 10-15-37 4.13 1,819,489 1,792,823 Series 2003-ML1A Cl A1 03-12-39 3.97 1,101,528 1,083,530 Series 2004-CBX Cl A3 01-12-37 4.18 1,000,000 989,008 Series 2004-CBX Cl A5 01-12-37 4.65 1,500,000 1,506,407 Series 2005-CB11 Cl A3 08-12-37 5.20 1,750,000 1,810,813 Series 2005-LDP2 Cl A1 07-15-42 4.33 2,640,862 2,647,913 LB-UBS Commercial Mtge Trust Series 2002-C2 Cl A3 06-15-26 5.39 2,500,000 2,595,390 Series 2002-C4 Cl A5 09-15-31 4.85 1,000,000 1,016,750 Series 2003-C8 Cl A2 11-15-27 4.21 2,415,000 2,399,641 Series 2003-C8 Cl A3 11-15-27 4.83 1,625,000 1,647,523 Series 2004-C2 Cl A3 03-15-29 3.97 1,250,000 1,208,025 Series 2004-C4 Cl A3 06-15-29 5.16 1,150,000(m) 1,188,107 Series 2004-C6 Cl A2 08-15-29 4.19 1,800,000 1,785,924 Series 2004-C6 Cl A4 08-15-29 4.58 1,550,000 1,555,506 Series 2004-C7 Cl A2 10-15-29 3.99 1,600,000 1,571,680 Series 2004-C8 Cl A2 12-15-29 4.20 2,000,000 1,982,240 Series 2005-C3 Cl A1 07-15-30 4.39 1,365,785 1,368,666 Series 2005-C5 Cl A2 09-15-40 4.89 1,625,000 1,649,018 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 1,710,639 1,706,093 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27% $2,895,270 $2,769,259 Series 2004-HQ4 Cl A5 04-14-40 4.59 1,250,000 1,249,288 Series 2004-IQ8 Cl A2 06-15-40 3.96 2,310,860 2,290,314 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 2,100,000 2,267,353 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 1,562,571 1,526,981 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A2 10-15-41 4.38 1,500,000 1,494,739 Series 2005-C16 Cl A3 10-15-41 4.62 2,000,000 2,005,669 Total 97,112,277 Mortgage-Backed (13.4%)(f,q) Adjustable Rate Mtge Trust Series 2004-2 Cl 6A1 02-25-35 5.27 1,853,989(i) 1,874,764 Banc of America Mtge Securities Series 2004-E Cl B1 06-25-34 4.04 1,013,883(i) 1,000,186 Series 2004-F Cl B1 07-25-34 4.14 1,831,046(i) 1,816,746 Bank of America Alternative Loan Trust Series 2003-11 Cl 1A1 01-25-34 6.00 1,949,172 1,976,382 Series 2003-11 Cl 4A1 01-25-19 4.75 1,333,412 1,329,814 Bear Stearns Adjustable Rate Mtge Trust Series 2004-10 Cl 13A1 01-25-35 5.03 2,574,470(i) 2,579,659 Chaseflex Trust Series 2005-2 Cl 2A2 06-25-35 6.50 3,215,359 3,308,807 Countrywide Alternative Loan Trust Series 2003-11T1 Cl A1 07-25-18 4.75 1,481,669 1,473,230 Series 2005-6CB Cl 1A1 04-25-35 7.50 2,125,435 2,227,808 Countrywide Home Loans Series 2004-12 Cl 1M 08-25-34 4.63 973,578(i) 957,304 Series 2005-R2 Cl 2A1 06-25-35 7.00 2,852,108(d) 3,024,126 CS First Boston Mtge Securities Series 2004-AR5 Cl CB1 06-25-34 4.42 1,164,777(i) 1,146,550 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Home Loan Mtge Corp 10-01-34 6.50% $898,716 $928,555 Collateralized Mtge Obligation 01-15-18 6.50 1,373,219 1,462,661 02-15-27 5.00 2,700,000 2,732,637 10-15-27 5.00 7,250,000 7,330,412 06-15-28 5.00 4,500,000 4,555,260 12-15-28 5.50 2,115,000 2,171,923 02-15-33 5.50 2,274,787 2,358,484 Interest Only 02-15-14 7.40 805,214(k) 49,972 07-15-17 0.92 2,817,955(k) 290,254 08-01-20 8.00 3,589,506(k) 619,154 10-15-22 14.56 3,386,869(k) 193,640 Principal Only 08-01-20 4.60 3,589,506(r) 2,949,066 Federal Home Loan Mtge Corp #A28602 11-01-34 6.50 1,336,500 1,380,875 Federal Home Loan Mtge Corp #B10258 10-01-18 5.00 3,774,142 3,806,099 Federal Home Loan Mtge Corp #B11835 01-01-19 5.50 699,007 714,570 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 3,125,001 3,163,682 Federal Home Loan Mtge Corp #C65869 04-01-32 6.00 1,885,820 1,934,017 Federal Home Loan Mtge Corp #C66871 05-01-32 6.50 4,895,477 5,087,833 Federal Home Loan Mtge Corp #C71514 07-01-32 6.50 200,232 207,312 Federal Home Loan Mtge Corp #C77689 03-01-33 6.50 613,463 639,546 Federal Home Loan Mtge Corp #C90598 10-01-22 6.50 674,364 702,082 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 3,424,655 3,527,718 Federal Home Loan Mtge Corp #D32310 11-01-22 8.00 23,505 25,150 Federal Home Loan Mtge Corp #D55755 08-01-24 8.00 82,599 88,625 Federal Home Loan Mtge Corp #D96300 10-01-23 5.50 422,910 430,481 Federal Home Loan Mtge Corp #D96348 10-01-23 5.50 6,926,873 7,050,872 Federal Home Loan Mtge Corp #E01127 02-01-17 6.50 462,357 478,604 Federal Home Loan Mtge Corp #E01419 05-01-18 5.50 1,968,038 2,011,854 Federal Home Loan Mtge Corp #E81009 07-01-15 7.50 153,320 162,135 Federal Home Loan Mtge Corp #E89496 04-01-17 6.00 4,061,758 4,190,974 Federal Home Loan Mtge Corp #E96516 05-01-13 4.50 1,480,055 1,478,049 Federal Home Loan Mtge Corp #E97591 06-01-18 5.50 471,716 483,093 Federal Home Loan Mtge Corp #E97855 08-01-18 5.00 2,289,025 2,314,305 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 139 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Home Loan Mtge Corp #E98725 08-01-18 5.00% $4,673,221 $4,715,187 Federal Home Loan Mtge Corp #E99592 10-01-18 5.00 234,472 236,592 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 2,190,374 2,210,353 Federal Home Loan Mtge Corp #G01410 04-01-32 7.00 727,014 760,709 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 2,821,597 2,917,242 Federal Home Loan Mtge Corp #G30216 04-01-22 6.50 5,874,977 6,118,665 Federal Natl Mtge Assn 09-01-20 5.50 3,650,000(j) 3,727,563 09-01-20 6.00 4,000,000(j) 4,127,500 09-01-35 6.50 1,000,000(j) 1,033,125 10-01-35 6.00 4,100,000(j) 4,189,688 Collateralized Mtge Obligation 12-25-26 8.00 1,100,840 1,169,593 Interest Only 12-25-12 13.29 672,830(k) 28,001 12-25-22 8.27 1,071,392(k) 138,256 12-25-31 1.19 2,294,144(k) 375,458 Federal Natl Mtge Assn #190899 04-01-23 8.50 290,331 313,122 Federal Natl Mtge Assn #190944 05-01-24 6.00 1,095,200 1,125,645 Federal Natl Mtge Assn #190988 06-01-24 9.00 178,308 192,734 Federal Natl Mtge Assn #250322 08-01-25 7.50 25,121 26,706 Federal Natl Mtge Assn #250384 11-01-25 7.50 280,796 298,511 Federal Natl Mtge Assn #250495 03-01-26 7.00 407,720 429,149 Federal Natl Mtge Assn #252381 04-01-14 5.50 5,779,529 5,907,814 Federal Natl Mtge Assn #254259 04-01-17 5.50 864,344 883,577 Federal Natl Mtge Assn #254494 08-01-22 7.00 359,876 378,538 Federal Natl Mtge Assn #254675 01-01-23 6.50 426,117 443,753 Federal Natl Mtge Assn #254708 02-01-23 7.00 597,202 628,171 Federal Natl Mtge Assn #254916 09-01-23 5.50 3,143,281 3,198,953 Federal Natl Mtge Assn #304279 02-01-25 8.50 113,416 123,726 Federal Natl Mtge Assn #309341 05-01-25 8.50 164,970 179,967 Federal Natl Mtge Assn #313049 08-01-11 8.50 436,237 461,340 Federal Natl Mtge Assn #323606 03-01-29 6.50 79,947 82,988 Federal Natl Mtge Assn #440730 12-01-28 6.00 289,399 299,129 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Natl Mtge Assn #505122 07-01-29 7.00% $1,105,594 $1,160,399 Federal Natl Mtge Assn #50553 04-01-22 8.00 131,369 141,005 Federal Natl Mtge Assn #510587 08-01-29 7.00 385,456 404,563 Federal Natl Mtge Assn #540041 02-01-29 7.00 761,587 801,614 Federal Natl Mtge Assn #545684 05-01-32 7.50 241,804 256,410 Federal Natl Mtge Assn #545885 08-01-32 6.50 415,845 431,439 Federal Natl Mtge Assn #555375 04-01-33 6.00 5,713,109 5,890,824 Federal Natl Mtge Assn #555376 04-01-18 4.50 1,236,615 1,228,083 Federal Natl Mtge Assn #555458 05-01-33 5.50 2,062,381 2,087,521 Federal Natl Mtge Assn #555734 07-01-23 5.00 2,000,034 2,003,428 Federal Natl Mtge Assn #555740 08-01-18 4.50 3,220,452 3,197,179 Federal Natl Mtge Assn #615135 11-01-16 6.00 220,780 228,028 Federal Natl Mtge Assn #616572 03-01-17 6.50 926,450 960,471 Federal Natl Mtge Assn #643381 06-01-17 6.00 243,474 251,486 Federal Natl Mtge Assn #645277 05-01-32 7.00 145,905 153,035 Federal Natl Mtge Assn #646446 06-01-17 6.50 231,691 240,183 Federal Natl Mtge Assn #650105 08-01-17 6.50 1,091,345 1,131,347 Federal Natl Mtge Assn #662197 09-01-32 6.50 514,184 532,511 Federal Natl Mtge Assn #667604 10-01-32 5.50 503,895 509,663 Federal Natl Mtge Assn #670387 08-01-32 7.00 378,228 396,839 Federal Natl Mtge Assn #670461 11-01-32 7.50 552,675 585,974 Federal Natl Mtge Assn #670711 10-01-32 7.00 670,188 702,936 Federal Natl Mtge Assn #673179 02-01-18 6.00 546,647 564,635 Federal Natl Mtge Assn #676511 12-01-32 7.00 385,733 404,581 Federal Natl Mtge Assn #678397 12-01-32 7.00 1,252,586 1,313,791 Federal Natl Mtge Assn #684601 03-01-33 6.00 4,095,856 4,234,882 Federal Natl Mtge Assn #687736 02-01-33 5.50 1,528,087 1,545,216 Federal Natl Mtge Assn #687887 03-01-33 5.50 2,114,205 2,146,203 Federal Natl Mtge Assn #688002 03-01-33 5.50 2,436,023 2,473,031 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Natl Mtge Assn #688034 03-01-33 5.50% $2,120,197 $2,150,407 Federal Natl Mtge Assn #689093 07-01-28 5.50 1,132,483 1,146,212 Federal Natl Mtge Assn #694546 03-01-33 5.50 994,756 1,005,907 Federal Natl Mtge Assn #694795 04-01-33 5.50 4,343,379 4,409,314 Federal Natl Mtge Assn #701937 04-01-33 6.00 2,215,916 2,270,281 Federal Natl Mtge Assn #703726 02-01-33 5.00 3,562,894 3,539,877 Federal Natl Mtge Assn #703818 05-01-33 6.00 2,455,575 2,519,875 Federal Natl Mtge Assn #709901 06-01-18 5.00 2,155,886 2,174,536 Federal Natl Mtge Assn #710823 05-01-33 5.50 2,470,805 2,506,031 Federal Natl Mtge Assn #720006 07-01-33 5.50 2,584,846 2,613,822 Federal Natl Mtge Assn #720070 07-01-23 5.50 2,907,228 2,958,719 Federal Natl Mtge Assn #720378 06-01-18 4.50 2,953,266 2,932,890 Federal Natl Mtge Assn #725232 03-01-34 5.00 7,754,480 7,723,694 Federal Natl Mtge Assn #725284 11-01-18 7.00 339,176 355,218 Federal Natl Mtge Assn #725431 08-01-15 5.50 186,023 190,115 Federal Natl Mtge Assn #725684 05-01-18 6.00 3,987,177 4,118,317 Federal Natl Mtge Assn #725737 08-01-34 4.53 6,088,215(i) 6,091,989 Federal Natl Mtge Assn #726940 08-01-23 5.50 395,465 400,926 Federal Natl Mtge Assn #730231 08-01-23 5.50 2,766,909 2,815,914 Federal Natl Mtge Assn #737330 09-01-18 5.50 2,101,606 2,149,589 Federal Natl Mtge Assn #737374 09-01-18 5.50 2,544,358 2,605,632 Federal Natl Mtge Assn #747642 11-01-28 5.50 440,366 445,704 Federal Natl Mtge Assn #747784 10-01-18 4.50 919,202 912,861 Federal Natl Mtge Assn #753074 12-01-28 5.50 2,252,878 2,280,190 Federal Natl Mtge Assn #753206 01-01-34 6.00 1,771,118 1,814,570 Federal Natl Mtge Assn #755056 12-01-23 5.50 2,319,773 2,360,859 Federal Natl Mtge Assn #755598 11-01-28 5.00 722,413 717,746 Federal Natl Mtge Assn #758947 12-01-18 6.00 850,491 878,031 Federal Natl Mtge Assn #761031 01-01-34 5.00 592,241 588,529 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 140 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Federal Natl Mtge Assn #765760 02-01-19 5.00% $4,889,562 $4,928,098 Federal Natl Mtge Assn #766641 03-01-34 5.00 2,667,257(j) 2,652,764 Federal Natl Mtge Assn #768117 08-01-34 5.44 1,047,087(i) 1,064,695 Federal Natl Mtge Assn #775582 05-01-34 6.50 4,374,590 4,521,144 Federal Natl Mtge Assn #790759 09-01-34 4.84 2,859,523(i) 2,870,166 Federal Natl Mtge Assn #811925 04-01-35 4.92 2,155,856(i) 2,170,467 Federal Natl Mtge Assn #815264 05-01-35 5.25 4,062,061(i) 4,109,877 First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.41 1,787,145(m) 1,822,941 Series 2005-AA2 Cl 2A1 04-25-35 5.43 2,124,329(m) 2,158,297 Series 2005-AA3 Cl 3A1 05-25-35 5.41 2,211,357(m) 2,235,350 Govt Natl Mtge Assn 09-01-35 5.00 6,800,000(j) 6,821,250 Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 230,352(k) 24,699 Govt Natl Mtge Assn #604708 10-15-33 5.50 2,244,367 2,289,957 Govt Natl Mtge Assn #780394 12-15-08 7.00 1,043,570 1,074,520 Harborview Mtge Loan Trust Series 2004-3 Cl B1 05-19-34 4.39 1,434,753(i) 1,416,372 IndyMac Index Mtge Loan Trust Series 2005-AR3 Cl 3A1 04-25-35 5.34 1,315,772(i) 1,329,746 Collateralized Mtge Obligation Interest Only Series 2005-AR8 Cl AX1 04-25-35 4.50 66,926,694(i,k) 826,126 Master Adjustable Rate Mtge Trust Series 2004-5 Cl B1 07-25-34 4.40 1,456,588(i) 1,437,506 Master Alternative Loans Trust Series 2004-2 Cl 4A1 02-25-19 5.00 2,313,426 2,326,439 Series 2004-4 Cl 2A1 05-25-34 6.00 2,618,537 2,673,710 Series 2004-7 Cl 8A1 08-25-19 5.00 4,777,442 4,780,452 Series 2004-8 Cl 7A1 09-25-19 5.00 2,299,209 2,301,141 Structured Adjustable Rate Mtge Loan Trust Series 2004-3AC Cl B1 03-25-34 4.93 1,837,589(i) 1,831,856 Series 2004-5 Cl B1 05-25-34 4.61 1,320,626(i) 1,301,266 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,g) (cont.) Structured Asset Securities Series 2003-33H Cl 1A1 10-25-33 5.50% $4,786,529 $4,813,982 Washington Mutual Series 2003-AR10 Cl A7 10-25-33 4.07 2,400,000(i) 2,405,853 Series 2004-CB2 Cl 6A 07-25-19 4.50 228,358 222,885 Series 2004-CB4 Cl 22A 12-25-19 6.00 2,341,769 2,415,609 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 4,200,000(j) 4,221,656 Series 2005-5 Cl 2A1 05-25-35 5.50 3,883,237 3,937,747 Series 2005-AR1 Cl 1A1 02-25-35 4.56 9,875,595(i) 9,832,736 Series 2005-AR4 Cl B1 04-25-35 4.58 623,581(i) 606,477 Total 325,037,841 Aerospace & Defense (--%) L-3 Communications 06-15-12 7.63 495,000 524,700 07-15-13 6.13 125,000 126,250 Moog Sr Sub Nts 01-15-15 6.25 50,000 50,000 Total 700,950 Automotive (0.1%) DaimlerChrysler NA Holding 11-15-13 6.50 735,000 790,529 Ford Motor 02-01-29 6.38 775,000 566,512 Total 1,357,041 Banking (1.9%) Bank of America Sr Unsecured 08-01-10 4.50 7,685,000 7,711,137 Bank United 03-15-09 8.00 3,500,000 3,888,063 Banknorth Group Sr Nts 05-01-08 3.75 3,385,000 3,348,137 Citigroup 08-03-10 4.63 11,000,000 11,092,213 Sr Nts 05-29-15 4.70 1,085,000 1,083,742 HSBC Bank USA Sub Nts 08-15-35 5.63 1,750,000 1,805,428 KFW Intl Finance 10-17-05 2.50 6,250,000(c) 6,240,099 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Banking (cont.) M&I Marshall & Ilsley Bank Sub Nts 06-16-15 4.85% $1,025,000 $1,032,148 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 8,420,000 9,248,730 Total 45,449,697 Building Materials (--%) Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 205,000 215,250 Chemicals (--%) Airgas 10-01-11 9.13 225,000 241,875 Compass Minerals Group 08-15-11 10.00 305,000 333,975 Georgia Gulf Sr Nts 12-15-13 7.13 428,000 444,050 MacDermid 07-15-11 9.13 175,000 188,125 Total 1,208,025 Diversified Manufacturing (0.2%) Tyco Intl Group 02-15-11 6.75 5,385,000(c) 5,930,113 Electric (1.1%) CMS Energy Sr Nts 01-15-09 7.50 450,000 474,750 Consumers Energy 1st Mtge 09-15-35 5.80 1,875,000 1,954,635 Dayton Power & Light 1st Mtge 10-01-13 5.13 1,175,000 1,210,004 Dominion Resources 06-15-35 5.95 1,980,000 2,068,146 DPL Sr Nts 09-01-11 6.88 975,000 1,067,625 Exelon 06-15-35 5.63 1,515,000 1,524,920 IPALCO Enterprises Secured 11-14-08 8.38 375,000 402,188 11-14-11 8.63 595,000 669,375 NorthWestern Energy Secured 11-01-14 5.88 215,000(d) 222,015 Ohio Edison 06-15-09 5.65 1,425,000(d) 1,467,180 Sr Nts 05-01-15 5.45 425,000 439,572 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 141 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) Ohio Power Sr Nts Series H 01-15-14 4.85% $2,530,000 $2,549,329 Pacific Gas & Electric 03-01-34 6.05 1,605,000 1,758,743 Pacificorp 1st Mtge 06-15-35 5.25 985,000 990,994 Potomac Edison 1st Mtge 11-15-14 5.35 1,035,000(d) 1,072,353 08-15-15 5.13 890,000(d) 910,014 Southern California Edison 1st Mtge 07-15-35 5.35 2,035,000 2,078,079 Tenaska Alabama Partners LP Secured 06-30-21 7.00 130,000(d) 135,615 Utilicorp Canada Finance 06-15-11 7.75 675,000(c) 705,375 Westar Energy 1st Mtge 07-01-14 6.00 4,033,000 4,390,355 Total 26,091,267 Entertainment (0.1%) Time Warner 05-15-29 6.63 1,715,000 1,865,693 United Artists Theatre 07-01-15 9.30 1,579,696 1,563,899 Total 3,429,592 Food and Beverage (0.1%) Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75 250,000(c) 278,750 Cott Beverages 12-15-11 8.00 310,000 327,050 Kraft Foods 06-01-12 6.25 1,840,000 2,019,297 Total 2,625,097 Gaming (0.2%) Boyd Gaming Sr Sub Nts 12-15-12 7.75 120,000 127,800 04-15-14 6.75 165,000 168,506 Caesars Entertainment Sr Nts 04-15-13 7.00 895,000 1,000,411 MGM MIRAGE 10-01-09 6.00 265,000 265,000 Sr Nts 02-27-14 5.88 115,000 110,975 07-15-15 6.63 770,000(d,j) 777,700 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 165,000 167,063 Sr Sub Nts 04-01-12 8.00 310,000 330,150 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gaming (cont.) Station Casinos Sr Nts 04-01-12 6.00% $345,000 $347,588 Sr Sub Nts 03-01-16 6.88 540,000(d,j) 554,850 Total 3,850,043 Gas Pipelines (0.1%) ANR Pipeline 03-15-10 8.88 440,000 480,021 Colorado Interstate Gas Sr Nts 03-15-15 5.95 160,000(d) 158,800 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 410,000 438,908 Southern Natural Gas 03-15-10 8.88 290,000 316,377 Southern Star Central Secured 08-01-10 8.50 190,000 205,200 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 400,000 430,000 Total 2,029,306 Health Care (0.2%) Cardinal Health 06-15-15 4.00 5,610,000 5,192,341 HCA Sr Nts 03-15-14 5.75 340,000 336,011 Triad Hospitals Sr Nts 05-15-12 7.00 300,000 310,500 Total 5,838,852 Home Construction (0.1%) DR Horton 12-01-07 7.50 225,000 237,301 01-15-09 5.00 410,000 408,548 Sr Nts 02-15-15 5.25 1,595,000 1,532,181 Meritage Homes 03-15-15 6.25 130,000 121,713 Standard-Pacific Sr Nts 08-15-15 7.00 330,000 325,050 Total 2,624,793 Independent Energy (0.1%) Chesapeake Energy 01-15-15 7.75 450,000 483,750 Sr Nts 06-15-14 7.50 39,000 42,120 Sr Unsecured 08-15-17 6.50 660,000(d) 673,200 Encore Acquisition Sr Sub Nts 04-15-14 6.25 180,000 179,100 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Independent Energy (cont.) Newfield Exploration Sr Nts 03-01-11 7.63% $50,000 $54,500 Sr Sub Nts 08-15-12 8.38 880,000 957,000 Plains Exploration & Production Sr Nts 06-15-14 7.13 235,000 250,275 Total 2,639,945 Life Insurance (0.7%) ASIF Global Financing XIX Secured 01-17-13 4.90 2,030,000(d) 2,057,750 ING Security Life Institutional Funding 01-15-10 4.25 4,065,000(d) 4,037,484 Metlife Sr Nts 06-15-35 5.70 3,520,000 3,657,319 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 825,000(d) 831,422 Pricoa Global Funding I 06-25-12 4.63 5,655,000(d) 5,665,478 Prudential Financial 06-13-35 5.40 1,675,000 1,667,473 Total 17,916,926 Lodging (--%) Hilton Hotels 12-01-12 7.63 495,000 567,933 ITT 11-15-15 7.38 225,000 246,375 Total 814,308 Media Cable (0.1%) Comcast 03-15-11 5.50 1,845,000 1,907,637 DIRECTV Holdings LLC/Finance Sr Nts 03-15-13 8.38 180,000 197,550 Videotron Ltee 01-15-14 6.88 145,000(c) 148,988 Total 2,254,175 Media Non Cable (0.2%) Corus Entertainment Sr Sub Nts 03-01-12 8.75 140,000(c) 150,500 Dex Media East LLC/Finance 11-15-09 9.88 75,000 81,844 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 340,000 367,625 Emmis Operating Sr Sub Nts 05-15-12 6.88 110,000 110,000 Gray Television 12-15-11 9.25 325,000 351,813 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 142 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Non Cable (cont.) Lamar Media 01-01-13 7.25% $165,000 $173,663 Sr Sub Nts 08-15-15 6.63 285,000(d) 290,700 News America 12-15-34 6.20 3,280,000 3,398,673 Quebecor Media Sr Nts 07-15-11 11.13 95,000(c) 104,500 Radio One Series B 07-01-11 8.88 350,000 374,062 Sun Media 02-15-13 7.63 240,000(c) 253,500 Susquehanna Media Sr Sub Nts 04-15-13 7.38 300,000 314,625 Total 5,971,505 Metals (--%) Peabody Energy Series B 03-15-13 6.88 550,000 572,688 Oil Field Services (0.1%) Halliburton 10-15-10 5.50 1,255,000 1,312,594 Key Energy Services Series C 03-01-08 8.38 210,000 217,350 Offshore Logistics 06-15-13 6.13 70,000 68,250 Pride Intl Sr Nts 07-15-14 7.38 140,000 151,900 Total 1,750,094 Other Financial Institutions (0.3%) HSBC Finance 06-30-15 5.00 5,535,000 5,563,820 Residential Capital 06-30-10 6.38 2,340,000(d) 2,388,719 Total 7,952,539 Packaging (--%) Owens-Illinois Glass Container 05-15-11 7.75 340,000 360,400 Silgan Holdings Sr Sub Nts 11-15-13 6.75 155,000 158,294 Total 518,694 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Paper (--%) Crown Paper Sr Sub Nts 09-01-05 11.00% $1,000,000(b,h,l) $-- Pharmaceuticals (--%) Merck & Co 03-01-15 4.75 505,000 500,630 Property & Casualty (--%) Willis Group North America 07-15-15 5.63 1,180,000 1,198,148 Railroads (0.1%) Union Pacific 04-15-12 6.50 255,000 281,276 05-01-14 5.38 3,010,000 3,134,021 Total 3,415,297 REIT (0.2%) Archstone-Smith Operating Trust 05-01-15 5.25 2,720,000 2,763,156 ERP Operating LP 04-01-13 5.20 990,000 1,009,813 Simon Property Group LP 06-15-15 5.10 1,715,000(d) 1,708,637 Total 5,481,606 Retailers (0.1%) Flooring America Series B 10-15-07 9.25 1,849,000(b,h,l) -- United Auto Group 03-15-12 9.63 125,000 134,219 Wal-Mart Stores 09-01-35 5.25 1,940,000(j) 1,957,584 Total 2,091,803 Transportation Services (0.1%) ERAC USA Finance 05-01-15 5.60 1,755,000(d) 1,812,575 Wireless (0.1%) Nextel Communications Sr Nts Series E 10-31-13 6.88 690,000 739,040 US Cellular Sr Nts 12-15-33 6.70 2,075,000 2,224,209 Total 2,963,249 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wirelines (1.6%) BellSouth Sr Unsecured 11-15-34 6.00% $985,000 $1,039,908 Qwest 03-15-12 8.88 350,000 382,375 Sprint Capital 01-30-11 7.63 9,430,000 10,777,764 11-15-28 6.88 295,000 338,054 Telecom Italia Capital 09-30-34 6.00 2,225,000(c,d) 2,284,198 TELUS 06-01-11 8.00 7,102,500(c) 8,261,649 Verizon Pennsylvania Series A 11-15-11 5.65 14,270,000 14,921,711 Total 38,005,659 Total Bonds (Cost: $883,303,754) $887,011,904 Short-Term Securities (3.2%)(p) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (1.2%) Federal Natl Mtge Assn Disc Nt 09-08-05 3.25% $30,200,000 $30,178,190 Commercial Paper (2.0%) Fairway Finance 10-03-05 3.61 10,000,000(t) 9,967,000 HSBC Finance 09-01-05 3.56 18,400,000 18,398,180 Ranger Funding 09-26-05 3.56 15,000,000(t) 14,961,542 Windmill Funding 09-01-05 3.42 5,000,000(t) 4,999,525 Total 48,326,247 Total Short-Term Securities (Cost: $78,511,936) $78,504,437 Total Investments in Securities (Cost: $2,287,314,133)(u) $2,506,748,863 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 143 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 6.4% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $53,598,234 or 2.2% of net assets. (e) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) The following abbreviations are used in the portfolio security description(s) to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (h) Negligible market value. (i) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (j) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $28,439,783. (k) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (l) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Aug. 31, 2005, is as follows: Security Acquisition Cost dates Crown Paper 11.00% Sr Sub Nts 2005 03-03-00 $580,109 Flooring America 9.25% Series B 2007 10-09-97 thru 12-17-02 2,058,360 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 06-15-01 1,558 (m) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (n) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Long Bond, Dec. 2005, 20-year $12,200,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 7,100,000 U.S. Treasury Note, Dec. 2005, 5-year 31,400,000 U.S. Treasury Note, Sept. 2005, 10-year 6,100,000 U.S. Treasury Note, Dec. 2005, 10-year 61,600,000 (o) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (p) Cash collateral received from security lending activity is invested in short-term securities and represents 1.3% of net assets. See Note 6 to the financial statements. 1.9% of net assets is the Fund's cash equivalent position. - -------------------------------------------------------------------------------- 144 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Balanced Fund Notes to Investments in Securities (continued) (q) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-20 4.50% $4,000,000 9-19-05 $3,920,625 $3,966,248 09-01-20 5.00 6,405,000 9-19-05 6,399,996 6,449,034 09-01-35 5.00 8,000,000 9-14-05 7,826,250 7,945,000 09-01-35 5.50 17,000,000 9-14-05 16,972,969 17,170,000 Federal Home Loan Mtge Corp 09-01-35 6.50 5,000,000 9-14-05 5,156,250 5,164,060 (r) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (s) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (t) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $29,928,067 or 1.2% of net assets. (u) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $2,300,814,408 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $253,768,394 Unrealized depreciation (47,833,939) ----------- Net unrealized appreciation $205,934,455 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 145 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Cash Management Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Certificates of Deposit (5.2%) Issuer Effective Principal Value(a) yield amount Certificate of Deposit Barclays Bank 06-01-06 3.46% $5,000,000(c) $4,999,627 Citibank 09-16-05 3.41 5,000,000 5,000,000 11-10-05 3.72 3,000,000 3,000,000 Credit Suisse First Boston NY 02-14-06 3.76 10,000,000(c) 10,000,000 DEPFA Bank 10-13-05 3.52 3,000,000 3,000,000 11-09-05 3.72 5,000,000 5,000,000 SunTrust Banks 05-12-06 3.73 5,000,000(c) 4,999,829 Total Certificates of Deposit (Cost: $35,999,456) $35,999,456 Commercial Paper (95.7%) Issuer Effective Principal Value(a) yield amount Asset-Backed (64.1%) Alpine Securitization 10-03-05 3.41% $5,000,000(b) $4,984,400 Amstel Funding 09-07-05 2.85 6,800,000(b) 6,796,237 09-19-05 3.18 10,000,000(b) 9,983,250 Amsterdam Funding 09-14-05 3.26 4,000,000(b) 3,994,930 10-12-05 3.53 8,000,000(b) 7,967,200 Beta Finance 09-29-05 3.31 5,400,000 5,385,636 10-20-05 3.47 5,500,000 5,473,649 10-21-05 3.50 12,300,000 12,239,322 Bryant Park Funding LLC 09-12-05 3.13 4,300,000(b) 4,295,520 09-20-05 3.35 6,300,000(b) 6,288,296 10-04-05 3.51 1,200,000(b) 1,196,040 10-17-05 3.47 5,000,000(b) 4,977,447 10-25-05 3.52 7,700,000(b) 7,658,767 CAFCO LLC 09-02-05 1.70 3,100,000(b) 3,099,707 09-27-05 3.42 3,000,000(b) 2,992,330 10-07-05 3.53 8,100,000(b) 8,070,759 10-25-05 3.55 7,000,000(b) 6,962,200 11-02-05 3.67 2,400,000(b) 2,384,665 CC (USA)/Centari 09-12-05 3.05 5,000,000 4,994,928 09-15-05 3.21 5,600,000 5,592,508 10-03-05 3.36 5,000,000 4,984,667 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Asset-Backed (cont.) CHARTA LLC 09-08-05 3.02% $5,000,000(b) $4,996,646 10-03-05 3.49 5,000,000(b) 4,984,044 10-05-05 3.35 4,200,000(b) 4,186,355 10-12-05 3.58 2,700,000(b) 2,688,776 10-17-05 3.55 4,000,000(b) 3,981,549 11-14-05 3.71 4,100,000(b) 4,068,522 Citibank Credit Card Dakota Notes 10-19-05 3.50 5,200,000(b) 5,175,317 CRC Funding LLC 09-21-05 3.29 3,400,000(b) 3,393,483 09-23-05 3.38 3,000,000(b) 2,993,528 10-14-05 3.55 6,000,000(b) 5,974,057 10-18-05 3.58 2,700,000(b) 2,687,169 11-01-05 3.65 3,500,000(b) 3,478,116 Dorado Finance 09-12-05 3.05 5,000,000 4,994,928 09-19-05 3.15 3,000,000 2,995,020 10-24-05 3.55 2,300,000 2,287,810 11-03-05 3.63 2,000,000 1,987,190 Edison Asset Securitization 12-13-05 3.76 3,000,000(b) 2,967,727 Emerald Certificates MBNA MCCT 09-01-05 3.22 5,300,000(b) 5,300,000 09-27-05 3.31 9,000,000(b) 8,977,705 11-08-05 3.71 5,000,000(b) 4,964,678 11-16-05 3.76 5,000,000(b) 4,960,100 Fairway Finance 01-03-06 3.64 5,000,000(c) 4,999,830 Falcon Asset Securitization 09-13-05 3.16 9,800,000(b) 9,788,828 FCAR Owner Trust 12-02-05 3.76 6,300,000 6,239,472 FCAR Owner Trust I 09-07-05 2.85 11,000,000 10,993,913 10-17-05 3.51 10,000,000 9,954,319 Five Finance 11-28-05 3.76 2,800,000 2,774,196 Galaxy Funding 09-16-05 3.15 3,300,000(b) 3,295,394 10-06-05 3.49 2,200,000(b) 2,192,343 10-27-05 3.56 11,500,000(b) 11,435,600 10-28-05 3.57 4,300,000(b) 4,275,422 Grampian Funding LLC 09-01-05 3.21 5,000,000(b) 5,000,000 10-20-05 3.48 5,000,000(b) 4,975,976 11-04-05 3.60 7,000,000(b) 6,954,827 11-08-05 3.64 4,400,000(b) 4,369,498 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Asset-Backed (cont.) Greyhawk Funding LLC 09-12-05 3.05% $5,800,000(b) $5,794,116 K2 (USA) LLC 09-22-05 3.20 14,500,000 14,471,665 09-26-05 3.29 2,300,000 2,294,553 11-04-05 3.65 5,000,000 4,967,289 01-17-06 3.52 3,500,000(c) 3,499,746 Nieuw Amsterdam 09-09-05 3.10 5,000,000(b) 4,996,122 09-28-05 3.45 2,200,000(b) 2,194,110 10-21-05 3.50 2,300,000(b) 2,288,660 10-24-05 3.52 7,500,000(b) 7,460,581 Old Line Funding 10-05-05 3.52 7,500,000(b) 7,474,429 Scaldis Capital LLC 10-24-05 3.52 7,400,000(b) 7,361,107 10-31-05 3.56 5,700,000(b) 5,665,800 11-08-05 3.66 3,900,000(b) 3,872,817 Sedna Finance 10-27-05 3.61 3,000,000 2,982,967 11-02-05 3.66 3,500,000 3,477,697 11-23-05 3.75 4,800,000 4,758,389 08-15-06 3.74 10,000,000(c) 10,000,000 Sigma Finance 11-03-05 3.61 4,600,000 4,570,698 03-20-06 3.57 15,000,000(c) 14,999,457 Thames Asset Global Securitization No 1 09-20-05 3.37 9,900,000(b) 9,881,504 Variable Funding Capital 09-06-05 2.82 3,500,000(b) 3,498,357 09-21-05 3.28 8,500,000(b) 8,483,756 White Pine Finance LLC 02-10-06 3.53 5,500,000(c) 5,499,512 03-15-06 3.53 5,000,000(c) 4,999,399 Windmill Funding 11-02-05 3.65 3,000,000(b) 2,980,935 Total 444,088,462 Banking (14.6%) DekaBank Deutsche Girozentrale 08-18-06 3.61 4,000,000(c) 4,000,000 DEPFA Bank 06-15-06 3.42 10,000,000(c) 10,000,000 Nordea Bank 09-06-05 2.82 12,900,000 12,893,944 09-26-05 3.28 4,200,000 4,190,083 Northern Rock 10-14-05 3.48 5,000,000(b) 4,978,799 10-26-05 3.54 5,800,000(b) 5,768,277 02-03-06 3.54 5,000,000(c) 5,000,000 07-07-06 3.41 10,700,000(c) 10,700,000 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 146 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Cash Management Fund Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Banking (cont.) Skandinaviska Enskilda Banken 09-18-06 3.58% $10,000,000(c) $10,000,000 12-31-40 3.55 5,000,000(c) 5,000,000 Societe Generale North America 09-06-05 2.73 3,500,000 3,498,410 12-14-05 3.77 7,800,000 7,715,275 Wells Fargo Bank 09-01-06 3.49 5,000,000(c) 5,000,000 Westpac Banking 07-11-06 3.40 10,700,000(c) 10,700,000 Westpac Capital 11-14-05 3.61 2,000,000 1,985,077 Total 101,429,865 Brokerage (7.7%) Bear Stearns Companies 09-08-05 2.99 2,500,000 2,498,342 11-07-05 3.66 10,000,000 9,931,325 09-15-06 3.58 5,000,000(c) 5,000,000 09-28-06 3.68 5,000,000(c) 5,000,000 Goldman Sachs Group 05-24-06 3.61 5,000,000(b,c) 5,000,000 05-25-06 3.54 5,000,000(b,c) 5,000,000 09-15-06 3.56 5,000,000(c) 5,000,000 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Brokerage (cont.) Lehman Brothers Holdings 06-22-06 3.70% $8,000,000(c) $8,000,000 Merrill Lynch & Co 02-03-06 3.60 5,000,000(c) 5,000,000 Morgan Stanley & Co 10-05-05 3.55 3,000,000 2,989,687 Total 53,419,354 Foreign Local Government (0.7%) Westdeutsche Landesbank Girozentrale 09-08-06 3.58 5,000,000(c) 5,000,000 Life Insurance (3.8%) Irish Life & Permanent 10-11-05 3.46 7,000,000(b) 6,972,545 10-13-05 3.46 5,000,000(b) 4,979,408 10-27-05 3.55 5,000,000(b) 4,972,078 11-14-05 3.73 2,600,000(b) 2,579,958 11-15-05 3.68 2,200,000(b) 2,183,042 09-21-06 3.64 5,000,000(c) 4,999,490 Total 26,686,521 Commercial Paper (continued) Issuer Effective Principal Value(a) yield amount Non Captive Consumer (2.5%) SLM 03-15-06 3.57% $7,500,000(c) $7,500,000 08-18-06 3.61 10,000,000(c) 10,000,000 Total 17,500,000 Other Financial Institutions (0.7%) HSBC Finance 09-25-06 3.63 5,000,000(c) 5,000,000 Pharmaceuticals (0.7%) Eli Lilly Services 09-01-06 3.72 5,000,000 5,000,000 Total Commercial Paper (Cost: $658,124,202) $658,124,202 Total Investments in Securities (Cost: $694,123,658)(d) $694,123,658 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $324,103,809 or 47.1% of net assets. (c) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. The maturity date disclosed represents the final maturity. For purposes of Rule 2a-7, maturity is the later of the next put or interest rate reset date. (d) Also represents the cost of securities for federal income tax purposes at Aug. 31, 2005. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 147 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Core Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (93.4%) Issuer Coupon Principal Value(a) rate amount Sovereign (1.7%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 409,000(c) $529,446 United Kingdom Treasury (British Pound) 12-07-06 7.50 180,000(c) 337,734 United Mexican States 09-27-34 6.75 115,000(c) 124,660 Total 991,840 U.S. Government Obligations & Agencies (28.3%) Federal Farm Credit Bank 10-10-08 4.25 225,000 226,287 Federal Home Loan Bank 09-22-05 2.13 275,000 274,761 08-11-06 3.25 850,000 843,829 Federal Home Loan Mtge Corp 09-15-06 3.63 895,000 891,868 06-15-08 3.88 870,000 865,580 10-15-08 5.13 185,000 190,619 03-18-09 3.76 125,000 123,495 07-12-10 4.13 962,000 960,267 Federal Natl Mtge Assn 05-15-07 3.88 1,250,000 1,247,275 05-15-08 6.00 580,000 608,515 02-15-09 3.25 1,215,000 1,182,083 U.S. Treasury 11-30-06 2.88 75,000 74,150 08-15-07 2.75 815,000 798,478 07-15-10 3.88 1,375,000 1,375,054 08-15-10 4.13 670,000 677,799 02-15-15 4.00 630,000 628,154 05-15-15 4.13 125,000 125,806 08-15-15 4.25 485,000 494,169 08-15-23 6.25 1,522,000(h) 1,885,973 02-15-26 6.00 1,958,000 2,401,151 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 534,765(m) 534,128 Total 16,409,441 Asset-Backed (3.2%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 297,301(d,j) 296,993 Aesop Funding II LLC Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 50,000(d,e) 48,983 AmeriCredit Automobile Receivables Trust Series 2002-C Cl A4 (FSA) 02-12-09 3.55 100,000(e) 99,537 Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 50,000(e) 49,445 Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 150,000(e) 149,320 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29% $100,000(d,e) $99,332 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 50,000 48,744 Series 2005-1 Cl A4 07-15-09 4.05 125,000 125,190 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 100,000 99,330 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 50,000 50,138 Franklin Auto Trust Series 2004-1 Cl A3 (MBIA) 03-15-12 4.15 25,000(e) 24,972 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 50,000 49,486 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 50,000(e) 49,479 Metris Master Trust Series 2004-2 Cl M 10-20-10 4.00 50,000(j) 50,048 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 60,000 59,114 Nissan Auto Lease Trust Series 2004-A Cl A3 08-15-07 2.90 50,000 49,482 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 75,000 74,225 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 55,000 54,751 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 150,000(e) 149,244 WFS Financial Owner Trust Series 2004-1 Cl D 08-22-11 3.17 54,603 53,841 Series 2004-3 Cl A3 03-17-09 3.30 50,000 49,522 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 100,000 98,986 Total 1,830,162 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (10.4%) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03% $75,000 $77,080 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 60,163 60,802 Bear Stearns Commercial Mtge Securities Series 2004-PWR5 Cl A3 07-11-42 4.57 100,000 100,224 Series 2004-T16 Cl A3 02-13-46 4.03 195,000 192,275 Series 2005-PWR8 Cl A1 06-11-41 4.21 146,888 146,512 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 166,146(d) 166,503 CDC Commercial Mtge Trust Series 2002-FX1 Cl A1 05-15-19 5.25 156,978 161,341 Series 2002-FX1 Cl A2 11-15-30 5.68 100,000 105,502 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 186,786(d) 186,124 Commercial Mtge Pass-Through Ctfs Series 2004-CNL Cl A1 09-15-14 3.79 50,000(d,j) 49,776 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 246,550 246,903 Series 2004-C1 Cl A2 01-15-37 3.52 50,000 48,895 Federal Natl Mtge Assn 08-25-12 4.72 100,000 101,024 Federal Natl Mtge Assn #385717 11-01-12 4.84 96,536 98,126 Federal Natl Mtge Assn #386599 11-01-10 4.47 24,195 24,095 Federal Natl Mtge Assn #386768 01-01-11 4.23 97,757 96,848 Federal Natl Mtge Assn #555806 10-01-13 5.11 185,613 192,679 Federal Natl Mtge Assn #735029 09-01-13 5.28 148,338 154,483 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 60,634 62,283 Series 2004-C2 Cl A2 03-10-40 4.12 50,000 49,310 Series 2005-C1 Cl A5 06-10-48 4.77 100,000 100,988 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 148 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) GE Capital Commercial Mtge (cont.) Series 2005-C3 Cl A1 07-10-45 4.59% $110,000 $110,823 Series 2005-C3 Cl A2 07-10-45 4.85 80,000 81,333 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 175,000(d) 176,727 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 100,000 99,791 Series 2005-C1 Cl A1 05-10-43 4.21 73,625 73,396 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 125,000 126,299 Series 2004-GG1 Cl A5 06-10-36 4.88 50,000 50,909 Series 2005-GG3 Cl A1 08-10-42 3.92 45,771 45,446 Series 2005-GG3 Cl A3 08-10-42 4.57 150,000 150,088 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 75,000 76,457 Series 2005-GG4 Cl A1 07-10-39 4.37 123,887 123,961 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 66,015 66,040 Series 2003-CB6 Cl A2 07-12-37 5.26 50,000 52,105 Series 2003-LN1 Cl A1 10-15-37 4.13 113,718 112,051 Series 2003-ML1A Cl A1 03-12-39 3.97 45,897 45,147 Series 2004-C2 Cl A2 05-15-41 5.26 100,000(j) 103,020 Series 2004-CBX Cl A3 01-12-37 4.18 50,000 49,450 Series 2004-CBX Cl A5 01-12-37 4.65 50,000 50,214 Series 2005-CB11 Cl A3 08-12-37 5.20 100,000 103,475 Series 2005-LDP2 Cl A1 07-15-42 4.33 244,524 245,177 LB-UBS Commercial Mtge Trust Series 2002-C4 Cl A4 09-15-26 4.56 60,000 60,074 Series 2003-C8 Cl A2 11-15-27 4.21 180,000 178,855 Series 2003-C8 Cl A3 11-15-27 4.83 100,000 101,386 Series 2004-C2 Cl A3 03-15-29 3.97 50,000 48,321 Series 2004-C4 Cl A3 06-15-29 5.16 50,000(j) 51,657 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) JPMorgan Chase Commercial Mtge Securities (cont.) Series 2004-C6 Cl A2 08-15-29 4.19% $100,000 $99,218 Series 2004-C6 Cl A4 08-15-29 4.58 125,000 125,444 Series 2004-C7 Cl A2 10-15-29 3.99 50,000 49,115 Series 2004-C8 Cl A2 12-15-29 4.20 75,000 74,334 Series 2005-C3 Cl A1 07-15-30 4.39 73,167 73,321 Series 2005-C5 Cl A2 09-15-40 4.89 100,000 101,478 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 97,751 97,491 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 136,491 130,551 Series 2004-HQ4 Cl A5 04-14-40 4.59 75,000 74,957 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 125,000 134,962 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 86,810 84,832 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A2 10-15-41 4.38 100,000 99,649 Series 2005-C16 Cl A3 10-15-41 4.62 100,000 100,283 Total 6,049,610 Mortgage-Backed (32.6%)(f,i) Adjustable Rate Mtge Trust Series 2005-3 Cl 7A1 07-25-35 5.10 141,670(g) 142,579 Bank of America Alternative Loan Trust Series 2003-11 Cl 4A1 01-25-19 4.75 80,813 80,595 Bear Stearns Adjustable Rate Mtge Trust Series 2004-10 Cl 13A1 01-25-35 5.03 152,723(g) 153,031 Series 2004-12 Cl 3A1 02-25-35 5.19 101,963(g) 102,441 Countrywide Alternative Loan Trust Series 2003-11T1 Cl A1 07-25-18 4.75 49,389 49,108 Series 2005-6CB Cl 1A1 04-25-35 7.50 116,782 122,407 Countrywide Home Loans Series 2005-R2 Cl 2A1 06-25-35 7.00 175,880(d) 186,488 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,i) (cont.) Federal Home Loan Mtge Corp Collateralized Mtge Obligation 01-15-18 6.50% $70,421 $75,008 10-15-27 5.00 300,000 303,306 06-15-28 5.00 275,000 278,377 12-15-28 5.50 125,000 128,364 Collateralized Mtge Obligation Interest Only 07-15-17 0.92 304,644(k) 31,379 08-01-20 8.00 247,552(k) 42,700 Collateralized Mtge Obligation Principal Only 08-01-20 4.60 250,000(l) 205,395 Federal Home Loan Mtge Corp #B11452 12-01-18 6.00 192,300 198,419 Federal Home Loan Mtge Corp #B11835 01-01-19 5.50 155,335 158,793 Federal Home Loan Mtge Corp #B12280 02-01-19 5.50 190,762 195,009 Federal Home Loan Mtge Corp #C46101 08-01-29 6.50 386,707 401,316 Federal Home Loan Mtge Corp #C90613 01-01-23 5.00 64,546 64,640 Federal Home Loan Mtge Corp #C90683 06-01-23 5.00 127,834 128,018 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 67,150 69,171 Federal Home Loan Mtge Corp #D96348 10-01-23 5.50 192,220 195,661 Federal Home Loan Mtge Corp #G01410 04-01-32 7.00 111,848 117,032 Federal Natl Mtge Assn 09-01-20 5.00 550,000(b) 553,781 09-01-20 5.50 540,000(b) 551,475 09-01-20 6.00 500,000(b) 515,938 09-01-35 5.50 300,000(b) 303,000 10-01-35 6.00 1,550,000(b) 1,583,906 Federal Natl Mtge Assn #252440 05-01-29 7.00 221,249 232,216 Federal Natl Mtge Assn #254560 11-01-32 5.00 27,860 27,756 Federal Natl Mtge Assn #255788 06-01-15 5.50 437,208 447,727 Federal Natl Mtge Assn #323715 05-01-29 6.00 101,214 103,912 Federal Natl Mtge Assn #545869 07-01-32 6.50 61,654 64,098 Federal Natl Mtge Assn #545874 08-01-32 6.50 182,344 189,422 Federal Natl Mtge Assn #555340 04-01-33 5.50 185,968 188,792 Federal Natl Mtge Assn #615135 11-01-16 6.00 239,178 247,030 Federal Natl Mtge Assn #650009 09-01-31 7.50 56,312 59,794 Federal Natl Mtge Assn #667604 10-01-32 5.50 229,043 231,665 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 149 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,i) (cont.) Federal Natl Mtge Assn #677089 01-01-33 5.50% $221,820 $224,358 Federal Natl Mtge Assn #677695 02-01-33 6.50 469,842 488,994 Federal Natl Mtge Assn #683116 02-01-33 6.00 390,907 400,504 Federal Natl Mtge Assn #704610 06-01-33 5.50 223,297 225,800 Federal Natl Mtge Assn #720378 06-01-18 4.50 73,832 73,322 Federal Natl Mtge Assn #724867 06-01-18 5.00 144,526 145,781 Federal Natl Mtge Assn #725232 03-01-34 5.00 484,655 482,731 Federal Natl Mtge Assn #725284 11-01-18 7.00 60,567 63,432 Federal Natl Mtge Assn #725431 08-01-15 5.50 128,291 131,114 Federal Natl Mtge Assn #725719 07-01-33 4.85 88,237(g) 87,741 Federal Natl Mtge Assn #725737 08-01-34 4.53 95,877(g) 95,937 Federal Natl Mtge Assn #735160 12-01-34 4.40 95,811(g) 95,614 Federal Natl Mtge Assn #743455 10-01-18 5.50 254,541 260,236 Federal Natl Mtge Assn #743579 11-01-33 5.50 140,538 142,113 Federal Natl Mtge Assn #747784 10-01-18 4.50 259,775 257,982 Federal Natl Mtge Assn #749745 11-01-18 4.50 339,933 337,587 Federal Natl Mtge Assn #753074 12-01-28 5.50 176,006 178,140 Federal Natl Mtge Assn #759330 01-01-19 6.50 170,852 177,109 Federal Natl Mtge Assn #759342 01-01-34 6.50 139,528 144,983 Federal Natl Mtge Assn #761031 01-01-34 5.00 225,563 224,149 Federal Natl Mtge Assn #763754 02-01-29 5.50 179,973 182,067 Federal Natl Mtge Assn #765760 02-01-19 5.00 174,200 175,573 Federal Natl Mtge Assn #790759 09-01-34 4.84 219,963(g) 220,782 Federal Natl Mtge Assn #791447 10-01-34 6.00 480,789 492,209 Federal Natl Mtge Assn #794958 10-01-19 6.00 266,454 275,173 Federal Natl Mtge Assn #800137 11-01-34 6.50 197,085 203,687 Federal Natl Mtge Assn #811925 04-01-35 4.92 143,724(g) 144,698 Federal Natl Mtge Assn #815264 05-01-35 5.25 386,863(g) 391,417 Federal Natl Mtge Assn #829227 08-01-35 6.00 500,000 511,884 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,i) (cont.) First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.41% $72,945(j) $74,406 Series 2005-AA2 Cl 2A1 04-25-35 5.44 111,807 113,595 Series 2005-AA3 Cl 3A1 05-25-35 5.42 113,987 115,224 Series 2005-AA4 Cl B1 06-25-35 5.39 129,935 132,106 Govt Natl Mtge Assn 09-01-35 5.00 100,000(b) 100,313 IndyMac Index Mtge Loan Trust Series 2005-AR3 Cl 3A1 04-25-35 5.34 66,904(g) 67,614 Master Alternative Loans Trust Series 2004-2 Cl 4A1 02-25-19 5.00 137,360 138,132 Series 2004-4 Cl 2A1 05-25-34 6.00 106,157 108,394 Series 2004-7 Cl 8A1 08-25-19 5.00 57,989 58,026 Series 2004-8 Cl 7A1 09-25-19 5.00 89,290 89,365 Series 2005-3 Cl 1A2 04-25-35 5.50 300,000 303,618 Structured Adjustable Rate Mtge Loan Trust Series 2004-5 Cl B1 05-25-34 4.61 99,670(g) 98,209 Structured Asset Securities Series 2003-33H Cl 1A1 10-25-33 5.50 186,488 187,558 Washington Mutual Series 2003-AR10 Cl A7 10-25-33 4.07 125,000(g) 125,305 Series 2004-CB2 Cl 6A 07-25-19 4.50 258,519 252,322 Series 2005-AR11 Cl A1B1 08-25-45 3.93 300,000(g) 300,000 Series 2005-AR8 Cl 2AB1 07-25-45 3.89 442,828(g) 442,690 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 275,000(b) 276,418 Series 2005-5 Cl 2A1 05-25-35 5.50 194,162 196,887 Series 2005-AR1 Cl 1A1 02-25-35 4.56 160,765(g) 160,068 Total 18,905,116 Automotive (0.2%) DaimlerChrysler NA Holding 11-15-13 6.50 45,000 48,400 Lear Series B 08-01-14 5.75 65,000 57,769 Total 106,169 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Banking (4.1%) Bank of America Sr Unsecured 08-01-10 4.50% $520,000 $521,769 Banknorth Group Sr Nts 05-01-08 3.75 155,000 153,312 Citigroup 08-03-10 4.63 700,000 705,867 Sr Nts 05-29-15 4.70 105,000 104,878 KFW Intl Finance 10-17-05 2.50 225,000(c) 224,644 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 615,000 675,531 Total 2,386,001 Diversified Manufacturing (0.7%) Tyco Intl Group 02-15-11 6.75 345,000(c) 379,924 Electric (2.1%) Consumers Energy 1st Mtge 09-15-35 5.80 125,000 130,309 Dayton Power & Light 1st Mtge 10-01-13 5.13 60,000 61,787 Dominion Resources 06-15-35 5.95 115,000 120,120 Exelon 06-15-35 5.63 90,000 90,589 Ohio Power Sr Nts Series H 01-15-14 4.85 155,000 156,184 Pacific Gas & Electric 03-01-34 6.05 85,000 93,142 Pacificorp 1st Mtge 06-15-35 5.25 55,000 55,335 Potomac Edison 1st Mtge 08-15-15 5.13 120,000(d) 122,699 Southern California Edison 1st Mtge 07-15-35 5.35 120,000 122,540 Westar Energy 1st Mtge 07-01-14 6.00 230,000 250,380 Total 1,203,085 Entertainment (0.2%) Time Warner 05-15-29 6.63 115,000 125,105 Food and Beverage (0.2%) Kraft Foods 06-01-12 6.25 85,000 93,283 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 150 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Health Care (0.6%) Cardinal Health 06-15-15 4.00% $353,000 $326,720 Life Insurance (1.8%) ASIF Global Financing XIX Secured 01-17-13 4.90 135,000(d) 136,845 ING Security Life Institutional Funding 01-15-10 4.25 220,000(d) 218,511 Metlife Sr Nts 06-15-35 5.70 215,000 223,387 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 100,000(d) 100,778 Pricoa Global Funding I 06-25-12 4.63 250,000(d) 250,464 Prudential Financial 06-13-35 5.40 100,000 99,551 Total 1,029,536 Media Cable (0.2%) Comcast 03-15-11 5.50 125,000 129,244 Media Non Cable (0.3%) News America 12-15-34 6.20 190,000 196,874 Oil Field Services (0.1%) Halliburton 10-15-10 5.50 80,000 83,671 Other Financial Institutions (0.9%) HSBC Finance 06-30-15 5.00 360,000 361,875 Residential Capital 06-30-10 6.38 155,000(d) 158,227 Total 520,102 Pharmaceuticals (--%) Merck & Co 03-01-15 4.75 25,000 24,784 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Property & Casualty (0.1%) Willis Group North America 07-15-15 5.63% $70,000 $71,077 Railroads (0.4%) Union Pacific 04-15-12 6.50 20,000 22,061 05-01-14 5.38 180,000 187,416 Total 209,477 REITS (0.6%) Archstone-Smith Operating Trust 05-01-15 5.25 170,000 172,697 ERP Operating LP 04-01-13 5.20 60,000 61,201 Simon Property Group LP 06-15-15 5.10 115,000(d) 114,573 Total 348,471 Retailers (0.2%) Wal-Mart Stores 09-01-35 5.25 130,000(b) 131,178 Transportation Services (0.2%) ERAC USA Finance 05-01-15 5.60 90,000(d) 92,953 Wireless (0.2%) US Cellular Sr Nts 12-15-33 6.70 115,000 123,269 Wirelines (4.1%) BellSouth Sr Unsecured 11-15-34 6.00 65,000 68,623 Sprint Capital 01-30-11 7.63 560,000 640,037 11-15-28 6.88 40,000 45,838 Telecom Italia Capital 09-30-34 6.00 135,000(c,d) 138,592 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wirelines (cont.) TELUS 06-01-11 8.00% $395,000(c) $459,465 Verizon Pennsylvania Series A 11-15-11 5.65 960,000 1,003,843 Total 2,356,398 Total Bonds (Cost: $53,812,827) $54,123,490 Short-Term Securities (14.1%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (9.7%) Federal Home Loan Bank Disc Nt 09-23-05 3.48% $700,000 $698,448 Federal Home Loan Mtge Corp Disc Nts 09-06-05 3.43 2,500,000 2,498,571 09-20-05 3.43 1,000,000 998,100 Federal Natl Mtge Assn Disc Nts 09-08-05 3.25 900,000 899,350 10-05-05 3.49 500,000 498,308 Total 5,592,777 Commercial Paper (4.4%) General Electric Capital 09-01-05 3.56 1,100,000 1,099,891 Rabobank USA Financial 09-09-05 3.50 1,500,000 1,498,688 Total 2,598,579 Total Short-Term Securities (Cost: $8,192,141) $8,191,356 Total Investments in Securities (Cost: $62,004,968)(n) $62,314,846 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $3,907,593. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 3.8% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $2,544,568 or 4.4% of net assets. (e) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation - -------------------------------------------------------------------------------- 151 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Core Bond Fund Notes to Investments in Securities (continued) (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (h) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Long Bond, Dec. 2005, 20-year $1,000,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 800,000 U.S. Treasury Note, Sept. 2005, 10-year 100,000 U.S. Treasury Note, Dec. 2005, 5-year 2,700,000 U.S. Treasury Note, Dec. 2005, 10-year 1,600,000 (i) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-20 4.50% $50,000 9-19-05 $49,008 $49,578 09-01-35 5.00 500,000 9-14-05 489,140 496,563 (j) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (k) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (l) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (m) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (n) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $62,028,410 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 479,699 Unrealized depreciation (193,263) -------- Net unrealized appreciation $ 286,436 --------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 152 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Diversified Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (99.1%) Issuer Coupon Principal Value(a) rate amount Sovereign (1.8%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 13,364,000(c) $17,299,561 United Kingdom Treasury (British Pound) 12-07-06 7.50 6,159,000(c) 11,556,118 United Mexican States 09-27-34 6.75 3,591,000(c) 3,892,644 Total 32,748,323 U.S. Government Obligations & Agencies (26.7%) Federal Farm Credit Bank 10-10-08 4.25 7,115,000 7,155,691 Federal Home Loan Bank 09-22-05 2.13 12,775,000 12,763,891 05-22-06 2.88 19,005,000 18,864,173 08-11-06 3.25 12,875,000 12,781,528 04-18-08 4.13 3,310,000 3,317,030 Federal Home Loan Mtge Corp 09-15-06 3.63 9,085,000 9,053,212 06-15-08 3.88 33,800,000 33,628,296 10-15-08 5.13 23,060,000 23,760,401 03-18-09 3.76 5,110,000 5,048,491 07-12-10 4.13 30,380,000 30,325,286 Federal Natl Mtge Assn 04-13-06 2.15 20,300,000 20,076,984 02-15-09 3.25 45,124,000 43,901,501 U.S. Treasury 11-15-05 5.75 7,461,000 7,493,351 12-31-05 1.88 10,255,000 10,194,516 11-30-06 2.88 6,520,000 6,446,141 08-15-07 3.25 29,000,000 28,683,958 05-15-15 4.13 30,350,000(r) 30,545,606 08-15-15 4.25 23,355,000 23,796,550 08-15-23 6.25 109,797,000(p) 136,053,963 02-15-26 6.00 4,610,000 5,653,372 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 17,784,756(h) 17,763,567 Total 487,307,508 Asset-Backed (4.1%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 10,197,772(d,m) 10,187,220 Aesop Funding II LLC Series 2002-1A Cl A1 (AMBAC) 10-20-06 3.85 1,333,333(d,l) 1,333,251 Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 1,500,000(d,l) 1,469,492 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) AmeriCredit Automobile Receivables Trust Series 2002-C Cl A4 (FSA) 02-12-09 3.55% $1,000,000(l) $995,365 Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 2,750,000(l) 2,719,492 Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 5,800,000(l) 5,773,720 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 3,900,000(d,l) 3,873,949 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 2,000,000 1,949,764 Series 2005-1 Cl A4 07-15-09 4.05 5,200,000 5,207,904 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 3,100,000 3,079,230 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 1,600,000 1,604,423 Citibank Credit Card Issuance Trust Series 2003-A3 Cl A3 03-10-10 3.10 300,000 292,154 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 2,200,000 2,177,384 Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40 2,500,000(l) 2,473,925 Metris Master Trust Series 2001-2 Cl C 11-20-09 5.51 1,625,000(d,m) 1,625,000 Series 2004-2 Cl D 10-20-10 6.86 850,000(d,m) 862,750 Series 2004-2 Cl M 10-20-10 4.00 1,600,000(m) 1,601,520 Series 2005-1A Cl D 03-21-11 5.51 900,000(d,m) 899,997 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 2,500,000 2,463,085 Nissan Auto Lease Trust Series 2004-A Cl A3 08-15-07 2.90 1,500,000 1,484,461 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 3,400,000 3,364,878 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 1,815,000 1,806,773 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) Residential Asset Securities Series 2002-KS1 Cl AI4 (AMBAC) 11-25-29 5.86% $628,734(l) $627,363 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 5,000,000(l) 4,974,800 WFS Financial Owner Trust Series 2004-3 Cl A3 03-17-09 3.30 8,200,000 8,121,577 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 4,500,000 4,454,370 Total 75,423,847 Commercial Mortgage-Backed(f) (10.6%) Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 2,250,000 2,312,389 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 3.74 3,800,000(d,m) 3,800,675 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 2,316,279 2,340,869 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 358,766 351,300 Series 2004-PWR5 Cl A3 07-11-42 4.57 1,790,000 1,794,017 Series 2004-T16 Cl A3 02-13-46 4.03 2,140,000 2,110,097 Series 2005-PWR8 Cl A1 06-11-41 4.21 4,798,334 4,786,050 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 5,221,721(d) 5,232,965 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 3,275,000 3,455,193 Citigroup Commercial Mtge Trust Series 2005-EMG Cl A1 09-20-51 4.15 7,471,452(d) 7,444,967 Commercial Mtge Pass-Through Ctfs Series 2004-CNL Cl A1 09-15-14 3.79 3,400,000(d,m) 3,384,768 CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49 4,355,756 4,361,970 Series 2004-C1 Cl A2 01-15-37 3.52 1,750,000 1,711,328 Federal Natl Mtge Assn #385683 02-01-13 4.83 3,136,681 3,194,557 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 153 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) Federal Natl Mtge Assn #385717 11-01-12 4.84% $2,312,028 $2,350,107 Federal Natl Mtge Assn #386599 11-01-10 4.47 1,064,558 1,060,195 Federal Natl Mtge Assn #555316 02-01-13 4.87 981,380 1,003,067 Federal Natl Mtge Assn #555806 10-01-13 5.11 976,911 1,014,102 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 2,425,352 2,491,317 Series 2004-C2 Cl A2 03-10-40 4.12 5,150,000 5,078,930 Series 2005-C1 Cl A5 06-10-48 4.77 2,200,000 2,221,741 Series 2005-C3 Cl A1 07-10-45 4.59 3,350,000 3,375,056 Series 2005-C3 Cl A2 07-10-45 4.85 2,520,000 2,561,987 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 5,625,000(d) 5,680,518 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 3,235,000 3,228,233 Series 2005-C1 Cl A1 05-10-43 4.21 3,239,479 3,229,418 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 3,200,000 3,233,245 Series 2004-GG1 Cl A5 06-10-36 4.88 1,625,000 1,654,547 Series 2005-GG3 Cl A1 08-10-42 3.92 2,105,474 2,090,525 Series 2005-GG3 Cl A3 08-10-42 4.57 5,000,000 5,002,917 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 3,000,000 3,058,270 Series 2005-GG4 Cl A1 07-10-39 4.37 4,013,925 4,016,333 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 2,464,555 2,465,499 Series 2003-CB6 Cl A1 07-12-37 4.39 3,825,953 3,806,823 Series 2003-CB6 Cl A2 07-12-37 5.26 2,500,000 2,605,240 Series 2003-LN1 Cl A1 10-15-37 4.13 2,274,361 2,241,029 Series 2003-ML1A Cl A1 03-12-39 3.97 1,927,675 1,896,177 Series 2004-C2 Cl A2 05-15-41 5.26 1,000,000(m) 1,030,201 Series 2004-CBX Cl A3 01-12-37 4.18 1,950,000 1,928,566 Series 2004-CBX Cl A5 01-12-37 4.65 3,000,000 3,012,815 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Commercial Mortgage-Backed(f) (cont.) JPMorgan Chase Commercial Mtge Securities (cont.) Series 2005-CB11 Cl A3 08-12-37 5.20% $3,150,000 $3,259,464 Series 2005-LDP2 Cl A1 07-15-42 4.33 5,086,104 5,099,684 LB-UBS Commercial Mtge Trust Series 2002-C2 Cl A3 06-15-26 5.39 3,590,000 3,726,980 Series 2002-C4 Cl A5 09-15-31 4.85 3,000,000 3,050,250 Series 2003-C8 Cl A2 11-15-27 4.21 4,600,000 4,570,744 Series 2003-C8 Cl A3 11-15-27 4.83 4,550,000 4,613,063 Series 2004-C2 Cl A3 03-15-29 3.97 2,200,000 2,126,124 Series 2004-C4 Cl A3 06-15-29 5.16 2,100,000(m) 2,169,587 Series 2004-C6 Cl A2 08-15-29 4.19 3,175,000 3,150,172 Series 2004-C6 Cl A4 08-15-29 4.58 2,925,000 2,935,391 Series 2004-C7 Cl A2 10-15-29 3.99 3,200,000 3,143,360 Series 2004-C8 Cl A2 12-15-29 4.20 3,700,000 3,667,144 Series 2005-C3 Cl A1 07-15-30 4.39 2,731,569 2,737,333 Series 2005-C5 Cl A2 09-15-40 4.89 3,350,000 3,399,513 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 3,250,213 3,241,578 Morgan Stanley Capital I Series 2003-IQ4 Cl A1 05-15-40 3.27 6,121,427 5,855,003 Series 2004-HQ4 Cl A5 04-14-40 4.59 2,400,000 2,398,632 Series 2004-IQ8 Cl A2 06-15-40 3.96 2,836,055 2,810,840 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 7,185,000 7,757,587 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 2,821,310 2,757,049 Wachovia Bank Commercial Mtge Trust Series 2005-C16 Cl A3 10-15-41 4.62 3,500,000 3,509,921 Total 193,597,422 Mortgage-Backed(f,n) (35.5%) Adjustable Rate Mtge Trust Series 2004-2 Cl 6A1 02-25-35 5.27 3,416,339(k) 3,454,621 Series 2005-3 Cl 7A1 07-25-35 5.10 1,133,361(k) 1,140,631 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Banc of America Mtge Securities Series 2004-E Cl B1 06-25-34 4.04% $1,755,749(k) $1,732,029 Series 2004-F Cl B1 07-25-34 4.14 3,167,216(k) 3,142,480 Bank of America Alternative Loan Trust Series 2003-11 Cl 1A1 01-25-34 6.00 3,537,386 3,586,768 Series 2003-11 Cl 4A1 01-25-19 4.75 2,525,401 2,518,587 Series 2004-3 Cl 1A1 04-25-34 6.00 6,163,685 6,317,777 Bear Stearns Adjustable Rate Mtge Trust Series 2004-10 Cl 13A1 01-25-35 5.03 5,301,663(k) 5,312,349 Series 2004-12 Cl 3A1 02-25-35 5.19 3,677,772(k) 3,694,984 Countrywide Alternative Loan Trust Series 2003-11T1 Cl A1 07-25-18 4.75 2,679,351 2,664,090 Series 2005-6CB Cl 1A1 04-25-35 7.50 4,059,347 4,254,869 Countrywide Home Loans Series 2004-12 Cl 1M 08-25-34 4.62 1,997,084(k) 1,963,701 Series 2005-R2 Cl 2A1 06-25-35 7.00 5,704,216(d) 6,048,252 CS First Boston Mtge Securities Series 2003-29 Cl 8A1 11-25-18 6.00 2,684,246 2,736,051 Series 2004-AR5 Cl CB1 06-25-34 4.42 2,056,946(k) 2,024,758 Federal Home Loan Mtge Corp 10-01-34 6.50 1,120,323 1,157,520 Collateralized Mtge Obligation 01-15-18 6.50 2,570,384 2,737,801 06-15-20 8.00 13,031 13,005 03-15-22 7.00 1,736,403 1,733,484 02-15-27 5.00 5,500,000 5,566,483 10-15-27 5.00 13,400,000 13,548,600 06-15-28 5.00 8,400,000 8,503,152 12-15-28 5.50 4,175,000 4,287,366 02-15-33 5.50 5,849,099 6,064,307 Interest Only 02-15-14 7.40 1,811,731(i) 112,436 08-01-20 8.00 7,154,257(i) 1,234,038 10-15-22 14.56 5,644,782(i) 322,733 Principal Only 08-01-20 4.60 7,154,257(j) 5,877,794 Federal Home Loan Mtge Corp #B11452 12-01-18 6.00 1,888,192 1,948,272 Federal Home Loan Mtge Corp #C00356 08-01-24 8.00 156,033 167,416 Federal Home Loan Mtge Corp #C14412 09-01-28 6.00 1,636,107 1,680,385 Federal Home Loan Mtge Corp #C53878 12-01-30 5.50 1,357,887 1,374,695 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 154 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Home Loan Mtge Corp #C59161 10-01-31 6.00% $4,249,834 $4,358,452 Federal Home Loan Mtge Corp #C79930 06-01-33 5.50 3,726,959 3,771,796 Federal Home Loan Mtge Corp #C80198 08-01-24 8.00 104,801 112,446 Federal Home Loan Mtge Corp #C80253 01-01-25 9.00 72,295 79,709 Federal Home Loan Mtge Corp #C90767 12-01-23 6.00 5,976,359 6,156,214 Federal Home Loan Mtge Corp #D95319 03-01-22 6.00 569,409 586,737 Federal Home Loan Mtge Corp #D96300 10-01-23 5.50 422,910 430,481 Federal Home Loan Mtge Corp #E01127 02-01-17 6.50 4,068,739 4,211,717 Federal Home Loan Mtge Corp #E01419 05-01-18 5.50 2,031,353 2,076,579 Federal Home Loan Mtge Corp #E77557 06-01-14 6.50 369,808 383,037 Federal Home Loan Mtge Corp #E96516 05-01-13 4.50 1,769,631 1,767,232 Federal Home Loan Mtge Corp #E97591 06-01-18 5.50 470,606 481,957 Federal Home Loan Mtge Corp #E98725 08-01-18 5.00 6,377,310 6,434,579 Federal Home Loan Mtge Corp #E99684 10-01-18 5.00 4,928,341 4,973,294 Federal Home Loan Mtge Corp #G01108 04-01-30 7.00 3,318,798(g) 3,474,334 Federal Home Loan Mtge Corp #G01427 12-01-31 6.50 835,089 865,023 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 705,399 729,311 Federal Home Loan Mtge Corp #G10198 05-01-07 9.00 54,664 55,409 Federal Home Loan Mtge Corp #G30225 02-01-23 6.00 7,377,434 7,601,943 Federal Natl Mtge Assn 03-01-15 6.00 4,332,185 4,474,567 09-01-20 5.00 6,205,000(g) 6,247,659 09-01-20 5.50 15,000,000(g) 15,318,750 09-01-20 6.00 17,000,000(g) 17,541,876 12-01-33 6.50 10,840,772 11,217,927 07-01-34 6.50 4,853,185 5,015,771 10-01-35 6.00 16,700,000(g) 17,065,313 Collateralized Mtge Obligation 12-25-26 8.00 2,259,619 2,400,743 Interest Only 12-25-12 13.29 1,513,868(i) 63,001 12-25-22 8.27 2,142,783(i) 276,511 12-25-31 1.19 2,380,258(i) 389,551 Federal Natl Mtge Assn #125032 11-01-21 8.00 31,572 33,854 Federal Natl Mtge Assn #125474 02-01-27 7.50 940,619 999,339 Federal Natl Mtge Assn #190764 09-01-07 8.50 107,246 107,875 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #190899 04-01-23 8.50% $414,746 $447,304 Federal Natl Mtge Assn #190988 06-01-24 9.00 441,495 477,216 Federal Natl Mtge Assn #253883 08-01-16 6.00 928,006 958,471 Federal Natl Mtge Assn #254224 02-01-17 7.00 1,431,892 1,499,560 Federal Natl Mtge Assn #254560 11-01-32 5.00 4,082,971 4,067,666 Federal Natl Mtge Assn #254675 01-01-23 6.50 183,849 191,458 Federal Natl Mtge Assn #254906 10-01-18 4.50 6,535,641 6,490,549 Federal Natl Mtge Assn #254916 09-01-23 5.50 5,534,908 5,632,939 Federal Natl Mtge Assn #255788 06-01-15 5.50 6,864,034 7,029,171 Federal Natl Mtge Assn #303727 02-01-11 6.00 156,055 160,845 Federal Natl Mtge Assn #442411 11-01-28 6.50 2,045,430 2,123,256 Federal Natl Mtge Assn #445254 12-01-13 5.50 2,818,163 2,880,159 Federal Natl Mtge Assn #446964 10-01-28 6.00 4,338,667 4,454,284 Federal Natl Mtge Assn #450370 01-01-29 6.50 2,232,967 2,317,929 Federal Natl Mtge Assn #484820 04-01-14 5.50 18,152 18,552 Federal Natl Mtge Assn #50553 04-01-22 8.00 121,106 129,989 Federal Natl Mtge Assn #510587 08-01-29 7.00 192,728 202,282 Federal Natl Mtge Assn #545339 11-01-31 6.50 144,267 150,365 Federal Natl Mtge Assn #545342 04-01-13 7.00 2,383,860 2,458,506 Federal Natl Mtge Assn #545869 07-01-32 6.50 1,972,922 2,051,143 Federal Natl Mtge Assn #545885 08-01-32 6.50 4,158,449 4,314,391 Federal Natl Mtge Assn #545910 08-01-17 6.00 2,270,754 2,351,245 Federal Natl Mtge Assn #555375 04-01-33 6.00 12,695,797 13,090,721 Federal Natl Mtge Assn #555376 04-01-18 4.50 269,579 267,719 Federal Natl Mtge Assn #555458 05-01-33 5.50 13,994,728 14,165,323 Federal Natl Mtge Assn #555734 07-01-23 5.00 3,960,068 3,966,787 Federal Natl Mtge Assn #555740 08-01-18 4.50 2,377,001 2,359,823 Federal Natl Mtge Assn #609621 11-01-31 7.00 3,402,761 3,570,206 Federal Natl Mtge Assn #617746 08-01-32 6.50 313,110 324,270 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #626720 01-01-17 6.00% $233,453 $241,117 Federal Natl Mtge Assn #630599 05-01-32 7.00 4,558,118 4,780,842 Federal Natl Mtge Assn #634367 03-01-17 6.50 1,415,020 1,469,865 Federal Natl Mtge Assn #640961 06-01-32 7.50 371,410 393,787 Federal Natl Mtge Assn #646938 06-01-32 7.00 2,242,301 2,351,866 Federal Natl Mtge Assn #647549 08-01-17 6.00 2,157,074 2,228,055 Federal Natl Mtge Assn #650159 10-01-32 6.50 3,221,741 3,361,384 Federal Natl Mtge Assn #652600 02-01-18 5.50 7,868,452 8,043,529 Federal Natl Mtge Assn #667604 10-01-32 5.50 7,438,465 7,523,603 Federal Natl Mtge Assn #667721 03-01-33 6.00 2,527,263 2,594,014 Federal Natl Mtge Assn #667787 02-01-18 5.50 1,065,657 1,089,321 Federal Natl Mtge Assn #669925 09-01-17 6.50 3,296,105 3,428,708 Federal Natl Mtge Assn #670382 09-01-32 6.00 7,980,500 8,176,428 Federal Natl Mtge Assn #670387 08-01-32 7.00 1,113,755 1,168,556 Federal Natl Mtge Assn #672289 12-01-17 5.50 654,282 670,064 Federal Natl Mtge Assn #678028 09-01-17 6.00 679,858 702,230 Federal Natl Mtge Assn #683116 02-01-33 6.00 390,907 400,504 Federal Natl Mtge Assn #684585 02-01-33 5.50 657,119 665,248 Federal Natl Mtge Assn #684586 03-01-33 6.00 2,446,718 2,513,216 Federal Natl Mtge Assn #684601 03-01-33 6.00 1,499,576 1,550,477 Federal Natl Mtge Assn #687051 01-01-33 6.00 6,571,307 6,727,496 Federal Natl Mtge Assn #687302 11-01-32 7.00 780,443 818,578 Federal Natl Mtge Assn #687736 02-01-33 5.50 3,397,188 3,435,270 Federal Natl Mtge Assn #688691 03-01-33 5.50 859,117 868,748 Federal Natl Mtge Assn #689093 07-01-28 5.50 1,981,845 2,005,871 Federal Natl Mtge Assn #694316 03-01-18 5.50 2,467,739 2,524,930 Federal Natl Mtge Assn #694546 03-01-33 5.50 2,233,589 2,258,628 Federal Natl Mtge Assn #694628 04-01-33 5.50 2,917,227 2,958,810 Federal Natl Mtge Assn #694795 04-01-33 5.50 3,691,873 3,747,917 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 155 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #694988 03-01-33 5.50% $7,585,066 $7,678,588 Federal Natl Mtge Assn #695202 03-01-33 6.50 2,883,909 2,984,241 Federal Natl Mtge Assn #695220 04-01-33 5.50 187,986 190,093 Federal Natl Mtge Assn #695387 04-01-18 5.00 1,377,762 1,393,049 Federal Natl Mtge Assn #705096 06-01-18 5.00 647,697 653,288 Federal Natl Mtge Assn #709901 06-01-18 5.00 3,521,281 3,551,743 Federal Natl Mtge Assn #711501 05-01-33 5.50 1,799,842 1,827,182 Federal Natl Mtge Assn #712109 04-01-18 5.00 1,807,435 1,827,459 Federal Natl Mtge Assn #720006 07-01-33 5.50 5,037,137 5,093,603 Federal Natl Mtge Assn #720378 06-01-18 4.50 4,303,031 4,273,343 Federal Natl Mtge Assn #723687 08-01-28 5.50 2,741,898 2,775,138 Federal Natl Mtge Assn #725232 03-01-34 5.00 15,024,305 14,964,656 Federal Natl Mtge Assn #725284 11-01-18 7.00 193,815 202,982 Federal Natl Mtge Assn #725684 05-01-18 6.00 6,997,104 7,227,243 Federal Natl Mtge Assn #725719 07-01-33 4.85 3,750,087(k) 3,729,011 Federal Natl Mtge Assn #725737 08-01-34 4.53 3,595,402(k) 3,597,632 Federal Natl Mtge Assn #726940 08-01-23 5.50 79,093 80,185 Federal Natl Mtge Assn #730153 08-01-33 5.50 729,348 737,524 Federal Natl Mtge Assn #730231 08-01-23 5.50 8,148,027 8,292,340 Federal Natl Mtge Assn #731075 07-01-18 5.50 170,921 174,961 Federal Natl Mtge Assn #731417 09-01-18 5.50 2,126,394 2,175,116 Federal Natl Mtge Assn #732094 08-01-18 5.50 145,819 149,199 Federal Natl Mtge Assn #735160 12-01-34 4.40 2,491,093(k) 2,485,961 Federal Natl Mtge Assn #737330 09-01-18 5.50 1,752,975 1,792,998 Federal Natl Mtge Assn #742840 10-01-18 5.50 1,615,410 1,651,856 Federal Natl Mtge Assn #743262 10-01-18 5.00 3,471,315 3,498,337 Federal Natl Mtge Assn #743455 10-01-18 5.50 6,132,783 6,270,000 Federal Natl Mtge Assn #747584 11-01-28 5.50 4,705,739 4,762,787 Federal Natl Mtge Assn #753919 12-01-33 4.95 4,175,469(k) 4,191,905 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Federal Natl Mtge Assn #756844 02-01-19 5.00% $2,919,713 $2,941,733 Federal Natl Mtge Assn #759342 01-01-34 6.50 1,088,315 1,130,867 Federal Natl Mtge Assn #761031 01-01-34 5.00 601,501 597,731 Federal Natl Mtge Assn #765758 02-01-19 5.00 3,304,594 3,330,638 Federal Natl Mtge Assn #765760 02-01-19 5.00 348,400 351,145 Federal Natl Mtge Assn #776962 04-01-29 5.00 10,392,429 10,327,284 Federal Natl Mtge Assn #776987 04-01-29 5.00 336,071 333,964 Federal Natl Mtge Assn #790759 09-01-34 4.84 3,695,383(k) 3,709,137 Federal Natl Mtge Assn #811925 04-01-35 4.92 4,527,297(k) 4,557,981 Federal Natl Mtge Assn #837258 09-01-35 4.92 2,475,000(g,k) 2,488,043 First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.41 3,246,038(m) 3,311,056 Series 2005-AA2 Cl 2A1 04-25-35 5.44 3,913,237(m) 3,975,810 Series 2005-AA3 Cl 3A1 05-25-35 5.42 4,194,739(m) 4,240,252 Series 2005-AA4 Cl B1 06-25-35 5.39 2,473,767 2,515,104 Govt Natl Mtge Assn 09-01-35 5.00 8,900,000(g) 8,927,813 Collateralized Mtge Obligation Interest Only Series 2002-70 Cl IC 08-20-32 0.00 4,859,624(i) 636,375 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 1,209,350(i) 129,669 Govt Natl Mtge Assn #604708 10-15-33 5.50 4,850,729 4,949,261 Harborview Mtge Loan Trust Series 2004-3 Cl B1 05-19-34 4.39 2,383,149(k) 2,352,619 IndyMac Index Mtge Loan Trust Series 2005-AR3 Cl 3A1 04-25-35 5.34 2,475,435(k) 2,501,726 Series 2005-AR8 Cl AX1 Collateralized Mtge Obligation Interest Only 04-25-35 4.50 130,589,613(i,k) 1,611,966 Master Adjustable Rate Mtge Trust Series 2004-5 Cl B1 07-25-34 4.40 2,542,856(k) 2,509,545 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed(f,n) (cont.) Master Alternative Loans Trust Series 2004-2 Cl 4A1 02-25-19 5.00% $4,626,852 $4,652,878 Series 2004-7 Cl 8A1 08-25-19 5.00 2,984,229 2,986,109 Series 2004-8 Cl 7A1 09-25-19 5.00 4,107,325 4,110,775 Structured Adjustable Rate Mtge Loan Trust Series 2004-3AC Cl B1 03-25-34 4.93 3,210,318(k) 3,200,302 Series 2004-5 Cl B1 05-25-34 4.61 2,367,160(k) 2,332,458 Structured Asset Securities Series 2003-33H Cl 1A1 10-25-33 5.50 8,516,292 8,565,138 Washington Mutual Series 2003-AR10 Cl A7 10-25-33 4.07 4,425,000(k) 4,435,792 Series 2004-CB2 Cl 6A 07-25-19 4.50 2,757,534 2,691,436 Series 2004-CB3 Cl 4A 10-25-19 6.00 3,833,042 3,970,499 Series 2004-CB4 Cl 22A 12-25-19 6.00 1,923,596 1,984,250 Series 2005-AR11 Cl A1B1 08-25-45 3.93 9,200,000(k) 9,200,000 Series 2005-AR8 Cl 2AB1 07-25-45 3.89 7,065,565(k) 7,063,357 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 8,800,000(g) 8,845,375 Series 2005-5 Cl 2A1 05-25-35 5.50 6,795,665 6,891,057 Series 2005-AR1 Cl 1A1 02-25-35 4.56 6,315,787(k) 6,288,377 Series 2005-AR4 Cl B1 04-25-35 4.58 1,097,503(k) 1,067,399 Total 647,422,953 Aerospace & Defense (0.1%) L-3 Communications 06-15-12 7.63 1,460,000 1,547,600 07-15-13 6.13 5,000 5,050 Moog Sr Sub Nts 01-15-15 6.25 85,000 85,000 Total 1,637,650 Automotive (0.2%) DaimlerChrysler NA Holding 11-15-13 6.50 1,565,000 1,683,236 Ford Motor 02-01-29 6.38 1,895,000 1,385,213 Total 3,068,449 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 156 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Banking (3.7%) Bank of America Sr Unsecured 08-01-10 4.50% $1,025,000 $1,028,486 Banknorth Group Sr Nts 05-01-08 3.75 3,405,000 3,367,920 Citigroup 08-03-10 4.63 23,800,000 23,999,515 Sr Nts 05-29-15 4.70 2,050,000 2,047,624 HSBC Bank USA Sub Nts 08-15-35 5.63 4,000,000 4,126,692 KFW Intl Finance 10-17-05 2.50 11,250,000(c) 11,232,179 M&I Marshall & Ilsley Bank Sub Nts 06-16-15 4.85 1,925,000 1,938,425 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 17,620,000(p) 19,354,231 Total 67,095,072 Building Materials (--%) Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 300,000 315,000 Chemicals (0.1%) Airgas 10-01-11 9.13 800,000 860,000 Compass Minerals Group 08-15-11 10.00 535,000 585,825 Georgia Gulf Sr Nts 12-15-13 7.13 792,000 821,700 MacDermid 07-15-11 9.13 290,000 311,750 Total 2,579,275 Diversified Manufacturing (0.7%) Tyco Intl Group 02-15-11 6.75 11,010,000(c) 12,124,520 Electric (2.8%) CMS Energy Sr Nts 01-15-09 7.50 860,000 907,300 Consumers Energy 1st Mtge 09-15-35 5.80 3,900,000 4,065,641 Dayton Power & Light 1st Mtge 10-01-13 5.13 2,220,000 2,286,136 Dominion Resources 06-15-35 5.95 3,930,000 4,104,956 DPL Sr Nts 09-01-11 6.88 1,841,000 2,015,895 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) Exelon 06-15-35 5.63% $3,015,000 $3,034,742 IPALCO Enterprises Secured 11-14-08 8.38 265,000 284,213 11-14-11 8.63 1,765,000 1,985,625 NorthWestern Energy Secured 11-01-14 5.88 400,000(d) 413,051 Ohio Edison 06-15-09 5.65 2,895,000(d) 2,980,692 Sr Nts 05-01-15 5.45 785,000 811,915 Ohio Power Sr Nts Series H 01-15-14 4.85 5,080,000 5,118,811 Pacific Gas & Electric 03-01-34 6.05 3,260,000 3,572,275 Pacificorp 1st Mtge 06-15-35 5.25 1,970,000 1,981,987 Potomac Edison 1st Mtge 11-15-14 5.35 1,865,000(d) 1,932,308 08-15-15 5.13 2,095,000(d) 2,142,112 Southern California Edison 1st Mtge 07-15-35 5.35 4,020,000 4,105,099 Tenaska Alabama Partners LP Secured 06-30-21 7.00 245,000(d) 255,582 Utilicorp Canada Finance 06-15-11 7.75 1,290,000(c) 1,348,050 Westar Energy 1st Mtge 07-01-14 6.00 7,940,000 8,643,548 Total 51,989,938 Entertainment (0.4%) Time Warner 05-15-29 6.63 3,640,000 3,959,840 United Artists Theatre 07-01-15 9.30 2,929,618 2,900,321 Total 6,860,161 Food and Beverage (0.3%) Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75 435,000(c) 485,025 Cott Beverages 12-15-11 8.00 555,000 585,525 Kraft Foods 06-01-12 6.25 3,365,000 3,692,899 Total 4,763,449 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gaming (0.4%) Boyd Gaming Sr Sub Nts 12-15-12 7.75% $215,000 $228,975 04-15-14 6.75 300,000 306,375 Caesars Entertainment Sr Nts 04-15-13 7.00 1,710,000 1,911,402 MGM MIRAGE 10-01-09 6.00 355,000 355,000 Sr Nts 02-27-14 5.88 370,000 357,050 07-15-15 6.63 1,550,000(d,g) 1,565,500 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 290,000 293,625 Sr Sub Nts 04-01-12 8.00 380,000 404,700 Station Casinos Sr Nts 04-01-12 6.00 530,000 533,975 Sr Sub Nts 03-01-16 6.88 1,090,000(d,g) 1,119,975 Total 7,076,577 Gas Pipelines (0.2%) ANR Pipeline 03-15-10 8.88 880,000 960,041 Colorado Interstate Gas Sr Nts 03-15-15 5.95 295,000(d) 292,788 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 640,000 685,124 Southern Natural Gas 03-15-10 8.88 410,000 447,292 Southern Star Central Secured 08-01-10 8.50 345,000 372,600 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 910,000 978,250 Total 3,736,095 Health Care (0.6%) Cardinal Health 06-15-15 4.00 11,375,000 10,528,143 HCA Sr Nts 03-15-14 5.75 595,000 588,019 Triad Hospitals Sr Nts 05-15-12 7.00 550,000 569,250 Total 11,685,412 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 157 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Home Construction (0.3%) DR Horton 12-01-07 7.50% $520,000 $548,429 01-15-09 5.00 535,000 533,106 Sr Nts 02-15-15 5.25 3,180,000 3,054,755 Meritage Homes 03-15-15 6.25 235,000 220,019 Standard-Pacific Sr Nts 08-15-15 7.00 670,000 659,950 Total 5,016,259 Independent Energy (0.3%) Chesapeake Energy 01-15-15 7.75 860,000 924,500 Sr Nts 06-15-14 7.50 69,000 74,520 Sr Unsecured 08-15-17 6.50 1,335,000(d) 1,361,700 Encore Acquisition Sr Sub Nts 04-15-14 6.25 325,000 323,375 Kerr-McGee 10-15-05 8.13 500,000 502,076 Newfield Exploration Sr Nts 03-01-11 7.63 1,500,000 1,635,000 Sr Sub Nts 08-15-12 8.38 270,000 293,625 Plains Exploration & Production Sr Nts 06-15-14 7.13 400,000 426,000 Total 5,540,796 Life Insurance (2.0%) ASIF Global Financing XIX Secured 01-17-13 4.90 4,190,000(d) 4,247,277 ING Security Life Institutional Funding 01-15-10 4.25 8,315,000(d) 8,258,716 Metlife Sr Nts 06-15-35 5.70 7,065,000 7,340,613 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 2,065,000(d) 2,081,074 Pricoa Global Funding I 06-25-12 4.63 10,280,000(d) 10,299,049 Prudential Financial 06-13-35 5.40 3,425,000 3,409,608 Total 35,636,337 Lodging (0.1%) Hilton Hotels 12-01-12 7.63 675,000 774,455 ITT 11-15-15 7.38 430,000 470,850 Total 1,245,305 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Cable (0.2%) Comcast 03-15-11 5.50% $2,695,000 $2,786,495 DIRECTV Holdings LLC Sr Nts 03-15-13 8.38 320,000 351,200 Videotron Ltee 01-15-14 6.88 255,000(c) 262,013 Total 3,399,708 Media Non Cable (0.6%) Corus Entertainment Sr Sub Nts 03-01-12 8.75 240,000(c) 258,000 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 795,000 859,593 Emmis Operating Sr Sub Nts 05-15-12 6.88 200,000 200,000 Gray Television 12-15-11 9.25 25,000 27,063 Lamar Media 01-01-13 7.25 335,000 352,588 Sr Sub Nts 08-15-15 6.63 585,000(d) 596,700 News America 12-15-34 6.20 6,535,000 6,771,442 Quebecor Media Sr Nts 07-15-11 11.13 295,000(c) 324,500 Radio One Series B 07-01-11 8.88 535,000 571,781 Sun Media 02-15-13 7.63 400,000(c) 422,500 Susquehanna Media Sr Sub Nts 04-15-13 7.38 450,000 471,938 Total 10,856,105 Metals (0.1%) Peabody Energy Series B 03-15-13 6.88 970,000 1,010,013 Oil Field Services (0.2%) Halliburton 10-15-10 5.50 2,520,000 2,635,648 Key Energy Services Series C 03-01-08 8.38 235,000 243,225 Offshore Logistics 06-15-13 6.13 135,000 131,625 Pride Intl Sr Nts 07-15-14 7.38 250,000 271,250 Total 3,281,748 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Other Financial Institutions (0.9%) HSBC Finance 06-30-15 5.00% $11,435,000 $11,494,542 Residential Capital 06-30-10 6.38 4,970,000(d) 5,073,475 Total 16,568,017 Other Industry (--%) ARAMARK Services 12-01-06 7.10 500,000 513,567 Packaging (--%) Owens-Illinois Glass Container 05-15-11 7.75 575,000 609,500 Silgan Holdings Sr Sub Nts 11-15-13 6.75 295,000 301,269 Total 910,769 Paper (0.1%) Crown Paper Sr Sub Nts 09-01-05 11.00 3,450,000(b,o,q) -- Louisiana-Pacific Sr Nts 08-15-10 8.88 1,440,000 1,627,553 Total 1,627,553 Pharmaceuticals (0.1%) Merck & Co 03-01-15 4.75 1,060,000 1,050,827 Property & Casualty (0.1%) Willis Group North America 07-15-15 5.63 2,385,000 2,421,681 Railroads (0.4%) Union Pacific 04-15-12 6.50 2,280,000 2,514,940 05-01-14 5.38 4,530,000 4,716,650 Total 7,231,590 REITS (0.6%) Archstone-Smith Operating Trust 05-01-15 5.25 5,535,000 5,622,818 ERP Operating LP 04-01-13 5.20 1,970,000 2,009,426 Simon Property Group LP 06-15-15 5.10 3,655,000(d) 3,641,440 Total 11,273,684 Retailers (0.2%) Flooring America Series B 10-15-07 9.25 185,000(b,o,q) -- United Auto Group 03-15-12 9.63 240,000 257,700 Wal-Mart Stores 09-01-35 5.25 4,120,000(g) 4,157,344 Total 4,415,044 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 158 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Transportation Services (0.2%) ERAC USA Finance 05-01-15 5.60% $3,330,000(d) $3,439,244 Greater Beijing First Expressways Sr Nts 06-15-07 9.50 2,290,000(b,o,q) -- Total 3,439,244 Wireless (0.3%) Nextel Communications Sr Nts Series E 10-31-13 6.88 1,025,000 1,097,850 US Cellular Sr Nts 12-15-33 6.70 4,175,000 4,475,216 Total 5,573,066 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wirelines (4.3%) BellSouth Sr Unsecured 11-15-34 6.00% $2,025,000 $2,137,882 Qwest 03-15-12 8.88 655,000 715,588 Sprint Capital 01-30-11 7.63 18,765,000 21,446,950 11-15-28 6.88 855,000 979,783 Telecom Italia Capital 09-30-34 6.00 4,540,000(c,d) 4,660,791 TELUS 06-01-11 8.00 13,955,000(c) 16,232,498 Verizon Pennsylvania Series A 11-15-11 5.65 30,293,000 31,676,480 Total 77,849,972 Total Bonds (Cost: $1,797,018,246) $1,808,292,936 Preferred Stock (--%) Issuer Shares Value(a) Pegasus Satellite 12.75% Cm Pay-in-kind Series B --(b,e,o) $1 Total Preferred Stock (Cost: $123) $1 Short-Term Securities (8.4%)(s) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (3.9%) Federal Home Loan Bank Disc Nt 10-14-05 3.65% $15,000,000 $14,933,445 Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43 20,000,000 19,962,000 Federal Natl Mtge Assn Disc Nt 09-08-05 3.25 35,900,000 35,874,073 Total 70,769,518 Commercial Paper (4.5%) Amsterdam Funding 10-03-05 3.61 15,000,000(t) 14,950,500 Nieuw Amsterdam 09-21-05 3.54 20,000,000(t) 19,958,817 Ranger Funding LLC 09-01-05 3.51 5,000,000(t) 4,999,513 09-26-05 3.56 15,000,000(t) 14,961,542 Sheffield Receivables 09-01-05 3.56 23,100,000(t) 23,097,715 Windmill Funding 09-01-05 3.42 5,000,000(t) 4,999,525 Total 82,967,612 Total Short-Term Securities (Cost: $153,754,035) $153,737,130 Total Investments in Securities (Cost: $1,950,772,404)(u) $1,962,030,067 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 4.4% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $106,205,278 or 5.8% of net assets. (e) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $83,374,383. (h) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (i) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (j) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (k) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. - -------------------------------------------------------------------------------- 159 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Bond Fund Notes to Investments in Securities (continued) (l) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (m) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (n) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-20 4.50% $1,000,000 9-19-05 $980,156 $991,562 09-01-35 5.00 15,500,000 9-14-05 15,163,359 15,393,437 09-01-35 5.50 30,000,000 9-14-05 29,942,906 30,300,000 09-01-35 6.50 14,500,000 9-14-05 14,965,020 14,980,313 (o) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Aug. 31, 2005, is as follows: Security Acquisition Cost dates Crown Paper 11.00% Sr Sub Nts 2005 02-10-00 thru 02-14-00 $2,093,399 Flooring America 9.25% Series B 2007 10-09-97 thru 12-17-02 205,934 Greater Beijing First Expressways (U.S. Dollar) 9.50% Sr Nts 2007 06-12-97 thru 11-03-98 380,438 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 2007 06-15-01 123 (p) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Long Bond, Dec. 2005, 20-year $22,800,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 8,100,000 U.S. Treasury Note, Sept. 2005, 10-year 10,100,000 U.S. Treasury Note, Dec. 2005, 5-year 27,000,000 U.S. Treasury Note, Dec. 2005, 10-year 105,800,000 (q) Negligible market value. (r) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (s) Cash collateral received from security lending activity is invested in short-term securities and represents 1.7% of net assets. See Note 6 to the financial statements. 6.7% of net assets is the Fund's cash equivalent position. (t) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $82,967,612 or 4.5% of net assets. (u) At Aug 31, 2005, the cost of securities for federal income tax purposes was $1,955,077,199 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 18,687,671 Unrealized depreciation (11,734,803) ----------- Net unrealized appreciation $ 6,952,868 ------------ How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 160 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Diversified Equity Income Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.0%) Issuer Shares Value(a) Aerospace & Defense (2.9%) Goodrich 252,700 $11,578,714 Honeywell Intl 597,000 22,853,160 United Technologies 291,000 14,550,000 Total 48,981,874 Airlines (0.8%) AMR 796,500(b,d) 10,027,935 Continental Airlines Cl B 52,500(b) 701,925 Northwest Airlines 645,400(b,d) 3,246,362 Total 13,976,222 Auto Components (0.3%) Ballard Power Systems 280,500(b,c) 1,582,020 Dana 216,500 2,914,090 Total 4,496,110 Building Products (1.8%) Ameron Intl 1,900 80,674 YORK Intl 514,700 29,533,486 Total 29,614,160 Capital Markets (1.9%) Lehman Brothers Holdings 50,900 5,378,094 Mellon Financial 356,700 11,574,915 Merrill Lynch & Co 164,400 9,397,104 Morgan Stanley 92,800 4,720,736 Total 31,070,849 Chemicals (1.8%) Air Products & Chemicals 32,600 1,806,040 Cabot 42,400 1,399,200 Dow Chemical 309,600 13,374,720 EI du Pont de Nemours & Co 247,300 9,785,661 Olin 179,107 3,345,719 Total 29,711,340 Commercial Banks (3.7%) Bank of America 761,900 32,784,557 US Bancorp 275,300 8,044,266 Wachovia 262,300 13,015,326 Wells Fargo & Co 139,700 8,328,914 Total 62,173,063 Commercial Services & Supplies (2.0%) Avery Dennison 30,100 1,608,544 Cendant 496,400 10,096,776 PHH 24,665(b) 745,870 Pitney Bowes 93,200 4,030,900 RR Donnelley & Sons 250,900 9,373,624 Waste Management 267,900 7,348,497 Total 33,204,211 Computers & Peripherals (1.1%) Hewlett-Packard 663,900 18,429,864 Common Stocks (continued) Issuer Shares Value(a) Construction & Engineering (2.7%) Fluor 192,000 $11,886,720 Insituform Technologies Cl A 92,100(b) 1,906,470 McDermott Intl 896,200(b) 30,963,710 Total 44,756,900 Construction Materials (1.6%) CEMEX ADR 217,902(c) 10,387,388 Hanson ADR 310,900(c) 16,319,141 Total 26,706,529 Consumer Finance (0.5%) Capital One Financial 98,800 8,125,312 Diversified Financial Services (3.4%) Citigroup 1,290,000 56,463,300 Diversified Telecommunication Services (7.3%) AT&T 1,003,600 19,750,848 BellSouth 589,800 15,505,842 BT Group 3,455,540(c) 13,444,516 MCI 180,100 4,617,764 SBC Communications 826,900 19,911,752 Sprint Nextel 372,700 9,664,111 Telefonos de Mexico ADR Cl L 1,326,600(c) 25,470,720 Verizon Communications 451,300 14,762,023 Total 123,127,576 Electrical Equipment (1.4%) Cooper Inds Cl A 106,900 7,102,436 Energy Conversion Devices 80,600(b,d) 2,797,626 FuelCell Energy 143,800(b,d) 1,637,882 Hubbell Cl B 32,600 1,473,520 Plug Power 237,200(b) 1,748,164 Rockwell Automation 170,900 8,893,636 Total 23,653,264 Energy Equipment & Services (8.1%) Baker Hughes 529,100 31,084,625 GlobalSantaFe 179,100 8,396,208 Halliburton 688,800 42,684,936 Schlumberger 328,100 28,292,063 Tidewater 581,500 25,900,010 Total 136,357,842 Food & Staples Retailing (0.9%) Albertson's 441,000 8,877,330 Wal-Mart Stores 131,900 5,930,224 Total 14,807,554 Food Products (0.6%) Archer-Daniels-Midland 475,200 10,696,752 Gas Utilities (0.5%) NiSource 379,400 9,158,716 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (1.0%) CIGNA 62,400 $7,195,968 Tenet Healthcare 738,400(b) 8,993,712 Total 16,189,680 Hotels, Restaurants & Leisure (1.2%) Royal Caribbean Cruises 345,600 14,764,032 Starwood Hotels & Resorts Worldwide Unit 93,900 5,474,370 Total 20,238,402 Household Durables (0.9%) Whirlpool 194,100 14,761,305 Industrial Conglomerates (3.6%) General Electric 1,102,508 37,055,294 Textron 204,400 14,573,720 Tomkins ADR 406,400(c,d) 8,355,584 Total 59,984,598 Insurance (12.8%) ACE 647,300(c) 28,746,593 American Intl Group 134,000 7,932,800 Aon 497,900 14,897,168 Axis Capital Holdings 349,200(c) 9,864,900 Endurance Specialty Holdings 234,800(c) 8,617,160 Hartford Financial Services Group 57,000 4,163,850 Jefferson-Pilot 166,600 8,285,018 Lincoln Natl 166,700 8,266,653 Loews 236,400 20,729,916 Marsh & McLennan Companies 699,498 19,620,919 Montpelier Re Holdings 276,000(c) 9,025,200 Safeco 237,700 12,393,678 St. Paul Travelers Companies 403,400 17,350,234 Torchmark 164,800 8,691,552 UnumProvident 76,300 1,474,116 XL Capital Cl A 529,500(c) 36,800,249 Total 216,860,006 IT Services (0.8%) Electronic Data Systems 600,889 13,459,914 Leisure Equipment & Products (0.6%) Eastman Kodak 397,400 9,684,638 Machinery (8.4%) Caterpillar 1,118,700 62,076,663 Crane 273,600 8,101,296 Deere & Co 264,058 17,264,112 Eaton 151,700 9,696,664 Ingersoll-Rand Cl A 320,900(c) 25,550,058 Parker Hannifin 283,100 18,242,964 Total 140,931,757 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 161 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund Common Stocks (continued) Issuer Shares Value(a) Media (1.4%) Gannett 129,300 $9,402,696 Time Warner 367,900 6,592,768 Viacom Cl B 226,000 7,681,740 Total 23,677,204 Metals & Mining (0.8%) Alcoa 307,900 8,248,641 Compass Minerals Intl 164,100 4,038,501 Freeport-McMoRan Copper & Gold Cl B 41,100 1,733,187 Total 14,020,329 Multiline Retail (0.3%) JC Penney 97,900 4,760,877 Oil & Gas (10.8%) Anadarko Petroleum 50,400 4,579,848 BP ADR 109,800(c) 7,508,124 Burlington Resources 100,400 7,408,516 Chevron 548,618 33,685,145 ConocoPhillips 193,800 12,779,172 Devon Energy 80,400 4,885,908 EnCana 226,200(c) 11,126,778 EOG Resources 49,600 3,165,968 Exxon Mobil 57,900 3,468,210 Kerr-McGee 110,352 9,714,287 Marathon Oil 406,100 26,116,291 Petroleo Brasileiro ADR 462,500(c) 28,934,000 Pioneer Natural Resources 179,900 8,887,060 Repsol ADR 268,000(c) 7,922,080 Total ADR 92,000(c,d) 12,129,280 Total 182,310,667 Paper & Forest Products (1.7%) Abitibi-Consolidated 647,100(c) 2,808,414 Intl Paper 427,400 13,185,290 MeadWestvaco 128,600 3,725,542 Weyerhaeuser 137,800 8,959,756 Total 28,679,002 Common Stocks (continued) Issuer Shares Value(a) Pharmaceuticals (3.0%) Abbott Laboratories 223,500 $10,086,555 Bristol-Myers Squibb 366,000(d) 8,956,020 Merck & Co 395,800 11,173,434 Pfizer 580,900 14,795,523 Wyeth 118,100 5,407,799 Total 50,419,331 Real Estate Investment Trust (0.1%) Rayonier 43,100 2,338,175 Road & Rail (1.7%) Burlington Northern Santa Fe 335,300 17,777,606 Union Pacific 166,600 11,373,782 Total 29,151,388 Semiconductors & Semiconductor Equipment (1.1%) Intel 616,200 15,848,664 Linear Technology 82,800 3,140,604 Total 18,989,268 Software (0.6%) Microsoft 355,900 9,751,660 Thrifts & Mortgage Finance (1.9%) Fannie Mae 478,100 24,402,224 Washington Mutual 167,900 6,981,282 Total 31,383,506 Tobacco (1.9%) Altria Group 452,800 32,012,960 Total Common Stocks (Cost: $1,396,763,242) $1,645,116,105 Preferred Stocks (0.3%) Issuer Shares Value(a) Schering-Plough 6.00% Cv 66,600 $3,623,972 Xerox 6.25% Cv 6,410 749,970 Total Preferred Stocks (Cost: $3,971,000) $4,373,942 Short-Term Securities (4.6%)(e) Issuer Effective Amount Value(a) Yield payable at maturity U.S. Government Agency (0.9%) Federal Home Loan Bank 09-02-05 3.39% $15,000,000 $14,997,177 Commercial Paper (3.7%) Amsterdam Funding 10-03-05 3.61 15,000,000(f) 14,950,500 Jupiter Securitization 09-29-05 3.60 10,000,000(f) 9,971,080 Nieuw Amsterdam 10-03-05 3.61 10,000,000(f) 9,967,000 Old Line Funding 09-01-05 3.56 11,700,000(f) 11,698,843 Windmill Funding 09-01-05 3.42 15,000,000(f) 14,998,575 Total 61,585,998 Total Short-Term Securities (Cost: $76,590,711) $76,583,175 Total Investments in Securities (Cost: $1,477,324,953)(g) $1,726,073,222 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 162 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Diversified Equity Income Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 15.8% of net assets. (d) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 1.9% of net assets. See Note 6 to the financial statements. 2.7% of net assets is the Fund's cash equivalent position. (f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $61,585,998 or 3.7% of net assets. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $1,482,222,616 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $279,737,503 Unrealized depreciation (35,886,897) ----------- Net unrealized appreciation $243,850,606 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 163 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Emerging Markets Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (94.8%)(c) Issuer Shares Value(a) Argentina (1.0%) Real Estate IRSA Inversiones y Representaciones GDR 154,129(b) $1,872,667 Brazil (9.6%) Diversified Financial Services (--%) Contax Participacoes ADR 122,064(b) 79,464 Diversified Telecommunication Services (1.0%) Tele Norte Leste Participacoes ADR 122,064 1,835,843 Metals & Mining (3.8%) Cia Vale do Rio Doce ADR 198,699 5,960,970 Companhia Siderurgica Nacional ADR 69,462 1,344,784 Total 7,305,754 Oil & Gas (3.8%) Petroleo Brasileiro ADR 132,690 7,296,623 Specialty Retail (1.0%) Lojas Renner 94,157(b) 1,998,239 China (6.2%) Diversified Telecommunication Services (1.0%) China Telecom Cl H 5,058,000 1,899,139 Insurance (1.3%) China Life Insurance Cl H 3,114,000(b) 2,426,223 Oil & Gas (3.9%) CNOOC 6,895,000 4,972,868 PetroChina Cl H 3,250,000 2,634,660 Total 7,607,528 Czechoslovakia Federated Republic (1.4%) Pharmaceuticals Zentiva 68,824 2,718,738 Egypt (1.4%) Commercial Banks (0.5%) Commercial Intl Bank 103,960 883,922 Wireless Telecommunication Services (0.9%) Orascom Telecom GDR 38,448(d) 1,777,836 Finland (0.9%) Auto Components Nokian Renkaat 77,500 1,649,414 Hong Kong (2.9%) Multiline Retail (0.6%) Lifestyle Intl Holdings 756,500 1,230,540 Specialty Retail (2.3%) Esprit Holdings 278,000 2,059,282 Giordano Intl 3,270,000 2,194,565 Sa Sa Intl Holdings 336,000 157,176 Total 4,411,023 Common Stocks (continued) Issuer Shares Value(a) Hungary (2.0%) Commercial Banks (0.6%) OTP Bank 31,300 $1,245,942 Oil & Gas (0.6%) MOL Magyar Olaj-es Gazipari 11,011 1,215,426 Pharmaceuticals (0.8%) Gedeon Richter 8,693 1,391,841 India (6.8%) Commercial Banks (1.9%) ICICI Bank ADR 83,454 1,951,155 State Bank of India GDR 38,938(d) 1,752,210 Total 3,703,365 Construction Materials (0.5%) Grasim Inds GDR 34,710 1,023,945 IT Services (1.6%) Infosys Technologies 56,994 3,076,627 Oil & Gas (1.1%) Oil & Natural Gas 91,528 2,034,785 Tobacco (1.1%) ITC 52,510 2,067,911 Wireless Telecommunication Services (0.6%) Bharti Tele-Ventures 167,947(b) 1,202,923 Indonesia (0.4%) Machinery PT United Tractors 1,788,109 679,127 Israel (3.0%) Chemicals (0.7%) Makhteshin-Agan Inds 233,572 1,321,017 Electronic Equipment & Instruments (1.6%) Lipman Electronic Engineering 60,078 1,918,291 Orbotech 46,199(b) 1,140,653 Total 3,058,944 Pharmaceuticals (0.7%) Teva Pharmaceutical Inds ADR 41,650 1,351,126 Mexico (9.4%) Beverages (1.6%) Grupo Modelo Series C 975,400 3,154,732 Commercial Banks (0.7%) Grupo Financiero Banorte Cl O 160,465 1,320,607 Construction Materials (0.5%) CEMEX ADR 19,955 951,255 Common Stocks (continued) Issuer Shares Value(a) Mexico (cont.) Food & Staples Retailing (1.1%) Wal-Mart de Mexico Series V 471,506 $2,054,659 Household Durables (0.7%) Urbi Desarrollos Urbanos 220,800(b) 1,348,392 Media (1.7%) Grupo Televisa ADR 51,672 3,245,002 Metals & Mining (0.5%) Grupo Mexico SA de CV Series B 507,330 894,969 Wireless Telecommunication Services (2.6%) America Movil ADR Series L 230,769 5,076,917 Netherlands (1.0%) Beverages Efes Breweries Intl GDR 47,458(b,d) 1,874,591 Poland (0.1%) Media TVN 8,324(b) 129,477 Russia (6.1%) Food & Staples Retailing (0.5%) Pyaterochka Holding GDR 55,496(b,d) 914,574 Metals & Mining (0.5%) Evraz Group GDR 60,105(b) 921,410 Oil & Gas (4.0%) LUKOIL ADR 122,579 5,969,598 Novatek GDR 83,548(d) 1,838,056 Total 7,807,654 Wireless Telecommunication Services (1.1%) Mobile Telesystems ADR 56,509 2,090,833 South Africa (9.9%) Commercial Banks (2.7%) ABSA Group 157,353 2,273,974 Standard Bank Group 272,785 2,987,004 Total 5,260,978 Food & Staples Retailing (1.0%) Massmart Holdings 253,699 1,908,198 Metals & Mining (2.8%) Gold Fields 181,742 2,104,781 Impala Platinum Holdings 30,878 3,244,657 Total 5,349,438 Oil & Gas (1.9%) Sasol 110,215 3,709,395 Wireless Telecommunication Services (1.5%) MTN Group 385,172 2,806,781 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 164 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Emerging Markets Fund Common Stocks (continued) Issuer Shares Value(a) South Korea (15.6%) Automobiles (1.5%) Hyundai Motor 41,799 $2,894,475 Commercial Banks (3.8%) Kookmin Bank 89,770 4,557,814 Shinhan Financial Group 91,780 2,725,892 Total 7,283,706 Construction & Engineering (1.2%) Hyundai Development 83,670 2,259,977 Electric Utilities (1.3%) Korea Electric Power 76,100 2,417,483 Food & Staples Retailing (1.6%) Shinsegae 8,753 3,138,241 Semiconductors & Semiconductor Equipment (6.2%) Samsung Electronics 22,697 12,068,746 Taiwan (10.9%) Commercial Banks (0.9%) Chinatrust Financial Holding 1,820,118 1,742,853 Computers & Peripherals (2.5%) Acer 1,158,019 2,254,077 Asustek Computer 628,980 1,572,324 Quanta Computer 605,000 989,196 Total 4,815,597 Common Stocks (continued) Issuer Shares Value(a) Taiwan (cont.) Electronic Equipment & Instruments (2.7%) AU Optronics 1,759,800 $2,681,523 Hon Hai Precision Industry 479,000 2,542,326 Total 5,223,849 Industrial Conglomerates (0.7%) Far Eastern Textile 1,949,400 1,298,125 Insurance (0.9%) Cathay Financial Holding 947,000 1,821,347 Semiconductors & Semiconductor Equipment (3.2%) Taiwan Semiconductor Mfg 2,372,898 3,995,922 United Microelectronics 3,193,000 1,980,757 Total 5,976,679 Thailand (3.2%) Commercial Banks (2.3%) Bangkok Bank 795,500 2,156,298 Kasikornbank 1,467,600 2,259,558 Total 4,415,856 Oil & Gas (0.9%) PTT Public 280,300 1,672,824 Turkey (1.6%) Commercial Banks (0.9%) Akbank 264,001 1,591,516 Common Stocks (continued) Issuer Shares Value(a) Turkey (cont.) Household Durables (0.7%) Arcelik 238,266 $1,427,777 United Kingdom (1.4%) Metals & Mining Anglo American 106,166 2,694,914 Total Common Stocks (Cost: $164,201,395) $181,929,759 Preferred Stock (0.8%)(c) Issuer Shares Value(a) Brazil Banco Bradesco 35,686 $1,514,686 Total Preferred Stock (Cost: $1,182,618) $1,514,686 Short-Term Security (3.4%) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper General Electric Capital 09-01-05 3.56% $6,600,000 $6,599,347 Total Short-Term Security (Cost: $6,600,000) $6,599,347 Total Investments in Securities (Cost: $171,984,013)(e) $190,043,792 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $8,157,267 or 4.2% of net assets. (e) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $172,260,896 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $19,172,051 Unrealized depreciation (1,389,155) ---------- Net unrealized appreciation $17,782,896 ----------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 165 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Global Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (94.4%)(c) Issuer Coupon Principal Value(a) rate amount Australia (1.7%) Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75% $70,000 $78,050 Commonwealth Bank of Australia (European Monetary Unit) 11-12-09 3.38 610,000 773,617 New South Wales Treasury (Australian Dollar) 03-01-08 8.00 7,755,000 6,221,869 Telstra 04-01-12 6.38 450,000 493,839 Western Australian Treasury (Australian Dollar) 10-16-06 5.50 3,050,000 2,304,514 Total 9,871,889 Austria (1.0%) Republic of Austria (European Monetary Unit) 01-15-10 5.50 4,325,000 5,981,429 Belgium (1.9%) Kingdom of Belgium (European Monetary Unit) 03-28-10 3.00 8,495,000 10,688,648 Brazil (0.2%) Federal Republic of Brazil 01-15-18 8.00 1,055,000 1,090,343 Canada (2.3%) Canada Housing Trust #1 (Canadian Dollar) 06-15-06 5.53 3,150,000 2,707,439 Canadian Pacific Railway (Canadian Dollar) 06-15-10 4.90 395,000(d) 349,110 Corus Entertainment Sr Sub Nts 03-01-12 8.75 30,000 32,250 Govt of Canada 11-05-08 5.25 1,000,000 1,039,944 Province of British Columbia (Canadian Dollar) 08-23-10 6.38 6,150,000 5,875,250 Province of Ontario (Canadian Dollar) 03-08-06 5.90 3,270,000 2,796,170 Sun Media 02-15-13 7.63 50,000 52,813 Utilicorp Canada Finance 06-15-11 7.75 150,000 156,750 Videotron Ltee 01-15-14 6.88 35,000 35,963 Total 13,045,689 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Czechoslovakia Federated Republic (0.2%) Republic of Czechoslovakia (Czech Crown) 06-16-13 3.70% 32,900,000 $1,435,148 Denmark (0.7%) Realkredit Danmark (Danish Krone) 01-01-08 4.00 23,000,000 3,944,158 Finland (2.0%) Republic of Finland (European Monetary Unit) 07-04-07 5.00 9,070,000 11,743,640 France (6.4%) Dexia Municipal Agency (European Monetary Unit) 09-03-07 4.25 600,000 767,971 France Telecom 03-01-06 7.95 550,000 558,206 Govt of France (European Monetary Unit) 04-25-12 5.00 9,135,000 12,777,670 04-25-13 4.00 9,170,000 12,156,079 10-25-16 5.00 7,370,000 10,623,275 Total 36,883,201 Germany (10.8%) Allgemeine Hypothekenbank Rheinboden (European Monetary Unit) 09-02-09 5.00 1,955,000(d) 2,629,365 Bayerische Landesbank (Japanese Yen) Sr Nts 04-22-13 1.40 282,000,000 2,611,093 Bundesrepublik Deutschland (European Monetary Unit) 01-04-10 5.38 520,000 715,973 07-04-13 3.75 11,830,000 15,424,798 07-04-27 6.50 7,130,000 12,726,644 07-04-28 4.75 1,965,000 2,862,344 07-04-34 4.75 4,610,000 6,859,001 Bundesschatzanweisungen (European Monetary Unit) 12-16-05 2.75 7,060,000 8,723,398 DEPFA Deutsche Pfandbriefbank (European Monetary Unit) 01-15-10 5.50 2,090,000 2,888,321 Deutsche Bank (European Monetary Unit) 07-28-09 4.25 375,000 492,824 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Germany (cont.) Landesbank Berlin Girozentrale (European Monetary Unit) 04-30-07 5.00% 1,990,000 $2,560,648 Rheinische Hypothekenbank (European Monetary Unit) 07-05-10 5.75 2,125,000 2,990,012 Total 61,484,421 Greece (4.0%) Hellenic Republic (European Monetary Unit) 06-21-06 2.75 7,435,000 9,213,057 04-19-07 4.65 5,735,000 7,344,379 10-22-22 5.90 4,060,000 6,407,553 Total 22,964,989 Italy (4.6%) Buoni Poliennali Del Tesoro (European Monetary Unit) 03-01-07 4.50 7,330,000 9,350,679 10-15-07 5.00 8,425,000 10,980,708 11-01-26 7.25 3,445,191 6,414,218 Total 26,745,605 Japan (7.9%) Development Bank of Japan (Japanese Yen) 06-20-12 1.40 629,000,000 5,870,434 Govt of Japan (Japanese Yen) 12-21-09 1.70 2,531,000,000 24,071,211 03-22-10 1.70 328,000,000 3,122,384 06-20-12 1.40 672,000,000 6,277,671 12-20-12 1.00 418,000,000 3,784,364 12-20-14 1.30 233,000,000 2,107,632 12-20-34 2.40 54,000,000 490,408 Total 45,724,104 Luxembourg (0.5%) Telecom Italia Capital 09-30-34 6.00 2,620,000(d) 2,689,708 Malaysia (0.3%) Petronas Capital 05-22-12 7.00 1,475,000(d) 1,671,184 Mexico (0.4%) Govt of Mexico (Mexican Peso) 12-24-09 9.00 15,350,000 1,438,291 United Mexican States 09-27-34 6.75 381,000 413,004 (Japanese Yen) 06-06-06 6.75 48,000,000 454,728 Total 2,306,023 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 166 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Netherlands (2.9%) Bank Nederlandse Gemeenten (British Pound) 08-06-07 7.38% 1,050,000 $1,990,442 Govt of Netherlands (European Monetary Unit) 01-15-08 2.50 9,150,000 11,339,988 07-15-12 5.00 2,565,000 3,587,635 Total 16,918,065 New Zealand (1.1%) Govt of New Zealand (New Zealand Dollar) 11-15-06 8.00 8,550,000 6,087,681 Norway (1.1%) Govt of Norway (Norwegian Krone) 05-16-11 6.00 36,180,000 6,480,741 Poland (1.1%) Republic of Poland (Polish Zloty) 03-24-10 5.75 20,595,000 6,596,351 South Africa (0.3%) Republic of South Africa (South African Rand) 08-31-10 13.00 9,890,000 1,891,127 South Korea (0.1%) Korea Development Bank (Japanese Yen) 06-25-08 .98 65,000,000 592,970 Spain (4.4%) Caja de Ahorros y Monte de Piedad de Madrid (European Monetary Unit) 03-25-11 3.50 2,900,000 3,707,227 Govt of Spain (European Monetary Unit) 07-30-09 5.15 11,475,000 15,550,681 07-30-10 3.25 4,850,000 6,151,975 Total 25,409,883 Supra-National (1.0%) European Investment Bank (British Pound) 12-07-11 5.50 2,875,000 5,499,507 Sweden (0.5%) Govt of Sweden (Swedish Krona) 04-20-06 3.50 16,550,000 2,215,927 08-15-07 8.00 4,600,000 677,169 Total 2,893,096 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United Kingdom (4.3%) BT Group 12-15-10 8.38% $550,000 $645,814 HBOS Treasury Services (European Monetary Unit) 02-12-09 3.50 1,900,000 2,420,421 United Kingdom Treasury (British Pound) 03-07-12 5.00 6,150,000 11,644,536 09-07-14 5.00 5,355,000 10,265,706 Total 24,976,477 United States (32.7%) AAA Trust Series 2005-2 Cl A1 11-26-35 3.74 3,141,358(d,g) 3,138,109 Aesop Funding II LLC Series 2002-1A Cl A1 (AMBAC) 10-20-06 3.85 133,333(d,h) 133,325 Series 2004-2A Cl A1 (FGIC) 04-20-08 2.76 500,000(d,h) 489,831 Airgas 10-01-11 9.13 75,000 80,625 Allied Waste North America Series B 04-01-08 8.88 35,000 36,925 AmeriCredit Automobile Receivables Trust Series 2005-BM Cl A3 (MBIA) 02-06-10 4.05 1,700,000(h) 1,692,297 ANR Pipeline 03-15-10 8.88 75,000 81,822 ARG Funding Series 2005-1A Cl A3 (MBIA) 04-20-10 4.29 1,000,000(d,h) 993,320 ASIF Global Financing XIX Secured 01-17-13 4.90 3,500,000(d) 3,547,844 Banc of America Commercial Mtge Series 2005-1 Cl A4 11-10-42 5.03 650,000(f) 668,024 Banc of America Large Loan Series 2005-BOCA Cl A2 12-15-16 3.74 1,400,000(d,f,g) 1,400,249 Bank of America-First Union NB Commercial Mtge Series 2001-3 Cl A1 04-11-37 4.89 752,039(f) 760,022 Bayerische Landesbank Sub Nts 12-01-08 5.88 800,000 842,221 Bear Stearns Commercial Mtge Securities Series 2003-T10 Cl A1 03-13-40 4.00 350,016(f) 342,732 Series 2004-T16 Cl A3 02-13-46 4.03 480,000(f) 473,293 Series 2005-PWR8 Cl A1 06-11-41 4.21 1,468,878(f) 1,465,117 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Boyd Gaming Sr Sub Nts 12-15-12 7.75% $25,000 $26,625 04-15-14 6.75 155,000 158,294 Caesars Entertainment Sr Nts 04-15-13 7.00 510,000(i) 570,067 California State Teachers' Retirement System Trust Series 2002-C6 Cl A3 11-20-14 4.46 1,898,808(d,f) 1,902,896 Capital Auto Receivables Asset Trust Series 2004-1 09-15-10 2.84 700,000 682,417 Series 2005-1 Cl A4 07-15-09 4.05 1,400,000 1,402,128 Capital One Auto Finance Trust Series 2005-BSS Cl A3 11-15-09 4.08 1,000,000 993,300 Cardinal Health 06-15-15 4.00 1,300,000(i) 1,203,216 Carmax Auto Owner Trust Series 2005-1 Cl A4 03-15-10 4.35 500,000 501,382 CDC Commercial Mtge Trust Series 2002-FX1 Cl A2 11-15-30 5.68 1,000,000(f) 1,055,021 Chesapeake Energy 01-15-15 7.75 105,000 112,875 Sr Nts 06-15-14 7.50 15,000 16,200 Sr Unsecured 08-15-17 6.50 165,000(d) 168,300 Citigroup (European Monetary Unit) Sr Nts 05-21-10 3.88 2,580,000 3,341,795 Citigroup Commercial Mtge Trust Series 2005-C3 Cl A1 05-15-43 4.39 980,726(f) 981,506 Series 2005-EMG Cl A1 09-20-51 4.15 2,241,435(d,f) 2,233,491 CMS Energy Sr Nts 01-15-09 7.50 150,000 158,250 Colorado Interstate Gas Sr Nts 03-15-15 5.95 35,000(d) 34,738 Comcast Cable Communications Holdings 03-15-13 8.38 48,000 57,997 Compass Minerals Group 08-15-11 10.00 75,000 82,125 Cott Beverages 12-15-11 8.00 195,000 205,725 Countrywide Alternative Loan Trust Series 2005-6CB Cl 1A1 04-25-35 7.50 1,223,877(f) 1,282,826 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 167 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) CS First Boston Mtge Securities Series 2002-CKS4 Cl A1 11-15-36 4.49% $1,150,577(f) $1,152,219 Series 2004-C1 Cl A2 01-15-37 3.52 150,000(f) 146,685 Series 2005-C4 Cl A1 08-15-38 4.77 2,250,000(f) 2,273,262 DaimlerChrysler NA Holding (European Monetary Unit) 01-16-07 5.63 655,000 841,305 Dex Media West LLC/Finance Sr Nts Series B 08-15-10 8.50 135,000 145,969 DIRECTV Holdings LLC/Finance Sr Nts 03-15-13 8.38 45,000 49,388 DR Horton Sr Nts 02-15-15 5.25 665,000 638,809 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 145,000 155,223 Emmis Operating Sr Sub Nts 05-15-12 6.88 25,000 25,000 Encore Acquisition Sr Sub Nts 04-15-14 6.25 45,000 44,775 ERAC USA Finance 05-01-15 5.60 1,515,000(d) 1,564,701 Federal Home Loan Mtge Corp 07-12-10 4.13 6,650,000 6,638,023 (European Monetary Unit) 02-15-07 4.63 3,570,000 4,551,984 Federal Home Loan Mtge Corp #A11799 08-01-33 6.50 142,635(f) 147,561 Federal Home Loan Mtge Corp #A15881 11-01-33 5.00 919,493(f) 915,916 Federal Home Loan Mtge Corp #E01377 05-01-18 4.50 717,707(f) 712,982 Federal Home Loan Mtge Corp #E91326 09-01-17 6.50 241,450(f) 249,904 Federal Home Loan Mtge Corp #E99967 10-01-18 5.00 763,461(f) 770,413 Federal Home Loan Mtge Corp #G01535 04-01-33 6.00 1,114,531(f) 1,152,311 Federal Natl Mtge Assn 10-15-06 4.38 2,910,000 2,922,464 Federal Natl Mtge Assn #255377 08-01-34 7.00 1,214,344(f) 1,273,104 Federal Natl Mtge Assn #360800 01-01-09 5.74 636,665(f) 661,161 Federal Natl Mtge Assn #386599 11-01-10 4.47 362,918(f) 361,430 Federal Natl Mtge Assn #440730 12-01-28 6.00 964,665(f) 997,096 Federal Natl Mtge Assn #555316 02-01-13 4.87 797,673(f) 815,301 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Federal Natl Mtge Assn #555734 07-01-23 5.00% $680,012(f) $681,166 Federal Natl Mtge Assn #555740 08-01-18 4.50 383,387(f) 380,617 Federal Natl Mtge Assn #575487 04-01-17 6.50 515,043(f) 536,367 Federal Natl Mtge Assn #621581 12-01-31 6.50 423,897(f) 441,769 Federal Natl Mtge Assn #631315 02-01-17 5.50 283,123(f) 289,920 Federal Natl Mtge Assn #639965 08-01-17 6.00 917,357(f) 950,669 Federal Natl Mtge Assn #640996 05-01-32 7.50 327,235(f) 346,951 Federal Natl Mtge Assn #646147 06-01-32 7.00 268,127(f) 282,271 Federal Natl Mtge Assn #652284 08-01-32 6.50 286,231(f) 296,433 Federal Natl Mtge Assn #653145 07-01-17 6.00 186,003(f) 192,758 Federal Natl Mtge Assn #654121 09-01-17 6.00 663,486(f) 687,601 Federal Natl Mtge Assn #655589 08-01-32 6.50 1,194,913(f) 1,244,751 Federal Natl Mtge Assn #666424 08-01-32 6.50 253,099(f) 262,120 Federal Natl Mtge Assn #670461 11-01-32 7.50 455,985(f) 483,458 Federal Natl Mtge Assn #684595 03-01-33 6.00 1,145,044(f) 1,173,155 Federal Natl Mtge Assn #687583 04-01-33 6.00 2,546,363(f) 2,610,445 Federal Natl Mtge Assn #688034 03-01-33 5.50 353,366(f) 358,401 Federal Natl Mtge Assn #688691 03-01-33 5.50 715,931(f) 723,956 Federal Natl Mtge Assn #720786 09-01-33 5.50 1,406,046(f) 1,421,808 Federal Natl Mtge Assn #735029 09-01-13 5.28 692,243(f) 720,918 Federal Natl Mtge Assn #739474 10-01-33 5.50 771,708(f) 782,996 Federal Natl Mtge Assn #741850 09-01-33 5.50 2,028,819(f) 2,051,562 Federal Natl Mtge Assn #748110 10-01-33 6.50 2,543,515(f) 2,632,003 Federal Natl Mtge Assn #753507 12-01-18 5.00 2,682,312(f) 2,703,340 Federal Natl Mtge Assn #755498 11-01-18 5.50 1,797,119(f) 1,837,532 Federal Natl Mtge Assn #756799 11-01-33 6.50 701,961(f) 731,499 Federal Natl Mtge Assn #756844 02-01-19 5.00 631,422(f) 636,184 Federal Natl Mtge Assn #791393 10-01-19 5.50 3,062,628(f) 3,130,352 Ford Motor 10-01-28 6.63 391,000 290,852 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Franklin Auto Trust Series 2004-1 Cl A3 (MBIA) 03-15-12 4.15% $800,000(h) $799,114 GE Capital Commercial Mtge Series 2001-3 Cl A1 06-10-38 5.56 727,606(f) 747,395 Series 2005-C1 Cl A5 06-10-48 4.77 500,000(f) 504,941 Series 2005-C3 Cl A1 07-10-45 4.59 1,060,000(f) 1,067,928 Series 2005-C3 Cl A2 07-10-45 4.85 790,000(f) 803,163 General Electric Capital (European Monetary Unit) 06-20-07 5.13 540,000 697,759 (New Zealand Dollar) 02-04-10 6.63 3,435,000 2,401,031 General Electric Capital Assurance Series 2003-1 Cl A3 05-12-35 4.77 1,775,000(d,f) 1,792,519 Genworth Financial (Japanese Yen) 06-20-11 1.60 120,000,000 1,095,938 Georgia Gulf Sr Nts 12-15-13 7.13 100,000 103,750 GMAC Commercial Mtge Securities Series 2004-C3 Cl A4 12-10-41 4.55 900,000(f) 898,117 Series 2005-C1 Cl A1 05-10-43 4.21 785,328(f) 782,889 Govt Natl Mtge Assn Collateralized Mtge Obligation Interest Only Series 2002-80 Cl CI 01-20-32 0.00 863,822(e,f) 92,621 Govt Natl Mtge Assn #604708 10-15-33 5.50 868,787(f) 886,435 Greenwich Capital Commercial Funding Series 2004-GG1 Cl A4 06-10-36 4.76 800,000(f) 808,311 Series 2004-GG1 Cl A5 06-10-36 4.88 500,000(f) 509,091 Series 2005-GG3 Cl A1 08-10-42 3.92 549,254(f) 545,354 Series 2005-GG3 Cl A3 08-10-42 4.57 1,550,000(f) 1,550,904 GS Mtge Securities II Series 2004-GG2 Cl A4 08-10-38 4.96 900,000(f) 917,481 Series 2005-GG4 Cl A1 07-10-39 4.37 1,214,088(f) 1,214,817 HCA Sr Nts 03-15-14 5.75 100,000 98,827 Hilton Hotels 12-01-12 7.63 100,000 114,734 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 168 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53% $600,000 $593,832 HSBC Bank USA Sub Nts 08-15-35 5.63 2,750,000 2,837,101 ING Security Life Institutional Funding 01-15-10 4.25 1,180,000(d) 1,172,013 Intl Paper (European Monetary Unit) 08-11-06 5.38 500,000 633,327 IPALCO Enterprises Secured 11-14-08 8.38 140,000 150,150 ITT 11-15-15 7.38 125,000 136,875 JPMorgan Chase Commercial Mtge Securities Series 2002-CIB5 Cl A1 10-12-37 4.37 792,178(f) 792,482 Series 2003-LN1 Cl A1 10-15-37 4.13 363,898(f) 358,565 Series 2003-ML1A Cl A1 03-12-39 3.97 413,073(f) 406,324 Series 2004-CBX Cl A5 01-12-37 4.65 700,000(f) 702,990 Series 2005-CB11 Cl A3 08-12-37 5.20 950,000(f,i) 983,013 Key Energy Services Series C 03-01-08 8.38 65,000 67,275 L-3 Communications 06-15-12 7.63 230,000 243,800 Lamar Media 01-01-13 7.25 50,000 52,625 Sr Sub Nts 08-15-15 6.63 180,000(d) 183,600 LB-UBS Commercial Mtge Trust Series 2003-C8 Cl A3 11-15-27 4.83 900,000(f) 912,474 Series 2004-C2 Cl A3 03-15-29 3.97 650,000(f) 628,173 Series 2004-C4 Cl A3 06-15-29 5.16 850,000(f,g) 878,166 Series 2004-C6 Cl A1 08-15-29 3.88 1,234,264(f) 1,220,869 Series 2004-C6 Cl A2 08-15-29 4.19 1,100,000(f) 1,091,398 Series 2004-C6 Cl A4 08-15-29 4.58 950,000(f) 953,375 Series 2004-C7 Cl A2 10-15-29 3.99 800,000(f) 785,840 Series 2004-C8 Cl A2 12-15-29 4.20 1,000,000(f) 991,120 Series 2005-C3 Cl A1 07-15-30 4.39 878,004(f) 879,857 Series 2005-C5 Cl A2 09-15-40 4.89 1,050,000(f) 1,065,519 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Long Beach Auto Receivables Trust Series 2004-C Cl A3 (FSA) 09-15-09 3.40% $600,000(h) $593,742 MacDermid 07-15-11 9.13 20,000 21,500 Meritage Homes 03-15-15 6.25 25,000 23,406 Merrill Lynch Mtge Trust Series 2005-MCP1 Cl A1 06-12-43 4.22 1,124,134(f) 1,121,147 Metris Master Trust Series 2004-2 Cl M 10-20-10 4.00 275,000(g) 275,261 Metropolitan Life Global Funding I Sr Nts 08-19-10 4.63 700,000(d) 705,449 MGM MIRAGE 10-01-09 6.00 25,000 25,000 Sr Nts 02-27-14 5.88 125,000 120,625 07-15-15 6.63 190,000(b,d) 191,900 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 30,000 30,375 Sr Sub Nts 04-01-12 8.00 50,000 53,250 Moog Sr Sub Nts 01-15-15 6.25 10,000 10,000 Morgan Stanley Capital I Series 2004-HQ4 Cl A5 04-14-40 4.59 690,000(f) 689,607 Morgan Stanley Group (European Monetary Unit) 03-16-06 5.25 2,045,000 2,561,131 Morgan Stanley, Dean Witter Capital I Series 2002-TOP7 Cl A2 01-15-39 5.98 1,350,000(f) 1,457,584 Newfield Exploration Sr Sub Nts 08-15-12 8.38 320,000 348,000 Nextel Communications Sr Nts Series E 10-31-13 6.88 185,000 198,149 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 900,000 890,703 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 20,000 21,000 NorthWestern Energy Secured 11-01-14 5.88 10,000(d) 10,326 Offshore Logistics 06-15-13 6.13 15,000 14,625 Owens-Illinois Glass Container 05-15-11 7.75 150,000 159,000 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Peabody Energy Series B 03-15-13 6.88% $145,000 $150,981 Plains Exploration & Production Sr Nts 06-15-14 7.13 50,000 53,250 Popular ABS Mtge Pass-Through Trust Series 2005-A Cl AF2 06-25-35 4.49 560,000 557,462 Potomac Edison 1st Mtge 11-15-14 5.35 75,000(d) 77,707 Pricoa Global Funding I 06-25-12 4.63 2,935,000(d) 2,940,439 Pride Intl Sr Nts 07-15-14 7.38 25,000 27,125 Prudential Commercial Mtge Trust Series 2003-PWR1 Cl A1 02-11-36 3.67 824,691(f) 805,907 Qwest 03-15-12 8.88 130,000 142,025 Residential Capital 06-30-10 6.38 1,085,000(d) 1,107,590 Silgan Holdings Sr Sub Nts 11-15-13 6.75 30,000 30,638 Simon Property Group LP 06-15-15 5.10 1,680,000(d) 1,673,767 Southern Natural Gas 03-15-10 8.88 100,000 109,095 Southern Star Central Secured 08-01-10 8.50 50,000 54,000 Sprint Capital 11-15-28 6.88 1,470,000 1,684,539 Standard-Pacific Sr Nts 08-15-15 7.00 85,000 83,725 Station Casinos Sr Nts 04-01-12 6.00 90,000 90,675 Sr Sub Nts 03-01-16 6.88 335,000(b,d) 344,213 Susquehanna Media Sr Sub Nts 04-15-13 7.38 115,000 120,606 Toyota Motor Credit (Japanese Yen) 06-09-08 0.75 292,000,000 2,666,411 Transcontinental Gas Pipe Line Series B 08-15-11 7.00 85,000 91,375 Triad Auto Receivables Owner Trust Series 2005-A Cl A3 (AMBAC) 03-12-10 4.05 1,500,000(h) 1,492,440 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 169 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Triad Hospitals Sr Nts 05-15-12 7.00% $100,000 $103,500 U.S. Treasury 02-15-08 3.38 1,795,000 1,775,366 05-15-15 4.13 540,000 543,480 08-15-15 4.25 3,935,000 4,009,395 08-15-23 6.25 6,600,000 8,178,331 02-15-26 6.00 1,590,000(i) 1,949,862 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 5,678,695(j) 5,671,929 United Auto Group 03-15-12 9.63 35,000 37,581 Verizon Pennsylvania Series A 11-15-11 5.65 7,005,000 7,324,918 Bonds (continued) Issuer Coupon Principal Value(a) rate amount United States (cont.) Wachovia Bank Commercial Mtge Trust Series 2003-C8 Cl A2 11-15-35 3.89% $750,000(f) $737,943 Series 2005-C16 Cl A3 10-15-41 4.62 1,050,000(f) 1,052,976 Wells Fargo Bank NA Sub Nts 02-01-11 6.45 2,365,000 2,597,773 World Omni Auto Receivables Trust Series 2005-A Cl A3 06-12-09 3.54 1,100,000 1,088,846 Total 187,457,302 Total Bonds (Cost: $525,421,390) $543,073,379 Short-Term Securities (4.0%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (0.9%) Federal Home Loan Bank 09-09-05 3.41% $5,000,000 $4,995,737 Commercial Paper (3.1%) HSBC Finance 09-01-05 3.56% $12,800,000 $12,798,735 Natl Australia Funding 09-01-05 3.49 5,000,000(k) 4,999,515 Total 17,798,250 Total Short-Term Securities (Cost: $22,796,211) $22,793,987 Total Investments in Securities (Cost: $548,217,601)(l) $565,867,366 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 170 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Global Bond Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $537,876. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $33,145,694 or 5.8% of net assets. (e) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (h) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation FGIC -- Financial Guaranty Insurance Company FSA -- Financial Security Assurance MBIA -- MBIA Insurance Corporation (i) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts Eurodollar, Sept. 2005, 10-year $4,400,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 1,200,000 U.S. Treasury Note, Sept. 2005, 10-year 1,400,000 U.S. Treasury Note, Dec. 2005, 5-year 3,900,000 U.S. Treasury Note, Dec. 2005, 10-year 17,300,000 (j) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (k) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $4,999,515 or 0.9% of net assets. (l) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $548,386,831 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $20,882,490 Unrealized depreciation (3,401,955) ---------- Net unrealized appreciation $17,480,535 ----------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 171 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Global Inflation Protected Securities Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (98.5%) Issuer Coupon Principal Value(a) rate amount Sovereign (1.0%) Bundesrepublik Deutschland (European Monetary Unit) 01-04-07 6.00% 578,000(c) $748,215 United Kingdom Treasury (British Pound) 12-07-06 7.50 235,000(c) 440,930 Total 1,189,145 Bonds (continued) Issuer Coupon Principal Value(a) rate amount U.S. Government Obligations & Agencies (97.5%)(b) U.S. Treasury Inflation-Indexed Bond 01-15-07 3.38% $11,772,780 $12,202,474 01-15-08 3.63 9,896,140 10,495,066 01-15-09 3.88 6,890,428 7,492,391 04-15-10 0.88 5,328,417 5,203,373 07-15-12 3.00 14,895,560 16,301,026 01-15-14 2.00 14,747,206 15,202,559 07-15-14 2.00 8,424,892 8,695,247 01-15-15 1.63 8,026,568 8,017,005 01-15-25 2.38 5,334,561 5,784,153 04-15-28 3.63 13,780,994 18,318,682 04-15-29 3.88 4,129,089 5,742,916 Total 113,454,892 Total Bonds (Cost: $113,791,069) $114,644,037 Short-Term Securities (1.2%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43% $700,000 $698,670 Federal Natl Mtge Assn Disc Nt 09-14-05 3.42 700,000 699,069 Total Short-Term Securities (Cost: $1,397,872) $1,397,739 Total Investments in Securities (Cost: $115,188,941)(d) $116,041,776 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 1.0% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $115,277,487 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $783,988 Unrealized depreciation (19,699) ------- Net unrealized appreciation $764,289 -------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 172 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Growth Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (95.7%) Issuer Shares Value(a) Aerospace & Defense (1.1%) Boeing 21,502 $1,441,064 Goodrich 8,567 392,540 Honeywell Intl 14,806 566,774 Lockheed Martin 33,670 2,095,620 Total 4,495,998 Beverages (1.2%) PepsiCo 88,183 4,836,838 Biotechnology (3.1%) Amgen 75,961(b) 6,069,283 Biogen Idec 28,185(b) 1,187,998 Genentech 39,138(b) 3,676,624 Gilead Sciences 32,556(b) 1,399,908 Total 12,333,813 Capital Markets (0.8%) Franklin Resources 16,062 1,292,027 Investors Financial Services 42,241 1,483,504 State Street 11,237 543,084 Total 3,318,615 Chemicals (0.6%) Monsanto 39,885 2,546,258 Commercial Banks (0.1%) ICICI Bank ADR 21,845(c) 510,736 Commercial Services & Supplies (0.1%) Cendant 18,317 372,568 Communications Equipment (4.0%) CIENA 177,980(b) 400,455 Cisco Systems 329,132(b) 5,799,306 Motorola 91,345 1,998,629 Nokia ADR 370,967(c) 5,850,149 QUALCOMM 40,713 1,616,713 Total 15,665,252 Computers & Peripherals (3.3%) Dell 201,860(b) 7,186,216 EMC 281,874(b) 3,624,900 Hewlett-Packard 71,762 1,992,113 Total 12,803,229 Consumer Finance (0.4%) Capital One Financial 6,110 502,486 First Marblehead 32,798(b) 948,847 Total 1,451,333 Diversified Financial Services (0.5%) Contax Participacoes 45,600(b,c) 29,686 streetTRACKS Gold Trust 45,505(b) 1,974,007 Total 2,003,693 Common Stocks (continued) Issuer Shares Value(a) Diversified Telecommunication Services (19.2%) ALLTEL 27,166 $1,684,020 Brasil Telecom Participacoes ADR 14,800(c) 539,460 Chunghwa Telecom 72,430(c) 1,394,278 France Telecom 31,211(c) 943,561 MCI 265,100 6,797,164 Sprint Nextel 1,900,537 49,280,924 Tele Norte Leste Participacoes 63,200(c) 950,528 Telewest Global 578,623(b,c) 12,845,431 Verizon Communications 16,236 531,080 Total 74,966,446 Electronic Equipment & Instruments (0.2%) Flextronics Intl 50,403(b,c) 658,263 Energy Equipment & Services (1.0%) Halliburton 32,389 2,007,146 Nabors Inds 6,055(b,c) 405,685 Schlumberger 9,277 799,956 Transocean 12,960(b) 765,158 Total 3,977,945 Food & Staples Retailing (1.1%) Rite Aid 192,600(b) 785,808 Safeway 16,300 386,799 Wal-Mart Stores 72,776 3,272,009 Total 4,444,616 Food Products (0.7%) Kellogg 61,640 2,794,141 Health Care Equipment & Supplies (2.8%) Alcon 6,754(c) 797,310 Baxter Intl 123,528 4,981,885 Boston Scientific 49,765(b) 1,337,683 Guidant 47,924 3,385,351 Hospira 13,900(b) 553,776 Total 11,056,005 Health Care Providers & Services (5.5%) Aetna 15,959 1,271,454 AmerisourceBergen 11,932 890,962 Cardinal Health 92,692 5,525,370 HCA 101,913 5,024,311 HealthSouth 55,731(b) 295,374 Magellan Health Services 50,738(b) 1,798,662 McKesson 15,126 705,930 Medco Health Solutions 43,829(b) 2,159,455 UnitedHealth Group 70,881 3,650,372 WellPoint 4,530(b) 336,353 Total 21,658,243 Hotels, Restaurants & Leisure (0.2%) McDonald's 22,150 718,768 Common Stocks (continued) Issuer Shares Value(a) Household Durables (0.1%) Harman Intl Inds 1,306 $135,040 Tempur-Pedic Intl 17,639(b) 283,459 Total 418,499 Household Products (2.4%) Procter & Gamble 59,529 3,302,669 Spectrum Brands 217,277(b) 6,116,347 Total 9,419,016 Industrial Conglomerates (1.3%) General Electric 28,070 943,433 Tyco Intl 148,504(c) 4,132,866 Total 5,076,299 Insurance (2.3%) ACE 47,797(c) 2,122,665 American Intl Group 93,242 5,519,926 Chubb 4,157 361,493 Hartford Financial Services Group 14,668 1,071,497 Total 9,075,581 Internet & Catalog Retail (0.2%) eBay 15,167(b) 614,112 Internet Software & Services (2.0%) Google Cl A 26,796(b) 7,663,656 Media (11.9%) Comcast Cl A 169,404(b) 5,209,173 Grupo Televisa ADR 5,535(c) 347,598 Liberty Global Cl A 68,635(b) 3,483,226 News Corp Cl A 56,455 915,136 NTL 440,298(b) 28,126,237 Time Warner 62,811(b) 1,125,573 Viacom Cl B 22,121 751,893 Vivendi Universal ADR 197,160(c) 6,220,398 Total 46,179,234 Metals & Mining (3.0%) Agnico-Eagle Mines 28,201(c) 368,869 Barrick Gold 25,187(c) 660,403 Coeur d'Alene Mines 579,462(b) 2,115,036 Glamis Gold 35,199(b,c) 669,485 Harmony Gold Mining ADR 123,159(c) 932,314 Kinross Gold 80,667(b,c) 509,815 Newmont Mining 137,210 5,430,773 PAN American Silver 56,000(b,c) 873,040 Stillwater Mining 33,478(b) 268,828 Total 11,828,563 Multiline Retail (0.4%) JC Penney 11,011 535,465 Kohl's 19,885(b) 1,042,968 Total 1,578,433 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 173 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Growth Fund Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (4.3%) Anadarko Petroleum 25,618 $2,327,908 Burlington Resources 24,859 1,834,346 Chevron 35,445 2,176,323 ConocoPhillips 40,906 2,697,341 Devon Energy 26,185 1,591,262 EnCana 8,330(c) 409,753 Exxon Mobil 32,290 1,934,171 Kinder Morgan Management LLC --(b) 1 Marathon Oil 23,638 1,520,160 Valero Energy 22,548 2,401,361 Total 16,892,626 Personal Products (2.5%) Avon Products 11,139 365,582 Gillette 176,159 9,489,685 Total 9,855,267 Pharmaceuticals (7.8%) Abbott Laboratories 63,096 2,847,522 AstraZeneca 12,349(c) 566,970 Bristol-Myers Squibb 58,258 1,425,573 GlaxoSmithKline ADR 32,394(c) 1,578,236 Johnson & Johnson 88,884 5,634,357 Novartis ADR 79,865(c) 3,893,419 Pfizer 314,755 8,016,809 Roche Holding 20,680(c) 2,869,652 Schering-Plough 52,426 1,122,441 Wyeth 53,496 2,449,582 Total 30,404,561 Semiconductors & Semiconductor Equipment (3.4%) Applied Materials 20,202 369,899 Freescale Semiconductor Cl A 68,897(b) 1,645,260 Freescale Semiconductor Cl B 37,150(b) 894,572 Intel 255,751 6,577,916 MEMC Electronic Materials 143,201(b) 2,414,369 Texas Instruments 45,608 1,490,469 Total 13,392,485 Software (4.0%) Adobe Systems 13,899 375,829 BMC Software 18,140(b) 362,800 Compuware 52,600(b) 476,556 Electronic Arts 20,192(b) 1,156,598 Macromedia 20,555(b) 759,507 Mercury Interactive 43,663(b) 1,601,122 Microsoft 194,495 5,329,164 Novell 62,656(b) 412,276 Oracle 226,561(b) 2,938,496 Siebel Systems 148,080 1,221,660 Symantec 42,897(b) 899,979 Total 15,533,987 Common Stocks (continued) Issuer Shares Value(a) Specialty Retail (--%) Gap 7,353 $139,781 Thrifts & Mortgage Finance (0.8%) Countrywide Financial 40,669 1,374,205 Fannie Mae 23,467 1,197,756 Freddie Mac 7,816 471,930 Total 3,043,891 Tobacco (0.8%) Altria Group 43,275 3,059,543 Wireless Telecommunication Services (2.6%) Hutchison Telecommunications Intl ADR 41,132(b,c) 746,546 KT Freetel 7,750(c) 187,754 LG Telecom 38,503(b,c) 207,782 Millicom Intl Cellular 46,138(b,c) 886,311 NeuStar Cl A 81,137(b) 2,232,079 O2 277,378(c) 767,990 Orascom Telecom GDR 74,302(c) 3,435,724 Telesp Celular Participacoes 91,685(c) 380,493 Turkcell Iletisim Hizmetleri ADR 59,080(c) 793,444 Vodafone Group ADR 24,663(c) 672,067 Total 10,310,190 Total Common Stocks (Cost: $353,587,807) $375,098,484 Options Purchased (0.2%) Issuer Contracts Exercise Expiration Value(a) price date Calls Sprint Nextel 920 $27.50 Jan. 2006 $625,600 Puts S&P 500 Index 135 1,135 Dec. 2005 135,000 Total Options Purchased (Cost: $823,415) $760,600 Short-Term Securities (4.4%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (2.6%) Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43% $2,300,000 $2,295,624 Federal Natl Mtge Assn Disc Nt 09-14-05 3.31 8,000,000 7,989,702 Total 10,285,326 Commercial Paper (1.8%) Bear Stearns Companies 09-09-05 3.43 900,000 899,228 Citibank 09-01-05 3.51 5,000,000(d) 4,999,513 Old Line Funding 09-01-05 3.56 1,200,000(d) 1,199,881 Total 7,098,622 Total Short-Term Securities (Cost: $17,385,594) $17,383,948 Total Investments in Securities (Cost: $371,796,816)(e) $393,243,032 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 174 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Growth Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 15.1% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $6,199,394 or 1.6% of net assets. (e) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $376,792,457 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $22,666,204 Unrealized depreciation (6,215,629) ---------- Net unrealized appreciation $16,450,575 ----------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 175 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - High Yield Bond Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (93.2%) Issuer Coupon Principal Value(a) rate amount Aerospace & Defense (3.2%) Communications & Power Inds Sr Sub Nts 02-01-12 8.00% $4,300,000 $4,439,750 CPI Holdco Sr Nts 02-01-15 9.67 4,200,000(h) 4,164,896 DRS Technologies Sr Sub Nts 11-01-13 6.88 3,190,000 3,229,875 L-3 Communications 06-15-12 7.63 7,425,000 7,870,500 07-15-13 6.13 7,425,000 7,499,250 Sr Sub Nts 10-15-15 6.38 8,100,000(d) 8,221,500 Moog Sr Sub Nts 01-15-15 6.25 1,660,000 1,660,000 Standard Aero Holdings 09-01-14 8.25 2,895,000 2,895,000 Total 39,980,771 Automotive (3.6%) Affinia Group 11-30-14 9.00 5,455,000(d) 4,500,375 ArvinMeritor 02-15-09 6.80 3,920,000 3,861,200 GMAC 09-15-11 6.88 13,440,000 12,727,452 IAAI Finance Sr Unsecured 04-01-13 11.00 4,900,000(d) 5,116,384 Lear Series B 08-01-14 5.75 9,375,000 8,332,031 Tenneco Automotive Series B 07-15-13 10.25 5,250,000 5,958,750 TRW Automotive Sr Nts 02-15-13 9.38 4,325,000 4,800,750 Total 45,296,942 Brokerage (0.7%) LaBranche & Co Sr Nts 05-15-09 9.50 830,000 879,800 05-15-12 11.00 6,855,000 7,574,775 Total 8,454,575 Building Materials (2.0%) Ainsworth Lumber 10-01-12 7.25 5,595,000(c) 5,231,325 Compression Polymers Holdings Sr Nts 07-01-13 10.50 2,425,000(d) 2,437,125 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Building Materials (cont.) Euramax Term Loan B 08-08-13 10.56% $6,000,000 $6,075,000 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 5,190,000 5,449,500 Norcraft Holdings/Capital Sr Disc Nts (Zero coupon through 09-01-08, thereafter 9.75%) 09-01-12 9.80 6,090,000(f) 4,323,900 NTK Holdings Sr Disc Nts (Zero coupon through 09-01-09, thereafter 10.375%) 03-01-14 11.12 2,695,000(d,f) 1,549,625 Total 25,066,475 Chemicals (2.9%) BCP Crystal US Holdings Sr Sub Nts 06-15-14 9.63 3,438,000 3,897,833 BCP Crystal US Holdings/Sub3 Sr Disc Nts Series B (Zero coupon through 10-01-09, thereafter 10.50%) 10-01-14 9.37 3,774,000(f) 2,698,410 Equistar Chemicals LP/Funding Sr Nts 05-01-11 10.63 3,875,000 4,301,250 Georgia Gulf Sr Nts 12-15-13 7.13 4,005,000 4,155,188 INVISTA 05-01-12 9.25 13,360,000(d) 14,629,199 Nell Sr Nts 08-15-15 8.38 3,440,000(c,d) 3,478,700 PQ 02-15-13 7.50 3,580,000(d) 3,597,900 Total 36,758,480 Construction Machinery (2.1%) Columbus McKinnon Sr Sub Nts 11-01-13 8.88 1,510,000(d,g) 1,528,875 Gardner Denver 05-01-13 8.00 460,000(d) 487,600 NationsRent Companies Secured 10-15-10 9.50 7,070,000 7,741,650 Neff Rental LLC/Finance Secured 06-15-12 11.25 2,540,000(d) 2,705,100 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Construction Machinery (cont.) United Rentals North America 02-15-12 6.50% $6,425,000 $6,272,406 Sr Sub Nts 02-15-14 7.00 7,295,000 6,948,488 Total 25,684,119 Consumer Cyclical Services (0.1%) Da-Lite Screen Sr Nts 05-15-11 9.50 1,195,000 1,269,688 Consumer Products (2.5%) AAC Group Holding Sr Disc Nts (Zero coupon through 10-01-08, thereafter 10.25%) 10-01-12 10.07 3,225,000(d,f) 2,386,500 ACCO Brands Sr Sub Nts 08-15-15 7.63 2,840,000(d) 2,847,100 Amscan Holdings Sr Sub Nts 05-01-14 8.75 1,895,000 1,804,988 Sealy Mattress Sr Sub Nts 06-15-14 8.25 3,995,000 4,264,663 Simmons Bedding Sr Disc Nts (Zero coupon through 12-15-09, thereafter 10.00%) 12-15-14 10.00 2,265,000(d,f) 1,302,375 Sr Sub Nts 01-15-14 7.88 5,665,000 5,438,399 Spectrum Brands 02-01-15 7.38 5,885,000 5,664,312 Visant 10-01-12 7.63 5,105,000 5,245,388 Visant Holding Sr Disc Nts (Zero coupon through 12-01-08, thereafter 10.25%) 12-01-13 10.14 3,350,000(f) 2,437,125 Total 31,390,850 Diversified Manufacturing (0.7%) ALH Finance LLC Sr Sub Nts 01-15-13 8.50 5,605,000 5,422,838 TriMas 06-15-12 9.88 3,815,000 3,261,825 Total 8,684,663 Electric (4.6%) Aquila Sr Nts 11-15-09 7.63 6,185,000 6,416,938 02-01-11 9.95 3,645,000 4,055,063 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 176 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) CMS Energy Sr Nts 08-01-10 7.75% $5,905,000 $6,406,925 Midwest Generation LLC Series B 01-02-16 8.56 6,910,160 7,601,176 Mirant Americas Generation LLC Sr Nts 10-01-21 8.50 3,615,000(b) 4,247,625 NRG Energy 12-15-13 8.00 2,943,000 3,178,440 Reliant Energy Secured 12-15-14 6.75 8,665,000 8,491,700 Tenaska Alabama Partners LP Secured 06-30-21 7.00 4,990,000(d) 5,205,518 Texas Genco LLC/Financing Sr Nts 12-15-14 6.88 9,238,000(d) 9,584,424 Utilicorp Canada Finance 06-15-11 7.75 2,005,000(c) 2,095,225 Total 57,283,034 Entertainment (2.3%) Hit Entertainment Term Loan B 02-24-12 8.88 2,700,000(g) 2,740,500 Loews Cineplex 08-01-14 9.00 11,850,000(d) 11,642,625 Six Flags Sr Nts 06-01-14 9.63 4,115,000 4,125,288 Speedway Motorsports Sr Sub Nts 06-01-13 6.75 6,425,000 6,649,875 United Artists Theatre 07-01-15 9.30 3,092,333 3,061,410 Total 28,219,698 Environmental (2.4%) Allied Waste North America Secured 02-15-14 6.13 6,740,000 6,285,050 Series B 09-01-12 9.25 695,000 759,288 Sr Nts 04-15-13 7.88 5,180,000 5,335,400 Clean Harbors Secured 07-15-12 11.25 5,350,000(d) 5,992,000 Waste Services Sr Sub Nts 04-15-14 9.50 7,030,000(d) 7,012,424 Term Loan B 03-31-11 5.28 4,505,779 4,573,366 Total 29,957,528 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Food and Beverage (1.9%) American Seafoods Group LLC/Finance Sr Disc Nts (Zero coupon through 11-01-08, thereafter 11.50%) 11-01-11 12.12% $10,755,000(f) $8,039,363 Burns Philp Capital Property Sr Sub Nts 02-15-11 10.75 13,645,000(c) 15,214,175 Total 23,253,538 Gaming (5.5%) Boyd Gaming Sr Sub Nts 04-15-14 6.75 15,500,000 15,829,374 CCM Merger 08-01-13 8.00 3,225,000(d) 3,289,500 MGM MIRAGE Sr Nts 02-27-14 5.88 15,345,000 14,807,924 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 6,175,000 6,252,188 Sr Sub Nts 04-01-12 8.00 6,277,000 6,685,005 Penn Natl Gaming Sr Sub Nts 03-01-15 6.75 3,135,000 3,103,650 River Rock Entertainment Authority Sr Nts 11-01-11 9.75 6,105,000 6,700,238 Seneca Gaming Sr Nts 05-01-12 7.25 3,405,000 3,541,200 Station Casinos Sr Nts 04-01-12 6.00 7,605,000 7,662,038 Wheeling Island Gaming 12-15-09 10.13 560,000 592,900 Total 68,464,017 Gas Pipelines (2.9%) ANR Pipeline 03-15-10 8.88 8,045,000 8,776,741 Colorado Interstate Gas Sr Nts 03-15-15 5.95 4,775,000(d) 4,739,188 El Paso CGP 06-15-10 7.75 650,000 666,250 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 9,185,000 9,832,607 Southern Natural Gas 03-15-10 8.88 4,925,000 5,372,958 Southern Star Central Secured 08-01-10 8.50 6,190,000 6,685,200 Total 36,072,944 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Health Care (7.7%) Community Health Systems Sr Sub Nts 12-15-12 6.50% $6,060,000 $6,128,175 DaVita Sr Nts 03-15-13 6.63 1,885,000(d) 1,913,275 Sr Sub Nts 03-15-15 7.25 7,875,000(d) 8,002,969 Fisher Scientific Intl Sr Sub Nts 07-01-15 6.13 5,500,000(d) 5,500,000 HCA Sr Nts 03-15-14 5.75 3,425,000 3,384,814 Sr Unsecured 12-01-09 5.50 3,410,000 3,395,201 01-15-15 6.38 6,370,000 6,539,939 IASIS Healthcare LLC/Capital Sr Sub Nts 06-15-14 8.75 7,500,000 8,081,250 LifeCare Holdings Sr Sub Nts 08-15-13 9.25 5,070,000(d) 4,993,950 MedCath Holdings Sr Nts 07-15-12 9.88 5,610,000 6,227,100 Select Medical 02-01-15 7.63 6,095,000 5,927,388 Tenet Healthcare Sr Nts 07-01-14 9.88 335,000 356,775 02-01-15 9.25 1,080,000(d) 1,115,100 Triad Hospitals Sr Nts 05-15-12 7.00 9,955,000 10,303,424 US Oncology 08-15-12 9.00 3,050,000 3,324,500 08-15-14 10.75 2,215,000 2,502,950 US Oncology Holdings Sr Nts 03-15-15 8.62 6,280,000(d,h) 6,280,000 Vanguard Health Holding I LLC Sr Disc Nts (Zero coupon through 10-01-09, thereafter 11.25%) 10-01-15 10.69 4,665,000(f) 3,463,763 Vanguard Health Holding II LLC Sr Sub Nts 10-01-14 9.00 8,150,000 8,863,124 Total 96,303,697 Home Construction (1.6%) Meritage Homes 03-15-15 6.25 4,930,000 4,615,713 Standard Pacific Sr Nts 08-15-10 6.50 860,000 853,550 Sr Sub Nts 04-15-12 9.25 1,250,000 1,371,875 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 177 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Home Construction (cont.) Stanley-Martin Communities LLC Sr Sub Nts 08-15-15 9.75% $2,820,000(d) $2,848,200 WCI Communities 03-15-15 6.63 6,795,000 6,200,437 William Lyon Homes Sr Nts 12-15-12 7.63 985,000 940,675 02-15-14 7.50 3,430,000 3,241,350 Total 20,071,800 Independent Energy (3.1%) Chesapeake Energy Sr Nts 09-15-13 7.50 800,000 860,000 06-15-14 7.50 2,177,000 2,351,160 08-15-14 7.00 7,341,000 7,744,755 06-15-15 6.38 3,060,000 3,121,200 01-15-16 6.88 1,760,000 1,823,800 Encore Acquisition Sr Sub Nts 04-15-14 6.25 2,300,000 2,288,500 07-15-15 6.00 5,000,000(d) 4,893,750 Hilcorp Energy I/Finance Sr Nts 09-01-10 10.50 6,660,000(d) 7,342,650 Newfield Exploration Sr Sub Nts 08-15-12 8.38 4,163,000 4,527,263 09-01-14 6.63 3,970,000 4,158,575 Total 39,111,653 Lodging (0.8%) Vail Resorts Sr Sub Nts 02-15-14 6.75 10,290,000 10,521,525 Media Cable (6.8%) Cablevision Systems Sr Nts Series B 04-15-12 8.00 2,235,000 2,221,031 CCO Holdings LLC/Capital Sr Nts 12-15-10 7.54 3,520,000(d,h) 3,484,800 11-15-13 8.75 8,885,000 8,818,363 Charter Communications Holdings LLC/Capital Sr Disc Nts 01-15-10 11.75 3,270,000 2,779,500 Charter Communications Operating LLC/Capital Sr Nts 04-30-12 8.00 9,580,000(d) 9,699,749 CSC Holdings Sr Nts 04-15-12 7.00 5,100,000(d) 4,870,500 Sr Sub Deb 05-15-16 10.50 2,175,000 2,354,438 DIRECTV Holdings LLC/Finance Sr Nts 03-15-13 8.38 9,970,000 10,942,074 06-15-15 6.38 5,000,000(d) 4,987,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Cable (cont.) Echostar DBS 10-01-14 6.63% $4,045,000 $4,009,606 Sr Nts 10-01-11 6.38 6,345,000 6,305,344 Insight Midwest LP/Capital Sr Nts 11-01-10 10.50 2,370,000 2,506,275 Kabel Deutschland 07-01-14 10.63 6,350,000(c,d) 7,096,125 Mediacom LLC/Capital Sr Nts 01-15-13 9.50 5,260,000 5,352,050 Videotron Ltee 01-15-14 6.88 8,570,000(c) 8,805,675 Total 84,233,030 Media Non Cable (9.2%) CanWest Media Series B 04-15-13 7.63 3,910,000(c) 4,183,700 Corus Entertainment Sr Sub Nts 03-01-12 8.75 7,925,000(c) 8,519,375 Dex Media 11-15-13 8.00 8,515,000 9,047,188 (Zero coupon through 11-15-08, thereafter 9.00%) 11-15-13 10.11 3,200,000(f) 2,600,000 Dex Media West LLC/Finance Sr Sub Nts Series B 08-15-13 9.88 5,345,000 6,046,531 Emmis Operating Sr Sub Nts 05-15-12 6.88 11,345,000 11,344,999 Inmarsat Finance 06-30-12 7.63 2,815,000(c) 2,959,269 Intelsat Bermuda Sr Nts 01-15-12 8.70 1,550,000(c,d,h) 1,577,125 Lamar Media 01-01-13 7.25 5,775,000 6,078,188 Sr Sub Nts 08-15-15 6.63 3,475,000(d) 3,544,500 Liberty Media Sr Nts 05-15-13 5.70 18,240,000 16,879,605 LodgeNet Entertainment Sr Sub Deb 06-15-13 9.50 2,920,000 3,197,400 Medianews Group Sr Sub Nts 04-01-14 6.38 3,700,000 3,552,000 PanAmSat 08-15-14 9.00 1,580,000 1,662,950 Quebecor Media Sr Nts 07-15-11 11.13 4,455,000(c) 4,900,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Non Cable (cont.) Rainbow Natl Services LLC Sr Nts 09-01-12 8.75% $8,115,000(d) $8,835,206 Sr Sub Deb 09-01-14 10.38 3,775,000(d) 4,303,500 RH Donnelley Sr Nts 01-15-13 6.88 8,430,000 8,577,525 Sinclair Broadcast Group 03-15-12 8.00 1,840,000 1,897,500 Sun Media 02-15-13 7.63 3,830,000(c) 4,045,438 Susquehanna Media Sr Sub Nts 04-15-13 7.38 1,295,000 1,358,131 Total 115,110,630 Metals (0.4%) Earle M Jorgensen Secured 06-01-12 9.75 4,390,000 4,796,075 Oil Field Services (0.8%) Grant Prideco Sr Unsecured 08-15-15 6.13 1,485,000(d) 1,503,563 Key Energy Services Series C 03-01-08 8.38 2,335,000 2,416,725 Sr Nts 05-01-13 6.38 5,505,000 5,505,000 Offshore Logistics 06-15-13 6.13 775,000 755,625 Total 10,180,913 Other Financial Institutions (2.5%) Cardtronics Sr Sub Nts 08-15-13 9.25 4,215,000(d) 4,288,763 Dow Jones CDX HY 06-29-10 8.25 11,880,000(d) 12,065,624 Residential Capital 06-30-10 6.38 10,140,000(d) 10,351,115 Triad Acquisition 05-01-13 11.13 4,060,000(d) 4,222,400 Total 30,927,902 Other Industry (0.3%) JohnsonDiversey Series B 05-15-12 9.63 2,735,000 2,796,538 Kinetek Sr Nts Series D 11-15-06 10.75 782,000 750,720 Total 3,547,258 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 178 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Packaging (2.4%) Crown European Holdings Secured 03-01-11 9.50% $6,305,000(c) $6,951,263 03-01-13 10.88 3,700,000(c) 4,366,000 Graham Packaging 10-15-12 8.50 4,755,000 4,897,650 Owens-Illinois Glass Container 05-15-11 7.75 1,985,000 2,104,100 05-15-13 8.25 6,660,000 7,126,200 Secured 11-15-12 8.75 3,970,000 4,327,300 Total 29,772,513 Paper (3.9%) Boise Cascade LLC 10-15-14 7.13 5,065,000 4,925,713 Cascades Sr Nts 02-15-13 7.25 5,760,000(c) 5,846,400 Crown Paper Sr Sub Nts 09-01-05 11.00 4,785,000(b,i,j) -- Domtar 12-01-13 5.38 7,500,000(c) 6,738,585 08-15-15 7.13 5,215,000(c) 5,199,277 JSG Funding Sr Nts 10-01-12 9.63 6,640,000(c) 6,789,400 Sr Sub Nts 04-01-15 7.75 5,650,000(c) 4,972,000 NewPage Secured 05-01-12 10.00 1,585,000(d) 1,592,925 Sr Sub Nts 05-01-13 12.00 9,160,000(d) 8,701,999 Norampac Sr Nts 06-01-13 6.75 4,018,000(c) 4,088,315 Total 48,854,614 Pharmaceuticals (1.2%) CDRV Investors Sr Disc Nts (Zero coupon through 01-01-10, thereafter 9.63%) 01-01-15 10.41 5,300,000(f) 3,074,000 VWR Intl Sr Sub Nts 04-15-14 8.00 1,870,000 1,855,975 Warner Chilcott 02-01-15 8.75 10,225,000(d) 10,122,750 Total 15,052,725 Railroads (0.2%) TFM Sr Nts 05-01-12 9.38 1,890,000(c,d) 2,041,200 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Retailers (3.4%) Duane Reade Sr Sub Nts 08-01-11 9.75% $3,960,000 $3,128,400 Flooring America Series B 10-15-07 9.25 1,109,000(b,i,j) -- General Nutrition Centers 01-15-11 8.63 4,890,000 4,792,200 Sr Sub Nts 12-01-10 8.50 5,635,000 4,986,975 Movie Gallery Sr Unsecured 05-01-12 11.00 2,755,000(d) 2,799,769 Rite Aid 12-15-08 6.13 2,285,000(d) 2,147,900 Toys "R" Us 04-15-13 7.88 2,890,000 2,586,550 Term Loan B 08-21-06 8.88 14,000,000(i) 13,999,999 United Auto Group 03-15-12 9.63 7,070,000 7,591,413 Total 42,033,206 Technology (1.0%) Sanmina-SCI 03-01-13 6.75 2,795,000 2,669,225 SunGard 01-15-14 4.88 6,665,000 5,865,200 Sr Sub Nts 08-15-15 10.25 1,570,000(d) 1,640,650 Syniverse Technologies Sr Sub Nts 08-15-13 7.75 2,260,000(d) 2,305,200 Total 12,480,275 Transportation Services (1.1%) Quality Distribution LLC/Capital 01-15-12 8.10 14,055,000(d,h) 13,492,800 Wireless (4.4%) Alamosa Delaware 07-31-10 11.00 2,755,000 3,120,038 Sr Nts 01-31-12 8.50 1,590,000 1,725,150 American Cellular Sr Nts Series B 08-01-11 10.00 1,960,000 2,087,400 American Tower Sr Nts 10-15-12 7.13 5,035,000 5,274,163 Centennial Communications/Cellular Operating LLC Sr Nts 02-01-14 8.13 3,360,000 3,570,000 Dobson Cellular Systems Secured 11-01-12 9.88 6,890,000 7,578,999 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Wireless (cont.) Rogers Communications Secured 12-15-10 6.54% $1,605,000(c,h) $1,673,213 12-15-12 7.25 1,765,000(c) 1,892,963 Sr Sub Nts 12-15-12 8.00 6,780,000(c) 7,254,599 Rural Cellular Secured 03-15-12 8.25 5,070,000 5,323,500 Sr Sub Nts Series B 05-15-08 9.63 2,330,000 2,341,650 SBA Telecommunications/Communications Sr Disc Nts (Zero coupon through 12-15-07, thereafter 9.75%) 12-15-11 8.54 7,195,000(f) 6,601,413 UbiquiTel Operating Sr Nts 03-01-11 9.88 3,380,000 3,768,700 US Unwired Secured Series B 06-15-12 10.00 2,175,000 2,523,000 Total 54,734,788 Wirelines (5.0%) Cincinnati Bell 07-15-13 7.25 5,350,000 5,737,875 02-15-15 7.00 3,740,000 3,665,200 Sr Sub Nts 01-15-14 8.38 2,055,000 2,075,550 Citizens Communications Sr Nts 01-15-13 6.25 8,870,000 8,570,638 GCI Sr Nts 02-15-14 7.25 11,520,000 11,260,799 Qwest Sr Nts 06-15-15 7.63 6,470,000(d) 6,631,750 Qwest Term Loan B 06-30-10 6.95 10,555,000 10,528,612 Qwest Services Secured 12-15-10 13.50 7,963,000 9,177,358 Valor Telecommunications Enterprises LLC/Finance Sr Nts 02-15-15 7.75 4,795,000(d) 4,711,088 Total 62,358,870 Total Bonds (Cost: $1,149,649,004) $1,161,462,796 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 179 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Common Stock (--%) Issuer Shares Value(a) Link Energy LLC Unit 494,265(b) $64,254 Total Common Stock (Cost: $3,913,363) $64,254 Preferred Stocks & Other (0.7%) Issuer Shares Value(a) GNC 12.00% Pay-in-kind Series A 2,105(k) $1,578,750 Pegasus Satellite 12.75% Cm Pay-in-kind Series B --(b,i,k) 5 SGW Holding 12.50% Cm Pay-in-kind Series B 20,650(b,i,j,k) -- Cv Series A 9,677(b,i,j) -- Warrants 250(b,i,j) -- Varde Fund V LP 5,000,000(b,e,i) 4,317,600 Wayland Investment LLC 6,000,000(b,e,i) 3,053,100 Total Preferred Stocks & Other (Cost: $9,307,887) $8,949,455 Short-Term Securities (3.9%) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper HSBC Finance 09-01-05 3.56% $24,400,000 $24,397,588 Morgan Stanley & Co 09-21-05 3.57 10,000,000 9,979,233 Natl Australia Funding 09-01-05 3.49 3,100,000(l) 3,099,699 Nieuw Amsterdam 10-03-05 3.61 10,000,000(l) 9,967,000 Sedna Finance 09-19-05 3.54 1,300,000 1,297,578 Total Short-Term Securities (Cost: $48,745,927) $48,741,098 Total Investments in Securities (Cost: $1,211,616,181)(m) $1,219,217,603 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 10.1% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $282,162,432 or 22.6% of net assets. (e) The share amount for Limited Liability Companies (LLC) or Limited Partnerships (LP) represents capital contributions. (f) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the annualized effective yield from the date of acquisition to maturity. (g) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $4,219,341. (h) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (i) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Aug. 31, 2005, is as follows: Security Acquisition Cost dates Crown Paper 11.00% Sr Sub Nts 2005 12-22-98 thru 03-14-00 $3,902,511 Flooring America 9.25% Series B 2007 10-09-97 thru 12-17-02 1,236,852 Pegasus Satellite 12.75% Cm Pay-in-kind Series B 06-15-01 450 SGW Holding 12.50% Cm Pay-in kind Series B 08-12-97 thru 04-15-03 271,392 Cv Series A 08-12-97 100,002 Warrants 08-12-97 78,900 Toys "R" Us 8.88% Term Loan B 2006 08-24-05 13,920,472 Varde Fund V LP 04-27-00 thru 06-19-00 --* Wayland Investment LLC 05-19-00 6,671,880 * The original cost for this position in the prior year was $5,000,000. During the current year, $5,000,000 was returned to the fund in the form of return of capital. - -------------------------------------------------------------------------------- 180 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - High Yield Bond Fund Notes to Investments in Securities (continued) (j) Negligible market value. (k) Pay-in-kind securities are securities in which the issuer makes interest or dividend payments in cash or in additional securities. The securities usually have the same terms as the original holdings. (l) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $13,066,699 or 1.0% of net assets. (m) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $1,207,499,117 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 34,919,203 Unrealized depreciation (23,200,717) ----------- Net unrealized appreciation $ 11,718,486 ------------ How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 181 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Income Opportunities Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (94.6%) Issuer Coupon Principal Value(a) rate amount Asset-Backed (1.2%) Metris Master Trust Series 2001-2 Cl C 11-20-09 5.51% $175,000(b,d) $175,000 Series 2004-2 Cl D 10-20-10 6.86 275,000(b,d) 279,125 Series 2005-1A Cl D 03-21-11 5.51 75,000(b,d) 75,000 Total 529,125 Aerospace & Defense (4.1%) Communications & Power Inds Sr Sub Nts 02-01-12 8.00 270,000 278,775 CPI Holdco Sr Nts 02-01-15 9.67 200,000(b) 198,328 DRS Technologies Sr Sub Nts 11-01-13 6.88 220,000 222,750 L-3 Communications 06-15-12 7.63 150,000 159,000 Sr Sub Nts 01-15-15 5.88 225,000 222,188 10-15-15 6.38 100,000(d) 101,500 Moog Sr Sub Nts 01-15-15 6.25 110,000 110,000 Standard Aero Holdings 09-01-14 8.25 140,000 140,000 TransDigm 07-15-11 8.38 355,000 376,300 Total 1,808,841 Automotive (4.2%) ArvinMeritor 02-15-09 6.80 100,000 98,500 GMAC 09-15-11 6.88 750,000 710,237 11-01-31 8.00 100,000 93,014 Lear Series B 05-15-09 8.11 220,000 227,700 08-01-14 5.75 270,000 239,963 Tenneco Automotive 11-15-14 8.63 150,000 155,625 TRW Automotive Sr Nts 02-15-13 9.38 310,000 344,100 Total 1,869,139 Brokerage (0.6%) LaBranche & Co Sr Nts 05-15-12 11.00 225,000 248,625 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Building Materials (1.7%) Ainsworth Lumber 10-01-12 7.25% $225,000(c) $210,375 Compression Polymers Holdings Sr Nts 07-01-13 10.50 65,000(d) 65,325 Norcraft Companies LP/Finance Sr Sub Nts 11-01-11 9.00 470,000 493,500 Total 769,200 Chemicals (4.6%) BCP Crystal US Holdings Sr Sub Nts 06-15-14 9.63 126,000 142,853 Equistar Chemicals LP/Funding Sr Nts 05-01-11 10.63 150,000 166,500 Georgia Gulf Sr Nts 12-15-13 7.13 365,000 378,688 INVISTA 05-01-12 9.25 380,000(d) 416,099 MacDermid 07-15-11 9.13 275,000 295,625 Nell Sr Nts 08-15-15 8.38 110,000(c,d) 111,238 PQ 02-15-13 7.50 385,000(d) 386,925 Resolution Performance Products LLC/Capital Secured 04-15-10 9.50 150,000 155,250 Total 2,053,178 Construction Machinery (3.3%) Case New Holland 08-01-11 9.25 145,000 154,425 Columbus McKinnon Sr Sub Nts 11-01-13 8.88 50,000(d,e) 50,625 Gardner Denver 05-01-13 8.00 255,000(d) 270,300 NationsRent Companies Secured 10-15-10 9.50 435,000 476,325 Neff Rental LLC/Finance Secured 06-15-12 11.25 60,000(d) 63,900 United Rentals North America 02-15-12 6.50 445,000 434,431 Total 1,450,006 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Consumer Cyclical Services (0.2%) Da-Lite Screen Sr Nts 05-15-11 9.50% $100,000 $106,250 Consumer Products (1.4%) ACCO Brands Sr Sub Nts 08-15-15 7.63 130,000(d) 130,325 Sealy Mattress Sr Sub Nts 06-15-14 8.25 215,000 229,513 Visant 10-01-12 7.63 255,000 262,012 Total 621,850 Diversified Manufacturing (1.2%) ALH Finance LLC Sr Sub Nts 01-15-13 8.50 125,000 120,938 Ispat Inland ULC Secured 04-01-14 9.75 55,000(c) 64,350 TriMas 06-15-12 9.88 95,000 81,225 Valmont Inds 05-01-14 6.88 245,000 250,206 Total 516,719 Electric (7.8%) Aquila Sr Nts 11-15-09 7.63 80,000 83,000 02-01-11 9.95 50,000 55,625 CMS Energy Sr Nts 02-01-12 6.30 180,000 183,600 DPL Sr Nts 09-01-11 6.88 54,000 59,130 IPALCO Enterprises Secured 11-14-08 8.38 65,000 69,713 11-14-11 8.63 345,000 388,125 Midwest Generation LLC Series B 01-02-16 8.56 359,536 395,489 NRG Energy 12-15-13 8.00 95,000 102,600 Pacificorp 1st Mtge 06-15-35 5.25 250,000 251,521 Potomac Edison 1st Mtge 11-15-14 5.35 310,000(d) 321,188 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 182 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Electric (cont.) Reliant Energy Secured 07-15-13 9.50% $185,000 $205,813 Sierra Pacific Power 04-15-12 6.25 75,000 77,250 Southern California Edison 1st Mtge 07-15-35 5.35 375,000 382,938 Tenaska Alabama Partners LP Secured 06-30-21 7.00 300,000(d) 312,957 Utilicorp Canada Finance 06-15-11 7.75 570,000(c) 595,649 Total 3,484,598 Entertainment (0.7%) Loews Cineplex 08-01-14 9.00 125,000(d) 122,813 Speedway Motorsports Sr Sub Nts 06-01-13 6.75 200,000 207,000 Total 329,813 Environmental (1.6%) Allied Waste North America Secured 04-15-11 6.38 75,000 72,281 Secured Series B 02-15-11 5.75 85,000 79,369 Series B 09-01-12 9.25 235,000 256,738 Clean Harbors Secured 07-15-12 11.25 260,000(d) 291,200 Total 699,588 Food and Beverage (3.0%) American Seafoods Group LLC 04-15-10 10.13 250,000 268,125 American Seafoods Group LLC/Finance Sr Disc Nts (Zero coupon through 11-01-08, thereafter 11.50%) 11-01-11 9.83 175,000(f) 130,813 Burns Philp Capital Property 11-15-10 9.50 140,000(c) 153,300 Sr Sub Nts 02-15-11 10.75 400,000(c) 446,000 Cott Beverages 12-15-11 8.00 325,000 342,875 Total 1,341,113 Gaming (7.9%) Boyd Gaming Sr Sub Nts 12-15-12 7.75 245,000 260,925 04-15-14 6.75 50,000 51,063 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gaming (cont.) Caesars Entertainment Sr Nts 04-15-13 7.00% $245,000 $273,855 Sr Sub Nts 03-15-10 7.88 50,000 54,813 CCM Merger 08-01-13 8.00 270,000(d) 275,399 Circus & Eldorado Jt Venture/Silver Legacy Capital 1st Mtge 03-01-12 10.13 200,000 211,000 MGM MIRAGE 09-15-10 8.50 170,000 186,575 Sr Nts 12-15-11 6.38 100,000 100,875 09-01-12 6.75 225,000 230,625 07-15-15 6.63 100,000(d,e) 101,000 Mohegan Tribal Gaming Authority Sr Nts 02-15-13 6.13 115,000 116,438 MTR Gaming Group Series B 04-01-10 9.75 165,000 179,231 Penn Natl Gaming Sr Sub Nts 12-01-11 6.88 50,000 50,500 River Rock Entertainment Authority Sr Nts 11-01-11 9.75 285,000 312,787 Riviera Holdings 06-15-10 11.00 75,000 81,750 Seneca Gaming Sr Nts 05-01-12 7.25 190,000 197,600 Station Casinos Sr Nts 04-01-12 6.00 100,000 100,750 Sr Sub Nts 03-01-16 6.88 260,000(d,e) 267,150 Virgin River Casino Secured 1-15-12 9.00 230,000(d) 242,650 Wheeling Island Gaming 12-15-09 10.13 210,000 222,338 Total 3,517,324 Gas Pipelines (6.0%) ANR Pipeline 03-15-10 8.88 300,000 327,287 Colorado Interstate Gas Sr Nts 03-15-15 5.95 185,000(d) 183,613 El Paso Natural Gas Sr Nts Series A 08-01-10 7.63 185,000 198,044 Energy Transfer Partners LP 02-01-15 5.95 145,000 148,768 Sr Nts 08-01-12 5.65 250,000(d) 252,818 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Gas Pipelines (cont.) Southern Natural Gas 09-15-08 6.13% $200,000 $202,029 03-15-10 8.88 50,000 54,548 03-01-32 8.00 175,000 202,807 Southern Star Central Secured 08-01-10 8.50 330,000 356,399 Transcontinental Gas Pipe Line 12-01-26 7.25 150,000 168,000 Series B 08-15-11 7.00 75,000 80,625 Sr Nts Series B 07-15-12 8.88 100,000 117,500 Williams Companies 03-15-32 8.75 120,000 145,800 Series A 01-15-31 7.50 200,000 217,500 Total 2,655,738 Health Care (5.1%) Community Health Systems Sr Sub Nts 12-15-12 6.50 55,000 55,619 Coventry Health Care Sr Nts 01-15-12 5.88 215,000 220,375 DaVita Sr Nts 03-15-13 6.63 340,000(d) 345,099 Fisher Scientific Intl Sr Sub Nts 07-01-15 6.13 175,000(d) 175,000 HCA Sr Nts 02-01-11 7.88 75,000 82,255 05-01-12 6.95 50,000 52,830 03-15-14 5.75 385,000 380,482 Sr Unsecured 12-01-09 5.50 40,000 39,826 MedCath Holdings Sr Nts 07-15-12 9.88 180,000 199,800 Select Medical 02-01-15 7.63 195,000 189,638 Tenet Healthcare Sr Nts 07-01-14 9.88 40,000 42,600 Triad Hospitals Sr Nts 05-15-12 7.00 155,000 160,425 Sr Sub Nts 11-15-13 7.00 155,000 159,069 US Oncology 08-15-12 9.00 160,000 174,400 Total 2,277,418 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 183 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Home Construction (2.9%) DR Horton Sr Nts 02-15-15 5.25% $115,000 $110,471 Sr Sub Nts 09-15-10 9.75 100,000 116,937 KB HOME Sr Sub Nts 02-01-10 7.75 100,000 105,441 Meritage Homes 03-15-15 6.25 205,000 191,931 Standard Pacific Sr Nts 08-15-10 6.50 150,000 148,875 05-15-11 6.88 75,000 75,000 Stanley-Martin Communities LLC Sr Sub Nts 08-15-15 9.75 90,000(d) 90,900 WCI Communities 05-01-12 9.13 100,000 105,000 03-15-15 6.63 140,000 127,750 William Lyon Homes 04-01-13 10.75 100,000 110,000 Sr Nts 12-15-12 7.63 100,000 95,500 Total 1,277,805 Independent Energy (2.5%) Chesapeake Energy Sr Nts 09-15-13 7.50 70,000 75,250 06-15-14 7.50 15,000 16,200 08-15-14 7.00 230,000 242,650 06-15-15 6.38 35,000 35,700 Encore Acquisition Sr Sub Nts 04-15-14 6.25 500,000 497,500 Hilcorp Energy I/Finance Sr Nts 09-01-10 10.50 100,000(d) 110,250 Newfield Exploration Sr Nts 03-01-11 7.63 35,000 38,150 Sr Sub Nts 08-15-12 8.38 100,000 108,750 Total 1,124,450 Lodging (1.1%) ITT 11-15-15 7.38 125,000 136,875 Vail Resorts Sr Sub Nts 02-15-14 6.75 345,000 352,763 Total 489,638 Media Cable (4.0%) Charter Communications Holdings LLC/Capital Sr Nts 04-30-14 8.38 145,000(d) 146,088 Sr Nts 04-30-12 8.00 200,000(d) 202,500 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Cable (cont.) CSC Holdings Sr Nts 07-15-08 7.25% $75,000 $75,844 Sr Nts Series B 07-15-09 8.13 125,000 128,125 04-01-11 7.63 145,000 145,363 DIRECTV Holdings LLC Sr Nts 06-15-15 6.38 310,000(d) 309,224 Echostar DBS 10-01-14 6.63 210,000 208,163 Sr Nts 10-01-11 6.38 60,000 59,625 Kabel Deutschland 07-01-14 10.63 215,000(c,d) 240,262 Mediacom LLC/Capital Sr Nts 01-15-13 9.50 40,000 40,700 Videotron Ltee 01-15-14 6.88 245,000(c) 251,737 Total 1,807,631 Media Non Cable (9.5%) CanWest Media Series B 04-15-13 7.63 100,000(c) 107,000 Corus Entertainment Sr Sub Nts 03-01-12 8.75 325,000(c) 349,375 Dex Media East LLC/Finance 11-15-12 12.13 50,000 59,125 Sr Nts 11-15-11 5.88 50,000 49,125 Sr Sub Nts Series B 08-15-13 9.88 445,000 503,405 Emmis Operating Sr Sub Nts 05-15-12 6.88 460,000 459,999 Entercom Radio LLC/Capital 03-01-14 7.63 160,000 167,000 Lamar Media 01-01-13 7.25 310,000 326,275 Sr Sub Nts 08-15-15 6.63 110,000(d) 112,200 Liberty Media Sr Nts 05-15-13 5.70 440,000 407,183 LodgeNet Entertainment Sr Sub Deb 06-15-13 9.50 35,000 38,325 PanAmSat 08-15-14 9.00 25,000 26,313 Radio One Series B 07-01-11 8.88 160,000 171,000 Rainbow Natl Services LLC Sr Nts 09-01-12 8.75 130,000(d) 141,538 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Media Non Cable (cont.) RH Donnelley 12-15-12 10.88% $250,000 $289,063 Salem Communications 12-15-10 7.75 474,000 495,922 Sun Media 02-15-13 7.63 200,000(c) 211,250 Susquehanna Media Sr Sub Nts 04-15-13 7.38 310,000 325,113 Total 4,239,211 Metals (0.2%) Earle M Jorgensen Secured 06-01-12 9.75 50,000 54,625 Peabody Energy Series B 03-15-13 6.88 50,000 52,063 Total 106,688 Oil Field Services (1.2%) Grant Prideco Sr Unsecured 08-15-15 6.13 40,000(d) 40,500 Key Energy Services Series C 03-01-08 8.38 100,000 103,500 Sr Nts 05-01-13 6.38 45,000 45,000 Offshore Logistics 06-15-13 6.13 250,000 243,750 Pride Intl Sr Nts 07-15-14 7.38 95,000 103,075 Total 535,825 Other Financial Institutions (1.7%) Cardtronics Sr Sub Nts 08-15-13 9.25 245,000(d) 249,288 Residential Capital 06-30-10 6.38 430,000(d) 438,952 Triad Acquisition 05-01-13 11.13 55,000(d) 57,200 Total 745,440 Other Industry (0.3%) JohnsonDiversey Series B 05-15-12 9.63 140,000 143,150 Packaging (3.1%) Crown European Holdings Secured 03-01-11 9.50 25,000(c) 27,563 03-01-13 10.88 455,000(c) 536,899 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 184 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Packaging (cont.) Owens-Illinois Glass Container 05-15-11 7.75% $280,000 $296,800 05-15-13 8.25 90,000 96,300 Secured 11-15-12 8.75 150,000 163,500 Silgan Holdings Sr Sub Nts 11-15-13 6.75 250,000 255,313 Total 1,376,375 Paper (3.3%) Boise Cascade LLC 10-15-14 7.13 145,000 141,013 Cascades Sr Nts 02-15-13 7.25 125,000(c) 126,875 Domtar 12-01-13 5.38 250,000(c) 224,620 08-15-15 7.13 180,000(c) 179,457 Georgia-Pacific 02-01-10 8.88 250,000 279,999 JSG Funding Sr Nts 10-01-12 9.63 335,000(c) 342,537 NewPage Secured 05-01-12 10.00 80,000(d) 80,400 Norampac Sr Nts 06-01-13 6.75 75,000(c) 76,313 Total 1,451,214 Pharmaceuticals (0.6%) Athena Neurosciences Finance LLC 02-21-08 7.25 100,000 95,750 VWR Intl Sr Nts 04-15-12 6.88 170,000 169,575 Total 265,325 Railroads (0.6%) TFM Sr Nts 05-01-12 9.38 245,000(c,d) 264,600 Retailers (1.5%) General Nutrition Centers 01-15-11 8.63 135,000 132,300 Rite Aid 12-15-28 6.88 175,000 132,125 Toys "R" Us 04-15-13 7.88 55,000 49,225 10-15-18 7.38 110,000 88,825 United Auto Group 03-15-12 9.63 270,000 289,913 Total 692,388 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Technology (1.3%) Flextronics Intl Sr Sub Nts 11-15-14 6.25% $260,000(c) $258,375 Saniminia-SCI 01-15-10 10.38 75,000 83,250 SunGard 01-15-14 4.88 180,000 158,400 Syniverse Technologies Sr Sub Nts 08-15-13 7.75 75,000(d) 76,500 Total 576,525 Transportation Services (0.2%) Interpool 08-01-07 7.20 100,000 102,250 Wireless (2.2%) American Cellular Sr Nts Series B 08-01-11 10.00 135,000 143,775 Nextel Communications Sr Nts Series E 10-31-13 6.88 265,000 283,835 Rogers Communications Secured 12-15-10 6.54 40,000(b,c) 41,700 05-01-11 9.63 125,000(c) 145,781 12-15-12 7.25 150,000(c) 160,875 03-01-14 6.38 150,000(c) 152,625 Sr Sub Nts 12-15-12 8.00 40,000(c) 42,800 Total 971,391 Wirelines (3.8%) Cincinnati Bell 07-15-13 7.25 200,000 214,500 Citizens Communications 05-15-11 9.25 100,000 110,750 GCI Sr Nts 02-15-14 7.25 300,000 293,250 MCI Sr Nts 05-01-09 7.69 80,000 83,200 05-01-14 8.74 35,000 39,200 Qwest 11-15-08 5.63 25,000 24,688 03-15-12 8.88 705,000 770,212 Sr Nts 06-15-13 6.67 80,000(b,d) 83,800 Valor Telecommunications Enterprises LLC/Finance Sr Nts 02-15-15 7.75 70,000(d) 68,775 Total 1,688,375 Total Bonds (Cost: $41,604,483) $42,136,806 Short-Term Securities (3.8%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (1.6%) Federal Natl Mtge Assn Disc Nt 09-14-05 3.42% $700,000 $699,069 Commercial Paper (2.2%) Alpine Securitization 09-01-05 3.56 1,000,000(g) 999,901 Total Short-Term Securities (Cost: $1,699,136) $1,698,970 Total Investments in Securities (Cost: $43,303,619)(h) $43,835,776 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 185 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Income Opportunities Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. At Aug. 31, 2005, the value of foreign securities represented 11.9% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $7,729,226 or 17.3% of net assets. (e) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $418,950. (f) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the annualized effective yield from the date of acquisition to maturity. (g) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $999,901 or 2.2% of net assets. (h) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $43,316,957 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 652,500 Unrealized depreciation (133,681) -------- Net unrealized appreciation $ 518,819 --------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 186 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - International Opportunity Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.1%)(c) Issuer Shares Value(a) Australia (1.9%) Metals & Mining (1.5%) BHP Billiton 925,623 $14,506,015 Newcrest Mining 252,107 3,271,912 Total 17,777,927 Real Estate (0.4%) Lend Lease 453,238 4,529,394 Austria (1.0%) Building Products (0.5%) Wienerberger 154,827 6,382,481 Commercial Banks (0.5%) Erste Bank der Oesterreichischen Sparkassen 108,014 5,998,522 Brazil (0.9%) Metals & Mining Cia Vale do Rio Doce ADR 346,800 10,404,000 Canada (0.6%) Metals & Mining Cameco 135,000 6,806,876 China (0.6%) Oil & Gas PetroChina Cl H 8,308,000 6,735,003 Czechoslovakia Federated Republic (0.5%) Pharmaceuticals Zentiva GDR 159,541(b,d) 6,209,368 Denmark (1.3%) Marine AP Moller - Maersk 1,385 14,980,842 Finland (1.6%) Electric Utilities (0.8%) Fortum 457,200 8,905,585 Oil & Gas (0.8%) Neste Oil 311,988(b) 10,487,658 France (10.0%) Beverages (0.7%) Pernod-Ricard 45,317 7,876,485 Construction & Engineering (0.7%) VINCI 91,744 8,160,977 Construction Materials (0.4%) Imerys 71,906 5,303,639 Diversified Telecommunication Services (0.5%) France Telecom 177,711 5,372,501 Electrical Equipment (0.8%) Schneider Electric 117,117 9,242,286 Health Care Equipment & Supplies (0.6%) Essilor Intl 92,919 7,269,528 Common Stocks (continued) Issuer Shares Value(a) France (cont.) Insurance (1.7%) AXA 753,891 $20,135,850 IT Services (0.7%) Atos Origin 113,259(b) 8,617,625 Office Electronics (0.8%) Neopost 103,866 9,626,371 Oil & Gas (2.5%) Total 111,318 29,360,358 Pharmaceuticals (0.6%) Sanofi-Aventis 87,597 7,500,794 Germany (7.6%) Auto Components (1.0%) Continental 147,382 11,701,311 Automobiles (0.5%) DaimlerChrysler 117,701 6,086,206 Capital Markets (0.3%) Deutsche Postbank 64,622 3,561,565 Computers & Peripherals (0.7%) Wincor Nixdorf 93,637 8,759,910 Diversified Telecommunication Services (0.8%) Deutsche Telekom 508,083 9,687,881 Electric Utilities (1.4%) E.ON 157,904 15,119,921 Health Care Equipment & Supplies (0.5%) Fresenius Medical Care 67,303 6,122,946 Health Care Providers & Services (0.8%) Celesio 105,738 9,249,429 Machinery (0.7%) MAN 161,946 8,185,878 Thrifts & Mortgage Finance (0.9%) Hypo Real Estate Holding 222,352 10,968,063 Greece (0.5%) Commercial Banks EFG Eurobank Ergasias 213,810 6,446,494 Hong Kong (2.9%) Real Estate (2.4%) Cheung Kong Holdings 610,000 6,663,017 New World Development 4,033,400 5,181,553 Sun Hung Kai Properties 1,010,000 10,278,230 Swire Pacific Cl A 690,000 6,585,254 Total 28,708,054 Specialty Retail (0.5%) Esprit Holdings 815,000 6,037,103 Common Stocks (continued) Issuer Shares Value(a) Hungary (0.3%) Commercial Banks OTP Bank 96,001 $3,821,459 Ireland (0.8%) Construction Materials CRH 333,919 9,089,769 Italy (3.9%) Diversified Telecommunication Services (0.4%) FastWeb 122,568(b) 5,298,375 Energy Equipment & Services (0.6%) Saipem 423,874 7,156,824 Oil & Gas (2.9%) Eni 1,120,435 33,218,061 Japan (20.7%) Automobiles (1.8%) Honda Motor 134,500 7,242,453 Toyota Motor 332,300 13,614,256 Total 20,856,709 Beverages (0.4%) Asahi Breweries 369,300 4,566,704 Building Products (0.5%) Asahi Glass 529,000 5,460,077 Capital Markets (1.0%) Nikko Cordial 804,000 3,984,577 Nomura Holdings 423,500 5,829,738 Tokai Tokyo Securities 734,000 2,404,307 Total 12,218,622 Chemicals (1.0%) Showa Denko 1,361,000 4,111,354 Sumitomo Chemical 1,336,000 7,464,420 Total 11,575,774 Commercial Banks (2.7%) Bank of Yokohama 1,130,000 7,297,944 Mitsubishi Tokyo Financial Group 1,323 13,656,030 Mizuho Financial Group 1,058 5,921,247 Sumitomo Mitsui Financial Group 550 4,513,218 Total 31,388,439 Commercial Services & Supplies (0.4%) Toppan Printing 486,000 4,866,254 Computers & Peripherals (0.3%) NEC 591,000 3,185,547 Construction & Engineering (0.9%) Nishimatsu Construction 1,709,000 6,564,136 Okumura 703,000 4,375,434 Total 10,939,570 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 187 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - International Opportunity Fund Common Stocks (continued) Issuer Shares Value(a) Japan (cont.) Consumer Finance (0.6%) ACOM 100,670 $6,662,016 Diversified Telecommunication Services (0.3%) Nippon Telegraph & Telephone 803 3,504,476 Electric Utilities (0.1%) Tokyo Electric Power 65,900 1,622,819 Electronic Equipment & Instruments (0.5%) Hoya 27,200 3,566,443 Keyence 9,650 2,280,865 Total 5,847,308 Household Durables (1.1%) Daito Trust Construction 177,900 7,453,530 Pioneer 197,700 3,082,671 Victor Company of Japan 421,000 2,664,344 Total 13,200,545 Insurance (0.5%) T&D Holdings 96,500 5,523,482 Internet Software & Services (0.4%) eAccess 7,229 5,306,189 Machinery (0.9%) Amada 580,000 4,506,924 Kurita Water Inds 225,700 4,036,969 Takuma 342,000 2,471,781 Total 11,015,674 Metals & Mining (1.5%) Mitsui Mining & Smelting 1,268,000 6,317,897 Nippon Steel 2,404,000 7,071,494 Nisshin Steel 1,414,000 4,110,589 Total 17,499,980 Multiline Retail (0.5%) Daiei 38,450(b) 722,390 Marui 311,000 5,114,643 Total 5,837,033 Office Electronics (0.8%) Canon 147,800 7,486,009 Ricoh 155,000 2,415,574 Total 9,901,583 Oil & Gas (0.6%) Nippon Oil 932,000 7,532,380 Pharmaceuticals (0.8%) Astellas Pharma 159,700 5,710,877 Chugai Pharmaceutical 228,600 4,316,561 Total 10,027,438 Real Estate (1.1%) Mitsui Fudosan 509,000 6,593,638 TOC 729,750 2,964,161 Tokyu 782,000 3,689,117 Total 13,246,916 Common Stocks (continued) Issuer Shares Value(a) Japan (cont.) Software (0.4%) Nintendo 46,700 $4,924,771 Specialty Retail (0.5%) Komeri 189,800 6,143,882 Textiles, Apparel & Luxury Goods (0.4%) ONWARD Kashiyama 334,000 5,016,957 Transportation Infrastructure (0.4%) Mitsubishi Logistics 416,000 4,517,026 Wireless Telecommunication Services (0.3%) NTT DoCoMo 2,013 3,248,220 Mexico (1.2%) Food & Staples Retailing (0.7%) Wal-Mart de Mexico Series V 1,936,225 8,437,393 Media (0.5%) Grupo Televisa ADR 87,091 5,469,315 Netherlands (2.3%) Diversified Financial Services (1.1%) ING Groep 452,310 13,198,460 Food Products (1.2%) Royal Numico 342,001(b) 14,207,774 Singapore (1.0%) Commercial Banks (0.4%) DBS Group Holdings 521,000 4,855,998 Real Estate (0.6%) City Developments 1,382,000 7,020,943 South Africa (0.9%) Metals & Mining Anglo American 405,191 10,282,338 South Korea (2.7%) Commercial Banks (1.1%) Kookmin Bank 137,690 6,990,816 Shinhan Financial Group 188,060 5,585,435 Total 12,576,251 Metals & Mining (0.2%) POSCO 11,874 2,470,215 Semiconductors & Semiconductor Equipment (1.4%) Samsung Electronics 31,220 16,600,708 Spain (3.0%) Commercial Banks (2.3%) Banco Bilbao Vizcaya Argentaria 681,969 11,376,330 Banco Santander Central Hispano 1,293,258 15,878,203 Total 27,254,533 IT Services (0.7%) Indra Sistemas 386,656 7,846,528 Common Stocks (continued) Issuer Shares Value(a) Sweden (1.5%) Communications Equipment (0.5%) Telefonaktiebolaget LM Ericsson Cl B 1,861,633 $6,501,531 Tobacco (1.0%) Swedish Match 907,400 11,562,495 Switzerland (8.9%) Capital Markets (1.8%) UBS 261,795 21,474,621 Chemicals (0.9%) Syngenta 100,648(b) 10,727,253 Food Products (1.4%) Nestle 60,124 16,903,724 Health Care Equipment & Supplies (0.9%) Nobel Biocare Holding 48,635 10,632,813 Metals & Mining (0.7%) Xstrata 335,012 7,877,177 Pharmaceuticals (2.7%) Roche Holding 230,187 31,941,809 Textiles, Apparel & Luxury Goods (0.5%) Swatch Group Cl B 40,498 5,627,580 Taiwan (1.5%) Commercial Banks (0.6%) Chinatrust Financial Holding 6,952,538 6,657,400 Semiconductors & Semiconductor Equipment (0.9%) Taiwan Semiconductor Mfg 6,536,402 11,007,195 Thailand (0.3%) Commercial Banks Bangkok Bank 1,242,100 3,366,861 United Kingdom (19.8%) Aerospace & Defense (0.7%) Rolls-Royce Group 1,407,836(b) 8,589,465 Commercial Banks (3.7%) Barclays 907,910 9,083,978 HSBC Holdings 644,357 10,394,925 Standard Chartered Bank 1,139,471 24,421,479 Total 43,900,382 Electric Utilities (0.5%) British Energy Group 648,287(b) 5,602,209 Food & Staples Retailing (2.6%) Tesco 3,652,123 21,523,128 Wm Morrison Supermarkets 2,810,545 9,166,119 Total 30,689,247 Hotels, Restaurants & Leisure (1.7%) Carnival 236,908 12,288,072 Enterprise Inns 547,272 8,165,035 Total 20,453,107 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 188 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - International Opportunity Fund Common Stocks (continued) Issuer Shares Value(a) United Kingdom (cont.) Household Products (0.6%) Reckitt Benckiser 214,111 $6,644,035 Insurance (1.9%) Britannic Group 697,093 7,806,900 Legal & General Group 2,601,095 5,236,522 Prudential 1,091,290 9,997,416 Total 23,040,838 Oil & Gas (4.1%) BG Group 2,118,257 19,168,607 BP 1,267,788 14,489,339 Royal Dutch Shell Cl A 482,976 15,752,921 Total 49,410,867 Pharmaceuticals (1.0%) GlaxoSmithKline 486,271 11,785,470 Semiconductors & Semiconductor Equipment (0.6%) ARM Holdings 3,214,358 6,686,929 Common Stocks (continued) Issuer Shares Value(a) United Kingdom (cont.) Wireless Telecommunication Services (2.4%) O2 3,247,510 $8,991,544 Vodafone Group 7,018,398 19,213,019 Total 28,204,563 Total Common Stocks (Cost: $974,665,366) $1,162,047,737 Preferred Stock & Other (1.1%)(c) Issuer Shares Value(a) Germany (1.1%) Porsche 16,782 $13,085,073 Singapore (--%) City Development Warrants 138,200(b,f) 497,270 Total Preferred Stock & Other (Cost: $9,629,382) $13,582,343 Short-Term Security (0.9%) Issuer Effective Amount Value(a) Yield payable at maturity Commercial Paper Alpine Securitization 09-01-05 3.56% $11,100,000(e) $11,098,902 Total Short-Term Security (Cost: $11,100,000) $11,098,902 Total Investments in Securities (Cost: $995,394,748)(g) $1,186,728,982 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $6,209,368 or 0.5% of net assets. (e) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $11,098,902 or 0.9% of net assets. (f) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Aug. 31, 2005, is as follows: Security Acquisition Cost date City Development Warrants 05-04-04 $-- (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $1,001,508,614 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $195,763,999 Unrealized depreciation (10,543,631) Net unrealized appreciation $185,220,368 The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 189 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Large Cap Equity Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.6%) Issuer Shares Value(a) Aerospace & Defense (3.1%) Boeing 212,396 $14,234,781 Empresa Brasileira de Aeronautica ADR 161,855(c) 5,804,120 General Dynamics 21,380 2,449,934 Goodrich 167,030 7,653,315 Honeywell Intl 348,182 13,328,407 Lockheed Martin 226,556 14,100,845 Northrop Grumman 135,790 7,616,461 United Technologies 256,113 12,805,650 Total 77,993,513 Auto Components (--%) Lear 19,081 719,354 Automobiles (0.2%) Ford Motor 135,585 1,351,782 General Motors 71,387(d) 2,440,722 Harley-Davidson 20,809 1,025,051 Total 4,817,555 Beverages (1.0%) Coca-Cola 30,301 1,333,244 Coca-Cola Enterprises 71,049 1,587,945 PepsiCo 401,200 22,005,820 Total 24,927,009 Biotechnology (1.7%) Amgen 275,847(b) 22,040,176 Biogen Idec 130,235(b) 5,489,405 Charles River Laboratories Intl 17,603(b) 894,584 Genentech 95,361(b) 8,958,213 Gilead Sciences 100,770(b) 4,333,110 MedImmune 60,712(b) 1,817,110 Total 43,532,598 Building Products (0.2%) American Standard Companies 46,321 2,112,238 Masco 75,315 2,310,664 Total 4,422,902 Capital Markets (2.7%) Bank of New York 180,467 5,516,876 E*TRADE Financial 176,195(b) 2,819,120 Franklin Resources 122,073 9,819,552 Investors Financial Services 243,157 8,539,674 Legg Mason 18,914 1,977,080 Lehman Brothers Holdings 82,741 8,742,414 Merrill Lynch & Co 91,326 5,220,194 Morgan Stanley 318,794 16,217,052 Natl Financial Partners 15,418 676,850 State Street 146,180 7,064,879 Total 66,593,691 Common Stocks (continued) Issuer Shares Value(a) Chemicals (1.1%) Dow Chemical 328,894 $14,208,222 Eastman Chemical 30,921 1,483,280 EI du Pont de Nemours & Co 70,797 2,801,437 Lyondell Chemical 78,252 2,018,902 Monsanto 88,060 5,621,750 RPM Intl 45,918 870,146 Total 27,003,737 Commercial Banks (4.4%) Bank of America 1,037,695 44,652,015 Commerce Bancorp 174,618(d) 5,888,119 Fifth Third Bancorp 43,227 1,790,030 ICICI Bank ADR 61,620(c) 1,440,676 PNC Financial Services Group 158,556 8,915,604 Regions Financial 39,108 1,279,614 US Bancorp 269,512 7,875,141 Wachovia 331,484 16,448,236 Wells Fargo & Co 370,828 22,108,765 Western Alliance Bancorp 500(b) 14,750 Total 110,412,950 Commercial Services & Supplies (0.6%) Apollo Group Cl A 11,710(b) 921,109 Avery Dennison 34,077 1,821,075 Cendant 499,946 10,168,901 Waste Management 43,383 1,189,996 Total 14,101,081 Communications Equipment (2.2%) CIENA 400,994(b) 902,237 Cisco Systems 1,331,729(b) 23,465,065 Corning 202,863(b) 4,049,145 Motorola 313,044 6,849,403 Nokia ADR 1,098,333(c) 17,320,711 QUALCOMM 89,889 3,569,492 Total 56,156,053 Computers & Peripherals (3.2%) Dell 797,850(b) 28,403,459 EMC 1,235,067(b) 15,882,962 Hewlett-Packard 658,985 18,293,424 Intl Business Machines 232,287 18,726,978 Total 81,306,823 Consumer Finance (1.1%) Capital One Financial 162,791 13,387,932 First Marblehead 156,367(b,d) 4,523,697 MBNA 342,908 8,641,282 Total 26,552,911 Containers & Packaging (0.1%) Temple-Inland 96,567 3,716,864 Common Stocks (continued) Issuer Shares Value(a) Diversified Financial Services (6.1%) Citigroup 971,360 $42,516,426 Consumer Discretionary Select Sector SPDR Fund 321,153(d) 10,758,626 Contax Participacoes ADR 173,600(b,c) 113,014 Energy Select Sector SPDR Fund 353,229(d) 17,880,452 Health Care Select Sector SPDR Fund 242,356 7,663,297 Industrial Select Sector SPDR Fund 443,512(d) 13,207,787 iShares Dow Jones US Healthcare Sector Index Fund 1 63 Jer Investors Trust 52,027(b) 939,608 JPMorgan Chase & Co 666,690 22,594,124 Materials Select Sector SPDR Trust 564,765(d) 15,525,390 streetTRACKS Gold Trust 100,469(b) 4,358,345 Utilities Select Sector SPDR Fund 560,728(d) 18,212,445 Total 153,769,577 Diversified Telecommunication Services (10.0%) ALLTEL 104,162 6,457,002 BellSouth 316,339 8,316,552 Brasil Telecom Participacoes ADR 51,700(c) 1,884,465 Chunghwa Telecom ADR 323,483(c,d) 6,227,048 Citizens Communications 65,775 897,171 France Telecom 108,944(c) 3,293,559 MCI 824,087 21,129,591 SBC Communications 719,396 17,323,056 Sprint Nextel 5,634,019 146,090,113 Tele Norte Leste Participacoes ADR 240,500(c) 3,617,120 Telewest Global 1,312,384(b,c) 29,134,925 Verizon Communications 269,794 8,824,962 Total 253,195,564 Electric Utilities (1.2%) Entergy 71,861 5,383,108 Exelon 187,497 10,104,212 FPL Group 63,448 2,733,974 PPL 91,358 2,919,802 Southern 197,695 6,800,708 TXU 17,077 1,656,811 Xcel Energy 83,150 1,599,806 Total 31,198,421 Electrical Equipment (0.1%) Emerson Electric 30,604 2,059,037 Electronic Equipment & Instruments (0.2%) Flextronics Intl 332,270(b,c) 4,339,446 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 190 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Common Stocks (continued) Issuer Shares Value(a) Energy Equipment & Services (1.2%) Cooper Cameron 31,274(b) $2,256,419 Halliburton 178,637 11,070,135 Nabors Inds 13,245(b,c) 887,415 Schlumberger 82,125 7,081,639 Transocean 82,054(b) 4,844,468 Weatherford Intl 52,115(b) 3,528,707 Total 29,668,783 Food & Staples Retailing (1.0%) CVS 219,965 6,460,372 Rite Aid 419,200(b) 1,710,336 Safeway 35,100 832,923 Wal-Mart Stores 375,996 16,904,780 Total 25,908,411 Food Products (0.8%) General Mills 84,985 3,919,508 Kellogg 382,428 17,335,461 Total 21,254,969 Gas Utilities (0.1%) ONEOK 82,195 2,794,630 Health Care Equipment & Supplies (1.9%) Alcon 14,912(c) 1,760,362 Baxter Intl 512,718 20,677,916 Boston Scientific 198,870(b) 5,345,626 Guidant 136,997 9,677,468 Hospira 76,728(b) 3,056,844 Medtronic 119,572 6,815,604 Total 47,333,820 Health Care Providers & Services (2.9%) Aetna 55,600 4,429,652 AmerisourceBergen 26,344 1,967,106 Cardinal Health 273,923 16,328,550 Caremark Rx 32,244(b) 1,506,762 CIGNA 28,363 3,270,821 HCA 329,087 16,223,989 HealthSouth 141,385(b) 749,341 Magellan Health Services 112,023(b) 3,971,215 McKesson 33,396 1,558,591 Medco Health Solutions 123,633(b) 6,091,398 UnitedHealth Group 247,029 12,721,994 WellPoint 52,714(b) 3,914,015 Total 72,733,434 Hotels, Restaurants & Leisure (0.3%) Carnival Unit 38,990 1,923,767 McDonald's 189,666 6,154,661 Total 8,078,428 Household Durables (0.3%) Fortune Brands 11,386 990,354 Harman Intl Inds 3,093 319,816 Leggett & Platt 35,886 868,800 Tempur-Pedic Intl 275,326(b,d) 4,424,489 Total 6,603,459 Common Stocks (continued) Issuer Shares Value(a) Household Products (2.6%) Colgate-Palmolive 118,267 $6,209,018 Procter & Gamble 541,006 30,015,013 Spectrum Brands 1,061,963(b) 29,894,258 Total 66,118,289 Industrial Conglomerates (2.5%) 3M 17,455 1,241,923 General Electric 1,017,112 34,185,135 Tyco Intl 941,711(c) 26,207,817 Total 61,634,875 Insurance (3.8%) ACE 390,185(c) 17,328,116 AFLAC 78,342 3,385,941 Allstate 34,354 1,931,038 American Intl Group 764,411 45,253,132 Assurant 35,525 1,326,148 Chubb 104,029 9,046,362 Endurance Specialty Holdings 49,718(c) 1,824,651 First American 45,584 1,896,750 Hartford Financial Services Group 128,507 9,387,436 State Auto Financial 104,098 3,171,866 Total 94,551,440 Internet & Catalog Retail (0.2%) eBay 121,971(b) 4,938,606 Internet Software & Services (0.8%) Google Cl A 61,381(b) 17,554,966 Yahoo! 98,159(b) 3,272,621 Total 20,827,587 IT Services (0.6%) Accenture Cl A 101,620(b,c) 2,479,528 Affiliated Computer Services Cl A 108,745(b) 5,649,302 Automatic Data Processing 20,638 882,275 First Data 12,429 516,425 Infosys Technologies ADR 13,582(c) 961,470 Ness Technologies 98,103(b,c) 850,553 Paychex 53,322 1,819,880 Satyam Computer Services ADR 27,410(c) 750,212 Total 13,909,645 Leisure Equipment & Products (0.1%) Mattel 86,769 1,564,445 Machinery (0.5%) Caterpillar 102,033 5,661,811 Illinois Tool Works 37,671 3,174,912 Ingersoll-Rand Cl A 20,063(c) 1,597,416 ITT Inds 14,789 1,613,776 Total 12,047,915 Media (7.7%) Comcast Cl A 575,821(b) 17,706,496 Comcast Special Cl A 176,589(b) 5,329,456 Common Stocks (continued) Issuer Shares Value(a) Media (cont.) EchoStar Communications Cl A 54,364 $1,627,115 Grupo Televisa ADR 12,719(c) 798,753 Liberty Global Cl A 210,881(b) 10,702,211 Liberty Media Cl A 1,152,241(b) 9,575,123 News Corp Cl A 584,264 9,470,919 NTL 1,138,226(b) 72,709,876 Time Warner 884,077 15,842,660 Tribune 98,094 3,685,392 Viacom Cl B 479,046 16,282,774 Vivendi Universal ADR 822,960(c) 25,964,387 Walt Disney 195,638 4,928,121 Total 194,623,283 Metals & Mining (1.3%) Agnico-Eagle Mines 65,018(c) 850,435 Alcan 53,313(c) 1,761,995 Alcoa 132,671 3,554,256 Barrick Gold 55,779(c) 1,462,525 Coeur d'Alene Mines 1,279,365(b) 4,669,682 Glamis Gold 77,714(b,c) 1,478,120 Harmony Gold Mining ADR 271,783(c) 2,057,397 Kinross Gold 178,101(b,c) 1,125,598 Newmont Mining 309,346 12,243,916 PAN American Silver 134,400(b,c) 2,095,296 Stillwater Mining 77,252(b) 620,334 Total 31,919,554 Multi-Utilities & Unregulated Power (0.5%) Dominion Resources 129,630 9,914,102 Duke Energy 67,922 1,969,059 Total 11,883,161 Multiline Retail (1.1%) Dollar General 26,594 506,882 Federated Dept Stores 60,134 4,148,043 JC Penney 139,253 6,771,873 Kohl's 128,843(b) 6,757,815 Target 175,628 9,440,006 Total 27,624,619 Office Electronics (0.1%) Xerox 172,334(b) 2,310,999 Oil & Gas (7.6%) Anadarko Petroleum 179,217 16,285,448 Apache 24,598 1,761,709 BP ADR 118,881(c) 8,129,083 Burlington Resources 82,748 6,105,975 Chevron 490,295 30,104,112 ConocoPhillips 508,005 33,497,849 Devon Energy 139,808 8,496,132 EnCana 18,850(c) 927,232 Exxon Mobil 1,126,305 67,465,669 Marathon Oil 52,190 3,356,339 Newfield Exploration 87,389(b) 4,126,509 Occidental Petroleum 29,325 2,434,855 Royal Dutch Shell Cl A ADR 36,611(c) 2,378,251 Valero Energy 68,445 7,289,393 Total 192,358,556 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 191 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Common Stocks (continued) Issuer Shares Value(a) Paper & Forest Products (0.4%) Bowater 85,166 $2,642,701 Intl Paper 126,327 3,897,188 Weyerhaeuser 41,006 2,666,210 Total 9,206,099 Personal Products (1.6%) Avon Products 312,470 10,255,265 Gillette 560,910 30,216,222 Total 40,471,487 Pharmaceuticals (6.0%) Abbott Laboratories 269,161 12,147,236 AstraZeneca 31,023(c) 1,424,335 Bristol-Myers Squibb 294,908 7,216,399 Eli Lilly & Co 61,250 3,369,975 GlaxoSmithKline ADR 96,201(c) 4,686,913 Johnson & Johnson 412,398 26,141,909 Merck & Co 127,934 3,611,577 Novartis ADR 307,602(c) 14,995,598 Pfizer 1,610,146 41,010,418 Roche Holding 112,058(c) 15,549,684 Schering-Plough 477,781 10,229,291 Wyeth 298,415 13,664,423 Total 154,047,758 Real Estate Investment Trust (0.5%) Apartment Investment & Management Cl A 53,572 2,137,523 Equity Office Properties Trust 168,057 5,596,298 HomeBanc 634,867 5,059,890 Total 12,793,711 Road & Rail (0.1%) Norfolk Southern 41,035 1,461,256 Semiconductors & Semiconductor Equipment (3.3%) Analog Devices 118,687 4,326,141 Applied Materials 112,740 2,064,269 Broadcom Cl A 179,263(b) 7,797,941 Credence Systems 75,197(b) 666,997 Cypress Semiconductor 266,707(b) 4,168,630 Freescale Semiconductor Cl A 289,706(b) 6,918,179 Freescale Semiconductor Cl B 234,094(b) 5,636,984 Intel 1,155,828 29,727,897 Linear Technology 77,272 2,930,927 Maxim Integrated Products 61 2,602 MEMC Electronic Materials 488,562(b) 8,237,155 Texas Instruments 319,700 10,447,796 Total 82,925,518 Common Stocks (continued) Issuer Shares Value(a) Software (2.7%) Adobe Systems 118,585 $3,206,538 BMC Software 40,756(b) 815,120 Cadence Design Systems 199,290(b) 3,190,633 Compuware 152,296(b) 1,379,802 Electronic Arts 62,535(b) 3,582,005 Macromedia 67,159(b) 2,481,525 Mercury Interactive 104,857(b) 3,845,106 Microsoft 1,006,411 27,575,661 Novell 144,536(b) 951,047 Oracle 762,775(b) 9,893,192 Siebel Systems 499,099 4,117,567 Symantec 255,176(b) 5,353,592 TIBCO Software 57,770(b) 441,363 Total 66,833,151 Specialty Retail (0.9%) AutoZone 4,766(b) 450,387 Bed Bath & Beyond 23,455(b) 951,100 Best Buy 79,393 3,783,870 Circuit City Stores 20,108 339,624 Gap 79,124 1,504,147 Home Depot 265,948 10,723,024 Lowe's Companies 56,053 3,604,768 Staples 54,137 1,188,849 Total 22,545,769 Textiles, Apparel & Luxury Goods (0.1%) Nike Cl B 16,650 1,313,852 Thrifts & Mortgage Finance (2.1%) BankAtlantic Bancorp Cl A 12,521 213,483 Countrywide Financial 570,011 19,260,671 Fannie Mae 370,369 18,903,634 Freddie Mac 212,849 12,851,823 Washington Mutual 56,600 2,353,428 Total 53,583,039 Tobacco (1.5%) Altria Group 527,252 37,276,716 Wireless Telecommunication Services (1.2%) Hutchison Telecommunications Intl ADR 102,867(b,c) 1,867,036 KT Freetel 36,500(c) 884,260 LG Telecom 181,420(b,c) 979,036 Millicom Intl Cellular 101,865(b,c) 1,956,827 NeuStar Cl A 188,350(b) 5,181,509 O2 1,060,231(c) 2,935,515 Orascom Telecom GDR 178,294(c,d) 8,244,314 Telesp Celular Participacoes ADR 200,515(c) 832,137 Turkcell Iletisim Hizmetleri ADR 130,441(c) 1,751,823 Vodafone Group ADR 175,898(c) 4,793,221 Total 29,425,678 Total Common Stocks (Cost: $2,299,487,510) $2,449,392,028 Short-Term Securities (6.1%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (2.4%) Federal Home Loan Bank 09-09-05 3.41% $25,000,000 $24,978,687 Federal Natl Mtge Assn Disc Nts 09-07-05 3.25 20,000,000 19,987,362 09-14-05 3.31 14,600,000 14,581,206 Total 59,547,255 Commercial Paper (3.7%) Fairway Finance 10-03-05 3.62 15,000,000(f) 14,950,363 Falcon Asset Securitization 09-14-05 3.51 10,000,000(f) 9,986,350 HSBC Finance 09-01-05 3.56 4,400,000 4,399,565 Jupiter Securitization 09-29-05 3.60 10,000,000(f) 9,971,080 Nieuw Amsterdam 09-12-05 3.51 10,000,000(f) 9,988,300 10-03-05 3.61 10,000,000(f) 9,967,000 Thunder Bay Funding LLC 09-01-05 3.47 15,000,000 (f) 14,998,554 Windmill Funding 09-01-05 3.42 20,000,000(f) 19,998,100 Total 94,259,312 Total Short-Term Securities (Cost: $153,821,315) $153,806,567 Total Investments in Securities (Cost: $2,453,308,825)(g) $2,603,198,595 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 192 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Equity Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 9.5% of net assets. (d) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 3.4% of net assets. See Note 6 to the financial statements. 2.7% of net assets is the Fund's cash equivalent position. (f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $89,859,747 or 3.6% of net assets. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $2,466,772,565 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $202,510,414 Unrealized depreciation (66,084,384) ----------- Net unrealized appreciation $136,426,030 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 193 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Large Cap Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (95.3%) Issuer Shares Value(a) Aerospace & Defense (4.3%) Boeing 900 $60,318 Empresa Brasileira de Aeronautica ADR 1,907(c) 68,385 General Dynamics 373 42,742 Goodrich 696 31,891 Honeywell Intl 2,768 105,959 Lockheed Martin 1,554 96,721 Northrop Grumman 2,371 132,989 United Technologies 1,882 94,100 Total 633,105 Auto Components (0.1%) Lear 333 12,554 Automobiles (0.1%) General Motors 525 17,950 Beverages (1.3%) Coca-Cola 529 23,276 Coca-Cola Enterprises 1,240 27,714 PepsiCo 2,505 137,399 Total 188,389 Biotechnology (0.1%) Biogen Idec 421(b) 17,745 Building Products (0.5%) American Standard Companies 809 36,890 Masco 1,315 40,345 Total 77,235 Capital Markets (4.5%) Bank of New York 3,151 96,326 E*TRADE Financial 1,003(b) 16,048 Franklin Resources 695 55,906 Investors Financial Services 1,662 58,369 Legg Mason 330 34,495 Lehman Brothers Holdings 828 87,486 Merrill Lynch & Co 1,594 91,113 Morgan Stanley 3,407 173,315 State Street 1,022 49,393 Total 662,451 Chemicals (1.8%) Dow Chemical 4,530 195,696 Eastman Chemical 540 25,904 Lyondell Chemical 1,366 35,243 RPM Intl 802 15,198 Total 272,041 Commercial Banks (7.4%) Bank of America 10,934 470,490 Commerce Bancorp 1,021 34,428 PNC Financial Services Group 1,323 74,392 Regions Financial 683 22,348 US Bancorp 4,705 137,480 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) Wachovia 3,095 $153,574 Wells Fargo & Co 3,487 207,895 Total 1,100,607 Commercial Services & Supplies (0.5%) Avery Dennison 595 31,797 Cendant 2,288 46,538 Total 78,335 Communications Equipment (1.3%) Cisco Systems 3,977(b) 70,075 Corning 748(b) 14,930 Motorola 1,925 42,119 Nokia ADR 4,253(c) 67,070 Total 194,194 Computers & Peripherals (2.9%) Dell 2,565(b) 91,314 EMC 4,013(b) 51,607 Hewlett-Packard 5,121 142,159 Intl Business Machines 1,718 138,505 Total 423,585 Consumer Finance (1.4%) Capital One Financial 1,312 107,898 First Marblehead 450(b) 13,019 MBNA 3,398 85,630 Total 206,547 Containers & Packaging (0.4%) Temple-Inland 1,686 64,894 Diversified Financial Services (5.0%) Citigroup 10,863 475,474 Contax Participacoes ADR 250(b,c) 163 JPMorgan Chase & Co 7,814 264,816 Total 740,453 Diversified Telecommunication Services (5.9%) ALLTEL 376 23,308 BellSouth 5,523 145,200 Chunghwa Telecom ADR 2,808(c) 54,054 Citizens Communications 1,148 15,659 MCI 4,049 103,816 SBC Communications 8,173 196,806 Sprint Nextel 6,981 181,017 Tele Norte Leste Participacoes ADR 350(c) 5,264 Telewest Global 1,024(b,c) 22,733 Verizon Communications 3,814 124,756 Total 872,613 Electric Utilities (3.0%) Entergy 1,255 94,012 Exelon 2,442 131,600 FPL Group 1,108 47,744 Common Stocks (continued) Issuer Shares Value(a) Electric Utilities (cont.) PPL 1,594 $50,944 Southern 2,497 85,897 Xcel Energy 1,452 27,936 Total 438,133 Electronic Equipment & Instruments (0.2%) Flextronics Intl 2,547(b,c) 33,264 Energy Equipment & Services (1.7%) Cooper Cameron 546(b) 39,394 Halliburton 1,225 75,913 Schlumberger 317 27,335 Transocean 933(b) 55,084 Weatherford Intl 910(b) 61,616 Total 259,342 Food & Staples Retailing (0.9%) CVS 1,217 35,743 Wal-Mart Stores 2,100 94,416 Total 130,159 Food Products (0.9%) General Mills 1,484 68,442 Kellogg 1,399 63,417 Total 131,859 Gas Utilities (0.3%) ONEOK 1,435 48,790 Health Care Equipment & Supplies (1.1%) Baxter Intl 1,898 76,547 Boston Scientific 524(b) 14,085 Guidant 544 38,428 Hospira 817(b) 32,549 Total 161,609 Health Care Providers & Services (1.2%) Cardinal Health 676 40,296 CIGNA 495 57,083 HCA 1,264 62,316 Medco Health Solutions 469(b) 23,108 Total 182,803 Hotels, Restaurants & Leisure (0.4%) McDonald's 1,735 56,301 Household Durables (0.1%) Leggett & Platt 627 15,180 Tempur-Pedic Intl 414(b) 6,653 Total 21,833 Household Products (1.9%) Colgate-Palmolive 1,358 71,295 Procter & Gamble 2,173 120,558 Spectrum Brands 3,414(b) 96,104 Total 287,957 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 194 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Industrial Conglomerates (1.9%) General Electric 3,525 $118,475 Tyco Intl 5,978(c) 166,368 Total 284,843 Insurance (5.3%) ACE 3,669(c) 162,939 AFLAC 371 16,035 Allstate 600 33,726 American Intl Group 5,184 306,892 Assurant 620 23,145 Chubb 1,273 110,700 Endurance Specialty Holdings 868(c) 31,856 First American 796 33,122 Hartford Financial Services Group 897 65,526 Total 783,941 Internet Software & Services (0.1%) Google Cl A 40(b) 11,440 IT Services (0.7%) Accenture Cl A 949(b,c) 23,156 Affiliated Computer Services Cl A 1,582(b) 82,185 Total 105,341 Leisure Equipment & Products (0.2%) Mattel 1,515 27,315 Machinery (0.9%) Caterpillar 932 51,716 Illinois Tool Works 310 26,127 Ingersoll-Rand Cl A 350(c) 27,867 ITT Inds 258 28,153 Total 133,863 Media (6.5%) Comcast Cl A 2,214(b) 68,081 Comcast Special Cl A 3,083(b) 93,045 EchoStar Communications Cl A 949 28,404 Liberty Global Cl A 1,045(b) 53,034 Liberty Media Cl A 14,162(b) 117,686 News Corp Cl A 1,313 21,284 NTL 2,126(b) 135,809 Time Warner 5,276 94,546 Tribune 1,713 64,357 Viacom Cl B 4,455 151,425 Vivendi Universal ADR 1,459(c) 46,031 Walt Disney 3,416 86,049 Total 959,751 Metals & Mining (0.4%) Alcan 931(c) 30,770 Alcoa 1,199 32,121 Total 62,891 Multi-Utilities & Unregulated Power (0.9%) Dominion Resources 1,833 140,188 Common Stocks (continued) Issuer Shares Value(a) Multiline Retail (1.0%) Federated Dept Stores 474 $32,697 JC Penney 732 35,597 Target 1,352 72,670 Total 140,964 Office Electronics (0.1%) Xerox 1,067(b) 14,308 Oil & Gas (12.1%) Anadarko Petroleum 2,141 194,553 BP ADR 2,076(c) 141,957 Chevron 4,515 277,221 ConocoPhillips 5,528 364,516 Devon Energy 1,120 68,062 Exxon Mobil 10,264 614,813 Newfield Exploration 1,526(b) 72,058 Royal Dutch Shell Cl A ADR 639(c) 41,509 Total 1,774,689 Paper & Forest Products (1.1%) Bowater 1,487 46,142 Intl Paper 2,206 68,055 Weyerhaeuser 716 46,554 Total 160,751 Personal Products (1.1%) Avon Products 2,792 91,634 Gillette 1,427 76,872 Total 168,506 Pharmaceuticals (3.5%) Bristol-Myers Squibb 1,702 41,648 GlaxoSmithKline ADR 431(c) 20,998 Johnson & Johnson 714 45,260 Merck & Co 1,768 49,911 Novartis ADR 1,071(c) 52,211 Pfizer 8,044 204,881 Schering-Plough 2,722 58,278 Wyeth 848 38,830 Total 512,017 Real Estate Investment Trust (1.0%) Apartment Investment & Management Cl A 935 37,307 Equity Office Properties Trust 2,934 97,701 HomeBanc 1,649 13,143 Total 148,151 Semiconductors & Semiconductor Equipment (1.9%) Broadcom Cl A 632(b) 27,492 Credence Systems 1,296(b) 11,496 Cypress Semiconductor 4,656(b) 72,773 Freescale Semiconductor Cl A 1,035(b) 24,716 Freescale Semiconductor Cl B 343(b) 8,259 Intel 2,485 63,914 MEMC Electronic Materials 3,050(b) 51,423 Texas Instruments 879 28,726 Total 288,799 Common Stocks (continued) Issuer Shares Value(a) Software (1.2%) Cadence Design Systems 3,479(b) $55,698 Microsoft 3,227 88,419 Siebel Systems 1,690 13,943 Symantec 620(b) 13,008 TIBCO Software 1,015(b) 7,755 Total 178,823 Specialty Retail (0.6%) Gap 1,085 20,626 Home Depot 1,868 75,318 Total 95,944 Thrifts & Mortgage Finance (3.1%) Countrywide Financial 4,655 157,292 Fannie Mae 3,162 161,389 Freddie Mac 1,759 106,208 Washington Mutual 693 28,815 Total 453,704 Tobacco (2.1%) Altria Group 4,398 310,939 Wireless Telecommunication Services (0.4%) Vodafone Group ADR 1,997(c) 54,418 Total Common Stocks (Cost: $13,478,870) $14,126,334 Total Investments in Securities (Cost: $13,478,870)(d) $14,126,334 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 195 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Large Cap Value Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 7.1% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $13,569,045 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 942,828 Unrealized depreciation (385,539) -------- Net unrealized appreciation $ 557,289 --------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 196 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Mid Cap Growth Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.3%) Issuer Shares Value(a) Biotechnology (8.0%) Biogen Idec 52,016(b) $2,192,474 Gilead Sciences 62,586(b) 2,691,198 Invitrogen 60,944(b) 5,163,785 MedImmune 118,573(b) 3,548,890 OSI Pharmaceuticals 31,342(b) 1,028,018 Techne 102,844(b) 5,859,023 Total 20,483,388 Capital Markets (5.3%) Investors Financial Services 73,695 2,588,168 Legg Mason 71,907 7,516,439 T Rowe Price Group 53,502 3,370,626 Total 13,475,233 Chemicals (2.1%) Sigma-Aldrich 86,800 5,416,320 Commercial Services & Supplies (5.1%) Cintas 95,974 3,958,928 Robert Half Intl 195,344 6,579,185 Strayer Education 25,739 2,597,580 Total 13,135,693 Communications Equipment (0.9%) Juniper Networks 100,182(b) 2,278,139 Computers & Peripherals (1.0%) Network Appliance 107,132(b) 2,543,314 Construction Materials (1.9%) Martin Marietta Materials 65,300 4,722,496 Electrical Equipment (1.7%) American Power Conversion 166,181 4,348,957 Energy Equipment & Services (6.0%) BJ Services 52,132 3,288,487 ENSCO Intl 110,306 4,507,103 Nabors Inds 51,887(b,c) 3,476,429 Noble 49,841 3,553,663 Tidewater 9,890 440,501 Total 15,266,183 Food & Staples Retailing (3.9%) Whole Foods Market 77,345 9,997,615 Health Care Equipment & Supplies (7.1%) Biomet 94,308 3,479,022 Diagnostic Products 146,457 7,908,677 Kinetic Concepts 67,897(b) 3,720,756 St. Jude Medical 65,115(b) 2,988,779 Total 18,097,234 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (9.1%) Dendrite Intl 249,712(b) $4,522,284 Express Scripts 76,810(b) 4,444,227 Health Management Associates Cl A 213,207 5,185,195 Lincare Holdings 115,804(b) 4,903,141 Omnicare 83,108 4,367,325 Total 23,422,172 Hotels, Restaurants & Leisure (4.4%) Brinker Intl 67,792(b) 2,518,473 CBRL Group 22,978 830,884 Cheesecake Factory 148,214(b) 4,693,938 Panera Bread Cl A 22,211(b) 1,238,041 Starbucks 17,958(b) 880,660 Station Casinos 17,826 1,191,133 Total 11,353,129 Household Durables (0.7%) Pulte Homes 21,276 1,833,991 Internet Software & Services (0.8%) Digital River 50,423(b) 1,915,066 IT Services (7.6%) Acxiom 220,309 4,366,524 Fiserv 144,269(b) 6,473,350 Paychex 165,119 5,635,511 VeriFone Holdings 131,348(b) 2,883,089 Total 19,358,474 Machinery (0.9%) Danaher 41,480 2,221,669 Media (3.6%) Catalina Marketing 159,380 3,815,557 Univision Communications Cl A 112,694(b) 3,031,469 Westwood One 113,900 2,315,587 Total 9,162,613 Oil & Gas (7.1%) Denbury Resources 34,781(b) 1,573,145 EOG Resources 80,769 5,155,484 Murphy Oil 63,626 3,477,161 Newfield Exploration 73,432(b) 3,467,459 Pogo Producing 58,826 3,294,256 XTO Energy 31,032 1,235,074 Total 18,202,579 Semiconductors & Semiconductor Equipment (5.6%) Broadcom Cl A 60,956(b) 2,651,586 KLA-Tencor 39,454 2,002,685 Maxim Integrated Products 65,216 2,781,462 Microchip Technology 140,676 4,377,837 Novellus Systems 92,548(b) 2,481,212 Total 14,294,782 Common Stocks (continued) Issuer Shares Value(a) Software (6.6%) Advent Software 120,384(b) $3,317,783 BMC Software 207,118(b) 4,142,360 Fair Isaac 140,864 5,757,112 Kronos 28,289(b) 1,225,762 NAVTEQ 52,639(b) 2,449,819 Total 16,892,836 Specialty Retail (4.6%) Advance Auto Parts 39,226(b) 2,390,040 Build-A-Bear Workshop 34,052(b) 755,273 Chico's FAS 41,746(b) 1,449,004 Williams-Sonoma 174,776(b) 7,034,734 Total 11,629,051 Textiles, Apparel & Luxury Goods (1.9%) Coach 143,414(b) 4,759,911 Trading Companies & Distributors (2.4%) Fastenal 99,264 6,013,413 Total Common Stocks (Cost: $199,410,911) $250,824,258 Short-Term Securities (1.9%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (1.0%) Federal Home Loan Bank Disc Nt 09-16-05 3.42% $1,400,000 $1,397,875 Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.43 1,100,000 1,097,910 Total 2,495,785 Commercial Paper (0.9%) General Electric Capital 09-01-05 3.56 2,300,000 2,299,773 Total Short-Term Securities (Cost: $4,796,022) $4,795,558 Total Investments in Securities (Cost: $204,206,933)(d) $255,619,816 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 197 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Growth Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 1.4% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $204,838,360 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $55,086,610 Unrealized depreciation (4,305,154) ---------- Net unrealized appreciation $50,781,456 ----------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 198 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Mid Cap Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.6%) Issuer Shares Value(a) Aerospace & Defense (1.0%) Goodrich 1,514 $69,371 Airlines (1.3%) AMR 4,177(b) 52,588 Continental Airlines Cl B 1,626(b) 21,740 Northwest Airlines 3,310(b) 16,649 Total 90,977 Auto Components (0.6%) Ballard Power Systems 1,508(b,c) 8,505 Johnson Controls 417 25,012 Lear 276 10,405 Total 43,922 Building Products (2.5%) American Standard Companies 1,427 65,071 YORK Intl 1,974 113,268 Total 178,339 Capital Markets (0.9%) AMVESCAP 1,350(c) 8,930 Mellon Financial 1,670 54,191 Total 63,121 Chemicals (4.6%) Agrium 1,312(c) 28,208 Cabot 1,024 33,792 Eastman Chemical 1,612 77,327 Imperial Chemical Inds ADR 1,667(c) 34,807 Lubrizol 808 33,411 Monsanto 970 61,925 Mosaic 1,667(b) 26,922 PPG Inds 546 34,387 Total 330,779 Commercial Banks (4.8%) AmSouth Bancorporation 3,110 81,855 Comerica 1,417 85,714 Hibernia Cl A 1,049 33,306 Huntington Bancshares 1,417 33,994 KeyCorp 1,873 62,034 North Fork Bancorporation 1,721 47,310 Total 344,213 Commercial Services & Supplies (1.7%) Dun & Bradstreet 308(b) 19,610 Pitney Bowes 594 25,691 Ritchie Bros Auctioneers 700(c) 29,337 RR Donnelley & Sons 1,292 48,269 Total 122,907 Communications Equipment (0.3%) Tellabs 2,800(b) 24,892 Computers & Peripherals (0.5%) Diebold 672 32,256 Common Stocks (continued) Issuer Shares Value(a) Construction & Engineering (2.0%) Fluor 1,149 $71,134 Insituform Technologies Cl A 404(b) 8,363 McDermott Intl 1,792(b) 61,914 Total 141,411 Construction Materials (0.1%) CEMEX ADR 175(c) 8,342 Consumer Finance (0.8%) Capital One Financial 657 54,032 Containers & Packaging (0.5%) Temple-Inland 839 32,293 Diversified Telecommunication Services (2.0%) CenturyTel 1,832 65,769 MCI 1,253 32,127 Qwest Communications Intl 11,250(b) 43,875 Total 141,771 Electric Utilities (3.5%) Consolidated Edison 1,100 51,601 DPL 1,315 35,492 DTE Energy 839 38,401 Pinnacle West Capital 2,490 111,876 Xcel Energy 734 14,122 Total 251,492 Electrical Equipment (2.2%) Cooper Inds Cl A 1,100 73,084 Energy Conversion Devices 291(b) 10,101 FuelCell Energy 700(b) 7,973 Plug Power 1,060(b) 7,812 Rockwell Automation 1,123 58,441 Total 157,411 Electronic Equipment & Instruments (0.7%) Agilent Technologies 1,024(b) 32,932 Solectron 3,421(b) 14,026 Total 46,958 Energy Equipment & Services (9.4%) BJ Services 1,721 108,561 Cooper Cameron 1,232(b) 88,889 GlobalSantaFe 4,700 220,335 Nabors Inds 1,060(b,c) 71,020 Smith Intl 1,948 67,674 Weatherford Intl 1,612(b) 109,149 Total 665,628 Food Products (2.3%) Archer-Daniels-Midland 3,594 80,901 Del Monte Foods 2,790(b) 30,160 Tyson Foods Cl A 2,950 52,451 Total 163,512 Gas Utilities (1.6%) NiSource 4,600 111,044 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (1.7%) CIGNA 230 $26,524 Service Corp Intl 3,847 32,661 Tenet Healthcare 4,830(b) 58,829 Total 118,014 Hotels, Restaurants & Leisure (1.8%) Royal Caribbean Cruises 2,130 90,994 Starwood Hotels & Resorts Worldwide Unit 594 34,630 Total 125,624 Household Durables (2.9%) Centex 368 24,932 DR Horton 594 21,930 KB HOME 94 6,971 Lennar Cl A 373 23,163 Mohawk Inds 335(b) 28,602 Stanley Works 824 37,698 Whirlpool 795 60,461 Total 203,757 Industrial Conglomerates (0.5%) Textron 484 34,509 Insurance (12.5%) ACE 3,484(c) 154,724 Aon 5,230 156,482 Bristol West Holdings 1,852 32,317 Everest Re Group 839(c) 77,683 Jefferson-Pilot 1,082 53,808 Lincoln Natl 824 40,862 Loews 1,253 109,876 Torchmark 1,105 58,278 Willis Group Holdings 1,253(c) 43,855 XL Capital Cl A 2,340(c) 162,631 Total 890,516 IT Services (1.7%) Computer Sciences 1,024(b) 45,619 Electronic Data Systems 3,316 74,279 Total 119,898 Leisure Equipment & Products (1.1%) Eastman Kodak 1,812 44,158 Hasbro 1,484 30,719 Total 74,877 Machinery (5.1%) AGCO 3,361(b) 69,001 Crane 594 17,588 Cummins 687 59,405 Dover 1,812 73,748 Eaton 367 23,459 Ingersoll-Rand Cl A 1,100(c) 87,583 Manitowoc 687 32,014 Total 362,798 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 199 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Mid Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Media (1.3%) Dex Media 1,035 $26,393 Interpublic Group of Companies 3,030(b) 36,753 Tribune 808 30,357 Total 93,503 Metals & Mining (2.6%) Compass Minerals Intl 1,430 35,192 Freeport-McMoRan Copper & Gold Cl B 2,130 89,822 Phelps Dodge 577 62,045 Total 187,059 Multi-Utilities & Unregulated Power (3.2%) CMS Energy 1,427(b) 22,975 Constellation Energy Group 434 25,498 Energy East 2,500 65,550 Public Service Enterprise Group 1,802 116,318 Total 230,341 Multiline Retail (1.6%) Family Dollar Stores 1,822 36,221 Federated Dept Stores 618 42,640 JC Penney 687 33,409 Total 112,270 Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (6.7%) Amerada Hess 450 $57,195 El Paso 1,461 16,948 Kerr-McGee 308 27,113 Pioneer Natural Resources 3,050 150,669 Suncor Energy 2,130(c) 126,224 Sunoco 1,024 74,445 Valero Energy 213 22,685 Total 475,279 Paper & Forest Products (1.7%) Abitibi-Consolidated 1,954(c) 8,480 Bowater 1,893 58,740 Georgia-Pacific 531 17,040 MeadWestvaco 1,253 36,299 Total 120,559 Real Estate Investment Trust (3.2%) Boston Properties 279 19,851 Crescent Real Estate Equities 3,050 59,872 Equity Residential 1,954 73,803 Rayonier 1,413 76,654 Total 230,180 Road & Rail (1.3%) CSX 2,080 91,374 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (1.8%) Intersil Cl A 1,751 $36,771 Natl Semiconductor 3,563 88,826 Total 125,597 Software (0.7%) BMC Software 2,600(b) 52,000 Specialty Retail (1.2%) AnnTaylor Stores 1,974(b) 50,535 AutoZone 186(b) 17,577 RadioShack 687 17,216 Total 85,328 Textiles, Apparel & Luxury Goods (1.3%) Liz Claiborne 1,623 66,591 VF 467 27,698 Total 94,289 Tobacco (0.6%) Reynolds American 467 39,200 Total Common Stocks (Cost: $6,474,960) $6,941,643 Total Investments in Securities (Cost: $6,474,960)(d) $6,941,643 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 11.9% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $6,475,065 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $522,500 Unrealized depreciation (55,922) ------- Net unrealized appreciation $466,578 -------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 200 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - New Dimensions Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.5%) Issuer Shares Value(a) Aerospace & Defense (7.0%) Boeing 1,082,624 $72,557,460 Lockheed Martin 459,049 28,571,210 United Technologies 1,038,375 51,918,750 Total 153,047,420 Beverages (1.4%) PepsiCo 563,855 30,927,447 Biotechnology (2.9%) Amgen 640,062(b) 51,140,954 Genzyme 111,442(b) 7,931,327 Gilead Sciences 128,841(b) 5,540,163 Total 64,612,444 Building Products (0.7%) American Standard Companies 341,598 15,576,869 Capital Markets (2.8%) Charles Schwab 4,475,605 60,554,936 Chemicals (1.1%) EI du Pont de Nemours & Co 585,201 23,156,404 Commercial Banks (3.0%) Bank of America 517,448 22,265,787 Commerce Bancorp 791,704(e) 26,696,260 US Bancorp 567,938 16,595,148 Total 65,557,195 Commercial Services & Supplies (0.2%) ITT Educational Services 74,820(b) 3,803,849 Communications Equipment (5.1%) Cisco Systems 2,087,296(b) 36,778,156 Motorola 2,901,558 63,486,088 Nokia ADR 822,683(c) 12,973,711 Total 113,237,955 Computers & Peripherals (8.7%) Apple Computer 1,078,900(b) 50,632,777 Dell 931,464(b) 33,160,118 EMC 3,405,154(b) 43,790,280 NCR 1,427,962(b) 48,864,860 SanDisk 404,851(b) 15,720,364 Total 192,168,399 Diversified Financial Services (1.6%) CapitalSource 798,720(b,e) 15,814,656 Citigroup 428,267 18,745,247 Total 34,559,903 Diversified Telecommunication Services (1.2%) Sprint Nextel 1,007,163 26,115,737 Common Stocks (continued) Issuer Shares Value(a) Energy Equipment & Services (2.6%) GlobalSantaFe 321,761 $15,084,156 Halliburton 214,225 13,275,523 Schlumberger 138,515 11,944,148 Transocean 299,413(b) 17,677,344 Total 57,981,171 Food & Staples Retailing (2.1%) CVS 312,203 9,169,402 Safeway 1,384,536 32,855,040 Whole Foods Market 33,378 4,314,440 Total 46,338,882 Health Care Equipment & Supplies (3.4%) Alcon 110,934(c) 13,095,759 Medtronic 864,661 49,285,676 St. Jude Medical 260,924(b) 11,976,412 Total 74,357,847 Health Care Providers & Services (3.7%) Caremark Rx 616,053(b) 28,788,157 UnitedHealth Group 1,019,368 52,497,452 Total 81,285,609 Hotels, Restaurants & Leisure (2.0%) Carnival Unit 409,176 20,188,744 Royal Caribbean Cruises 443,678 18,953,924 Starbucks 104,678(b) 5,133,409 Total 44,276,077 Household Durables (3.0%) DR Horton 372,653 13,758,349 Pulte Homes 617,761 53,250,998 Total 67,009,347 Household Products (3.4%) Procter & Gamble 1,336,822 74,166,885 Industrial Conglomerates (2.1%) General Electric 1,389,623 46,705,229 Internet & Catalog Retail (1.2%) Amazon.com 39,321(b) 1,679,007 eBay 616,777(b) 24,973,300 Total 26,652,307 Internet Software & Services (2.6%) Google Cl A 57,703(b) 16,503,058 Yahoo! 1,245,077(b) 41,510,867 Total 58,013,925 IT Services (0.9%) Fiserv 260,259(b) 11,677,821 Infosys Technologies ADR 110,409(c) 7,815,853 Total 19,493,674 Common Stocks (continued) Issuer Shares Value(a) Media (3.2%) Comcast Special Cl A 2,093,041(b) $63,167,977 DreamWorks Animation SKG Cl A 285,546(b) 7,429,907 Total 70,597,884 Multi-Utilities & Unregulated Power (1.0%) Dominion Resources 296,733 22,694,140 Multiline Retail (3.5%) Federated Dept Stores 403,671 27,845,226 Nordstrom 521,366 17,507,470 Target 606,777 32,614,264 Total 77,966,960 Office Electronics (0.8%) Xerox 1,314,322(b) 17,625,058 Oil & Gas (9.2%) Apache 524,877 37,591,691 Burlington Resources 100,690 7,429,915 Chesapeake Energy 677,608 21,419,189 ConocoPhillips 940,673 62,027,977 Exxon Mobil 939,868 56,298,093 Murphy Oil 141,197 7,716,416 Suncor Energy 121,036(c) 7,172,593 Total 199,655,874 Pharmaceuticals (6.5%) Abbott Laboratories 228,591 10,316,312 Eli Lilly & Co 120,523 6,631,175 Johnson & Johnson 977,697 61,976,214 Merck & Co 110,633 3,123,170 Novartis ADR 120,896(c) 5,893,680 Pfizer 973,481 24,794,561 Schering-Plough 843,913 18,068,177 Sepracor 233,077(b) 11,700,465 Total 142,503,754 Semiconductors & Semiconductor Equipment (3.1%) Intel 1,923,197 49,464,627 Texas Instruments 558,896 18,264,721 Total 67,729,348 Software (5.2%) Amdocs 404,090(b,c) 11,860,042 Autodesk 301,755 13,035,816 Microsoft 2,863,729 78,466,174 Symantec 543,991(b) 11,412,931 Total 114,774,963 Specialty Retail (2.7%) Advance Auto Parts 541,705(b) 33,006,086 Lowe's Companies 397,879 25,587,598 Total 58,593,684 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 201 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - New Dimensions Fund Common Stocks (continued) Issuer Shares Value(a) Tobacco (0.6%) Altria Group 200,703 $14,189,702 Total Common Stocks (Cost: $2,007,517,562) $2,165,930,878 Short-Term Securities (3.5%)(f) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (--%) Federal Home Loan Bank 09-02-05 3.39% $1,000,000 $999,812 Short-Term Securities (continued) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper (3.5%) Barton Capital 09-09-05 3.51% $10,000,000(d) $9,991,225 General Electric Capital 09-01-05 3.56 28,100,000 28,097,221 Jupiter Securitization 09-08-05 3.51 10,000,000(d) 9,992,200 Old Line Funding 09-01-05 3.56 28,500,000(d) 28,497,182 Total 76,577,828 Total Short-Term Securities (Cost: $77,585,284) $77,577,640 Total Investments in Securities (Cost: $2,085,102,846)(g) $2,243,508,518 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 2.7% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $48,480,607 or 2.2% of net assets. (e) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 1.5% of net assets. See Note 6 to the financial statements. 2.0% of net assets is the Fund's cash equivalent position. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $2,092,065,153 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $216,794,917 Unrealized depreciation (65,351,552) ----------- Net unrealized appreciation $151,443,365 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 202 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - S&P 500 Index Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (98.8%) Issuer Shares Value(a) Aerospace & Defense (2.2%) Boeing 26,796 $1,795,867 General Dynamics 6,496 744,377 Goodrich 3,908 179,065 Honeywell Intl 27,667 1,059,092 L-3 Communications Holdings 3,845 314,829 Lockheed Martin 13,104 815,593 Northrop Grumman 11,650 653,449 Raytheon 14,663 575,083 Rockwell Collins 5,782 278,288 United Technologies 33,202 1,660,099 Total 8,075,742 Air Freight & Logistics (0.9%) FedEx 9,794 797,623 Ryder System 2,087 73,233 United Parcel Service Cl B 36,133 2,561,469 Total 3,432,325 Airlines (0.1%) Southwest Airlines 23,924 318,668 Auto Components (0.2%) Cooper Tire & Rubber 2,079 35,135 Dana 4,869 65,537 Delphi 18,203 101,027 Goodyear Tire & Rubber 5,705(b) 95,844 Johnson Controls 6,226 373,435 Visteon 4,169 41,190 Total 712,168 Automobiles (0.5%) Ford Motor 59,687 595,079 General Motors 18,342 627,114 Harley-Davidson 9,236 454,965 Total 1,677,158 Beverages (2.3%) Anheuser-Busch Companies 25,177 1,115,593 Brown-Forman Cl B 2,924 165,586 Coca-Cola 73,404 3,229,775 Coca-Cola Enterprises 11,440 255,684 Constellation Brands Cl A 7,130(b) 196,218 Molson Coors Brewing Cl B 2,545 163,160 Pepsi Bottling Group 6,354 187,316 PepsiCo 54,308 2,978,794 Total 8,292,126 Biotechnology (1.5%) Amgen 40,140(b) 3,207,186 Applera-Applied Biosystems Group 6,402(e) 137,643 Biogen Idec 11,174(b) 470,984 Chiron 4,806(b) 175,131 Genzyme 8,182(b) 582,313 Gilead Sciences 14,650(b) 629,950 MedImmune 8,040(b) 240,637 Total 5,443,844 Common Stocks (continued) Issuer Shares Value(a) Building Products (0.2%) American Standard Companies 5,797 $264,343 Masco 14,069 431,637 Total 695,980 Capital Markets (2.8%) Bank of New York 25,244 771,709 Bear Stearns Companies 3,687 370,544 Charles Schwab 36,956 500,015 E*TRADE Financial 11,950(b) 191,200 Federated Investors Cl B 3,080 95,665 Franklin Resources 6,425 516,827 Goldman Sachs Group 14,335 1,593,765 Janus Capital Group 7,363 104,039 Lehman Brothers Holdings 8,974 948,193 Mellon Financial 13,730 445,539 Merrill Lynch & Co 30,657 1,752,354 Morgan Stanley 35,537 1,807,766 Northern Trust 6,597 328,794 State Street 10,732 518,678 T Rowe Price Group 4,010 252,630 Total 10,197,718 Chemicals (1.5%) Air Products & Chemicals 7,435 411,899 Dow Chemical 31,173 1,346,673 Eastman Chemical 2,607 125,058 Ecolab 7,124 235,092 EI du Pont de Nemours & Co 32,302 1,278,190 Engelhard 3,917 111,439 Hercules 3,665(b) 46,729 Intl Flavors & Fragrances 2,866 103,463 Monsanto 8,696 555,153 PPG Inds 5,563 350,358 Praxair 10,488 506,570 Rohm & Haas 6,259 271,703 Sigma-Aldrich 2,238 139,651 Total 5,481,978 Commercial Banks (5.5%) AmSouth Bancorporation 11,448 301,311 Bank of America 130,434 5,612,575 BB&T 17,725 719,103 Comerica 5,477 331,304 Compass Bancshares 4,020 188,176 Fifth Third Bancorp 16,926 700,906 First Horizon Natl 4,026 157,336 Huntington Bancshares 7,532 180,693 KeyCorp 13,225 438,012 M&T Bank 3,170 337,985 Marshall & Ilsley 6,910 302,451 Natl City 19,275 706,043 North Fork Bancorporation 15,486 425,696 PNC Financial Services Group 9,194 516,979 Regions Financial 15,043 492,207 SunTrust Banks 11,019 774,415 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) Synovus Financial 10,087 $290,203 US Bancorp 59,439 1,736,808 Wachovia 51,130 2,537,071 Wells Fargo & Co 54,723 3,262,585 Zions Bancorporation 2,908 203,153 Total 20,215,012 Commercial Services & Supplies (0.9%) Allied Waste Inds 8,782(b) 70,080 Apollo Group Cl A 5,303(b) 417,134 Avery Dennison 3,294 176,031 Cendant 34,106 693,717 Cintas 4,853 200,186 Equifax 4,210 139,098 H&R Block 10,722 288,958 Monster Worldwide 3,923(b) 122,555 Pitney Bowes 7,456 322,472 Robert Half Intl 5,177 174,361 RR Donnelley & Sons 6,918 258,456 Waste Management 18,420 505,261 Total 3,368,309 Communications Equipment (2.7%) ADC Telecommunications 3,761(b) 78,755 Andrew 5,269(b) 60,752 Avaya 15,469(b) 157,784 CIENA 18,615(b) 41,884 Cisco Systems 207,276(b) 3,652,204 Comverse Technology 6,498(b) 167,518 Corning 47,004(b) 938,200 JDS Uniphase 46,973(b) 74,687 Lucent Technologies 143,688(b) 442,559 Motorola 79,539 1,740,313 QUALCOMM 52,982 2,103,915 Scientific-Atlanta 4,940 189,004 Tellabs 14,543(b) 129,287 Total 9,776,862 Computers & Peripherals (3.6%) Apple Computer 26,724(b) 1,254,157 Dell 78,521(b) 2,795,348 EMC 77,926(b) 1,002,128 Gateway 9,637(b) 29,296 Hewlett-Packard 93,613 2,598,697 Intl Business Machines 52,328(d) 4,218,684 Lexmark Intl Cl A 3,851(b) 242,536 NCR 6,054(b) 207,168 Network Appliance 11,879(b) 282,007 QLogic 2,944(b) 101,745 Sun Microsystems 110,471(b) 419,790 Total 13,151,556 Construction & Engineering (--%) Fluor 2,809 173,905 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 203 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Common Stocks (continued) Issuer Shares Value(a) Construction Materials (0.1%) Vulcan Materials 3,317 $238,326 Consumer Finance (1.3%) American Express 37,984 2,098,236 Capital One Financial 9,350 768,944 MBNA 41,118 1,036,174 Providian Financial 9,544(b) 177,518 SLM 13,607 676,948 Total 4,757,820 Containers & Packaging (0.2%) Ball 3,568 133,836 Bemis 3,478 90,950 Pactiv 4,838(b) 93,906 Sealed Air 2,710(b) 137,533 Temple-Inland 3,670 141,257 Total 597,482 Distributors (0.1%) Genuine Parts 5,656 259,158 Diversified Financial Services (3.4%) CIT Group 6,825 309,036 Citigroup 168,721 7,384,918 JPMorgan Chase & Co 114,125 3,867,696 Moody's 8,960 440,026 Principal Financial Group 9,528 436,382 Total 12,438,058 Diversified Telecommunication Services (3.1%) ALLTEL 12,339 764,895 AT&T 25,984 511,365 BellSouth 59,387 1,561,284 CenturyTel 4,255 152,755 Citizens Communications 11,048 150,695 Qwest Communications Intl 54,232(b) 211,505 SBC Communications 107,132 2,579,738 Sprint Nextel 95,375 2,473,074 Verizon Communications 89,753 2,935,820 Total 11,341,131 Electric Utilities (2.3%) Allegheny Energy 5,267(b) 158,853 Ameren 6,590 361,989 American Electric Power 12,455 463,077 CenterPoint Energy 9,426 133,943 Cinergy 6,437 283,485 Consolidated Edison 7,884 369,838 DTE Energy 5,645 258,372 Edison Intl 10,571 476,012 Entergy 6,872 514,782 Exelon 21,704 1,169,628 FirstEnergy 10,696 545,817 FPL Group 12,714 547,846 PG&E 12,001 450,278 Pinnacle West Capital 3,187 143,192 PPL 12,316 393,619 Progress Energy 8,061 351,379 Southern 24,144 830,554 Common Stocks (continued) Issuer Shares Value(a) Electric Utilities (cont.) TECO Energy 6,715 $116,908 TXU 7,775 754,331 Xcel Energy 13,047 251,024 Total 8,574,927 Electrical Equipment (0.4%) American Power Conversion 5,877 153,801 Cooper Inds Cl A 3,015 200,317 Emerson Electric 13,512 909,087 Rockwell Automation 5,664 294,755 Total 1,557,960 Electronic Equipment & Instruments (0.3%) Agilent Technologies 14,023(b) 450,980 Jabil Circuit 5,975(b) 175,904 Molex 5,453 145,922 Sanmina-SCI 17,048(b) 86,433 Solectron 31,530(b) 129,273 Symbol Technologies 7,967 73,137 Tektronix 2,873 72,601 Total 1,134,250 Energy Equipment & Services (1.6%) Baker Hughes 10,991 645,721 BJ Services 5,254 331,422 Halliburton 16,407 1,016,742 Nabors Inds 4,825(b,c) 323,275 Natl Oilwell Varco 5,585(b) 358,613 Noble 4,402 313,863 Rowan Companies 3,510 130,572 Schlumberger 19,106 1,647,511 Transocean 10,579(b) 624,584 Weatherford Intl 4,485(b) 303,679 Total 5,695,982 Food & Staples Retailing (2.7%) Albertson's 11,942 240,392 Costco Wholesale 15,489 672,842 CVS 26,272 771,609 Kroger 23,634(b) 466,535 Safeway 14,533 344,868 SUPERVALU 4,409 153,433 SYSCO 20,527 685,191 Wal-Mart Stores 108,513 4,878,745 Walgreen 33,164 1,536,489 Total 9,750,104 Food Products (1.2%) Archer-Daniels-Midland 20,235 455,490 Campbell Soup 10,534(d) 309,700 ConAgra Foods 16,802 383,590 General Mills 11,994 553,162 Hershey 7,050 416,585 HJ Heinz 11,357 407,943 Kellogg 11,341 514,088 McCormick & Co 4,390 148,865 Sara Lee 25,535 485,165 Tyson Foods Cl A 11,470 203,937 WM Wrigley Jr 6,349 451,096 Total 4,329,621 Common Stocks (continued) Issuer Shares Value(a) Gas Utilities (0.1%) KeySpan 5,612 $214,210 Nicor 1,428 59,133 NiSource 8,813 212,746 Peoples Energy 1,238 51,464 Total 537,553 Health Care Equipment & Supplies (2.3%) Bausch & Lomb 1,738 131,723 Baxter Intl 20,134 812,004 Becton, Dickinson & Co 8,190 431,040 Biomet 8,173(d) 301,502 Boston Scientific 24,322(b) 653,775 CR Bard 3,412 219,494 Fisher Scientific Intl 3,895(b) 251,150 Guidant 10,539 744,475 Hospira 5,127(b) 204,260 Medtronic 39,229 2,236,052 Millipore 1,620(b) 103,599 PerkinElmer 4,206 87,064 St. Jude Medical 11,754(b) 539,509 Stryker 12,158 663,219 Thermo Electron 5,229(b) 145,889 Waters 3,806(b) 173,059 Zimmer Holdings 8,008(b) 658,017 Total 8,355,831 Health Care Providers & Services (2.7%) Aetna 9,424 750,810 AmerisourceBergen 3,414 254,923 Cardinal Health 13,893 828,162 Caremark Rx 14,715(b) 687,632 CIGNA 4,250 490,110 Express Scripts 4,820(b) 278,885 HCA 13,597 670,332 Health Management Associates Cl A 7,992 194,365 Humana 5,251(b) 252,888 IMS Health 7,345 199,784 Laboratory Corp of America Holdings 4,368(b) 215,430 Manor Care 2,574 101,596 McKesson 9,574 446,819 Medco Health Solutions 9,775(b) 481,614 Quest Diagnostics 5,910 295,382 Tenet Healthcare 15,199(b) 185,124 UnitedHealth Group 41,068 2,115,002 WellPoint 19,872(b) 1,475,496 Total 9,924,354 Hotels, Restaurants & Leisure (1.5%) Carnival Unit 17,087 843,073 Darden Restaurants 4,723 148,349 Harrah's Entertainment 5,892 409,848 Hilton Hotels 12,382 286,891 Intl Game Technology 11,146 308,967 Marriott Intl Cl A 6,434 406,693 McDonald's 41,110 1,334,019 Starbucks 12,641(b,d) 619,915 Starwood Hotels & Resorts Worldwide Unit 7,005 408,392 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 204 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Common Stocks (continued) Issuer Shares Value(a) Hotels, Restaurants & Leisure (cont.) Wendy's Intl 3,732 $175,926 Yum! Brands 9,396 445,182 Total 5,387,255 Household Durables (0.7%) Black & Decker 2,592 221,098 Centex 4,152 281,298 DR Horton 8,810 325,265 Fortune Brands 4,719 410,458 KB HOME 2,706 200,677 Leggett & Platt 6,147 148,819 Maytag 2,587 48,894 Newell Rubbermaid 8,930 209,230 Pulte Homes 3,850 331,870 Snap-On 1,871 66,421 Stanley Works 2,441 111,676 Whirlpool 2,169 164,952 Total 2,520,658 Household Products (1.8%) Clorox 4,999 287,792 Colgate-Palmolive 16,970 890,925 Kimberly-Clark 15,514 966,832 Procter & Gamble 80,254(d) 4,452,493 Total 6,598,042 Industrial Conglomerates (4.2%) 3M 24,956 1,775,619 General Electric 343,991(d) 11,561,538 Textron 4,373 311,795 Tyco Intl 65,498(c) 1,822,809 Total 15,471,761 Insurance (4.3%) ACE 9,324(c) 414,079 AFLAC 16,269 703,146 Allstate 21,676 1,218,407 Ambac Financial Group 3,510 240,716 American Intl Group 84,165 4,982,567 Aon 10,306 308,356 Chubb 6,336 550,979 Cincinnati Financial 5,410 221,702 Hartford Financial Services Group 9,623 702,960 Jefferson-Pilot 4,408 219,210 Lincoln Natl 5,630 279,192 Loews 5,178 454,059 Marsh & McLennan Companies 17,283 484,788 MBIA 4,391 254,546 MetLife 23,783 1,164,890 Progressive 6,443 621,170 Prudential Financial 16,932 1,089,913 Safeco 4,138 215,755 St. Paul Travelers Companies 21,853 939,898 Torchmark 3,375 177,998 UnumProvident 9,661 186,651 XL Capital Cl A 4,540(c) 315,530 Total 15,746,512 Common Stocks (continued) Issuer Shares Value(a) Internet & Catalog Retail (0.4%) eBay 39,398(b) $1,595,225 Internet Software & Services (0.4%) Yahoo! 42,560(b) 1,418,950 IT Services (1.0%) Affiliated Computer Services Cl A 4,100(b) 212,995 Automatic Data Processing 18,922 808,916 Computer Sciences 5,974(b) 266,142 Convergys 4,617(b) 65,654 Electronic Data Systems 16,830 376,992 First Data 25,256 1,049,386 Fiserv 6,201(b) 278,239 Paychex 11,539 393,826 Sabre Holdings Cl A 4,256 81,630 Unisys 10,993(b) 73,103 Total 3,606,883 Leisure Equipment & Products (0.2%) Brunswick 3,147 138,468 Eastman Kodak 9,313 226,958 Hasbro 5,435 112,505 Mattel 13,349 240,682 Total 718,613 Machinery (1.4%) Caterpillar 22,160 1,229,658 Cummins 1,413 122,182 Danaher 8,926 478,077 Deere & Co 7,996 522,778 Dover 6,605 268,824 Eaton 4,892 312,697 Illinois Tool Works 8,850 745,878 Ingersoll-Rand Cl A 5,469(c) 435,442 ITT Inds 2,991 326,378 Navistar Intl 2,139(b) 68,362 PACCAR 5,635 394,901 Pall 4,037 115,458 Parker Hannifin 3,900 251,316 Total 5,271,951 Media (3.6%) Clear Channel Communications 16,537 550,682 Comcast Cl A 71,528(b) 2,199,486 Dow Jones & Co 2,299 93,914 Gannett 8,059 586,050 Interpublic Group of Companies 13,713(b) 166,339 Knight-Ridder 2,258 144,693 McGraw-Hill Companies 12,152 585,969 Meredith 1,457 71,539 New York Times Cl A 4,720 150,710 News Corp Cl A 93,550 1,516,446 Omnicom Group 5,945 478,216 Time Warner 151,973 2,723,355 Tribune 9,671 363,339 Univision Communications Cl A 9,432(b) 253,721 Common Stocks (continued) Issuer Shares Value(a) Media (cont.) Viacom Cl B 52,296 $1,777,541 Walt Disney 66,209 1,667,805 Total 13,329,805 Metals & Mining (0.7%) Alcoa 28,283 757,702 Allegheny Technologies 2,916 80,540 Freeport-McMoRan Copper & Gold Cl B 5,832 245,935 Newmont Mining 14,459 572,287 Nucor 5,198 293,583 Phelps Dodge 3,140 337,644 United States Steel 3,703 155,230 Total 2,442,921 Multi-Utilities & Unregulated Power (0.9%) AES 21,183(b) 333,420 Calpine 18,435(b) 56,595 CMS Energy 7,096(b) 114,246 Constellation Energy Group 5,756 338,165 Dominion Resources 11,041 844,416 Duke Energy 30,059 871,410 Dynegy Cl A 10,772(b) 46,966 Public Service Enterprise Group 7,738 499,488 Sempra Energy 8,311 372,499 Total 3,477,205 Multiline Retail (1.1%) Big Lots 3,692(b) 43,603 Dillard's Cl A 2,320 52,223 Dollar General 9,786 186,521 Family Dollar Stores 5,412 107,591 Federated Dept Stores 8,554 590,049 JC Penney 8,538 415,203 Kohl's 10,582(b) 555,026 Nordstrom 7,968 267,565 Sears Holdings 3,320(b) 451,055 Target 28,655 1,540,206 Total 4,209,042 Office Electronics (0.1%) Xerox 31,080(b,d) 416,783 Oil & Gas (8.1%) Amerada Hess 2,784 353,846 Anadarko Petroleum 7,647 694,883 Apache 10,644 762,323 Ashland 2,179 132,461 Burlington Resources 12,502 922,523 Chevron 73,524 4,514,374 ConocoPhillips 45,158 2,977,719 Devon Energy 15,366 933,792 El Paso 20,903 242,475 EOG Resources 7,758 495,193 Exxon Mobil 206,468 12,367,433 Kerr-McGee 3,781 332,841 Kinder Morgan 3,521 336,150 Marathon Oil 11,800 758,858 Murphy Oil 5,325 291,011 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 205 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (cont.) Occidental Petroleum 12,921 $1,072,831 Sunoco 4,466 324,678 Valero Energy 8,330 887,145 Williams Companies 18,515 415,477 XTO Energy 11,706 465,899 Total 29,281,912 Paper & Forest Products (0.4%) Georgia-Pacific 8,436 270,711 Intl Paper 15,906 490,700 Louisiana-Pacific 3,600 91,044 MeadWestvaco 6,043 175,066 Weyerhaeuser 7,939 516,194 Total 1,543,715 Personal Products (0.6%) Alberto-Culver 2,770 118,972 Avon Products 15,306 502,343 Gillette 32,356 1,743,017 Total 2,364,332 Pharmaceuticals (6.6%) Abbott Laboratories 50,294 2,269,768 Allergan 4,230 389,372 Bristol-Myers Squibb 63,381 1,550,933 Eli Lilly & Co 36,748 2,021,875 Forest Laboratories 11,040(b) 490,176 Johnson & Johnson 96,445 6,113,649 King Pharmaceuticals 7,845(b) 115,322 Merck & Co 71,459 2,017,288 Mylan Laboratories 8,740 160,729 Pfizer 241,158(d) 6,142,294 Schering-Plough 47,845 1,024,361 Watson Pharmaceuticals 3,382(b) 116,611 Wyeth 43,413 1,987,881 Total 24,400,259 Real Estate Investment Trust (0.7%) Apartment Investment & Management Cl A 3,090 123,291 Archstone-Smith Trust 6,450 259,935 Equity Office Properties Trust 13,219 440,193 Equity Residential 9,299 351,223 Plum Creek Timber 5,969 219,361 ProLogis 6,055 263,453 Public Storage 3,350 226,192 Simon Property Group 7,129 542,302 Vornado Realty Trust 3,780 325,156 Total 2,751,106 Road & Rail (0.5%) Burlington Northern Santa Fe 12,209 647,321 CSX 7,026 308,652 Norfolk Southern 13,116 467,061 Union Pacific 8,532 582,480 Total 2,005,514 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (3.3%) Advanced Micro Devices 12,810(b) $266,064 Altera 12,049(b) 263,512 Analog Devices 12,003 437,509 Applied Materials 53,316 976,216 Applied Micro Circuits 9,938(b) 27,330 Broadcom Cl A 9,494(b) 412,989 Freescale Semiconductor Cl B 13,032(b) 313,811 Intel 200,217 5,149,580 KLA-Tencor 6,383 324,001 Linear Technology 9,928 376,569 LSI Logic 12,579(b) 121,262 Maxim Integrated Products 10,635 453,583 Micron Technology 19,939(b) 237,473 Natl Semiconductor 11,318 282,158 Novellus Systems 4,480(b) 120,109 NVIDIA 5,481(b) 168,157 PMC-Sierra 5,854(b) 49,642 Teradyne 6,354(b) 106,747 Texas Instruments 53,913 1,761,877 Xilinx 11,381 319,692 Total 12,168,281 Software (3.9%) Adobe Systems 15,856 428,746 Autodesk 7,412 320,198 BMC Software 7,181(b) 143,620 Citrix Systems 5,485(b) 130,543 Computer Associates Intl 17,262 465,384 Compuware 12,544(b) 113,649 Electronic Arts 9,944(b) 569,592 Intuit 6,016(b) 275,773 Mercury Interactive 2,807(b) 102,933 Microsoft 325,894(d) 8,929,496 Novell 12,354(b) 81,289 Oracle 143,290(b) 1,858,471 Parametric Technology 8,813(b) 53,407 Siebel Systems 16,754 138,221 Symantec 38,659(b) 811,066 Total 14,422,388 Specialty Retail (2.3%) AutoNation 7,240(b) 150,664 AutoZone 2,126(b) 200,907 Bed Bath & Beyond 9,585(b) 388,672 Best Buy 14,523 692,166 Circuit City Stores 6,204 104,786 Gap 24,580 467,266 Home Depot 69,617 2,806,957 Limited Brands 12,333 271,079 Lowe's Companies 25,055 1,611,287 Office Depot 10,239(b) 307,170 OfficeMax 2,291 67,699 RadioShack 4,398 110,214 Sherwin-Williams 4,057 188,083 Staples 23,892 524,668 Tiffany & Co 4,665 174,564 TJX Companies 15,258 319,045 Total 8,385,227 Common Stocks (continued) Issuer Shares Value(a) Textiles, Apparel & Luxury Goods (0.4%) Coach 12,230(b) $405,914 Jones Apparel Group 3,912 110,240 Liz Claiborne 3,522 144,508 Nike Cl B 7,411 584,801 Reebok Intl 1,823 102,635 VF 3,238 192,046 Total 1,540,144 Thrifts & Mortgage Finance (1.6%) Countrywide Financial 19,056 643,902 Fannie Mae 31,393 1,602,299 Freddie Mac 22,394 1,352,150 Golden West Financial 9,166 559,034 MGIC Investment 3,063 191,223 Sovereign Bancorp 11,826 275,782 Washington Mutual 28,453 1,183,076 Total 5,807,466 Tobacco (1.4%) Altria Group 67,171 4,748,990 Reynolds American 3,775 316,874 UST 5,365 228,334 Total 5,294,198 Trading Companies & Distributors (--%) WW Grainger 2,706 174,050 Total Common Stocks (Cost: $329,259,856) $362,856,106 Short-Term Securities (1.4%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies Federal Home Loan Bank Disc Nt 09-23-05 3.48% $2,600,000 $2,594,236 Federal Natl Mtge Assn Disc Nt 09-14-05 3.42 2,500,000 2,496,675 Total Short-Term Securities (Cost: $5,091,398) $5,090,911 Total Investments in Securities (Cost: $334,351,254)(f) $367,947,017 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 206 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - S&P 500 Index Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 0.9% of net assets. (d) Partially pledged as initial margin deposit on the following open stock index futures contracts (see Note 7 to the financial statements): Type of security Contracts Purchase contracts E-Mini S&P 500 Index, Sept. 2005 83 (e) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (f) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $336,562,678 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 53,098,972 Unrealized depreciation (21,714,633) ----------- Net unrealized appreciation $ 31,384,339 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 207 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Select Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (79.1%) Issuer Shares Value(a) Aerospace & Defense (3.2%) Curtiss-Wright 1,000 $64,560 GenCorp 5,000(b) 94,250 Honeywell Intl 8,000 306,240 Kaman Cl A 3,000 71,970 Sequa Cl A 3,000(b) 205,500 Total 742,520 Auto Components (0.7%) Dana 6,000 80,760 Modine Mfg 2,500 87,900 Proliance Intl 589(b) 3,340 Total 172,000 Automobiles (0.2%) Coachmen Inds 4,000 53,880 Beverages (2.9%) Brown-Forman Cl A 3,000 177,720 Coca-Cola 6,000 264,000 Diageo ADR 2,500(c) 144,275 PepsiAmericas 1,000 25,220 Pernod-Ricard ADR 1,517(c) 65,791 Total 677,006 Building Products (0.9%) Griffon 7,000(b) 179,480 Water Pik Technologies 1,500(b) 29,550 Total 209,030 Chemicals (2.2%) Ferro 17,000 322,660 Hercules 5,000(b) 63,750 Sensient Technologies 7,000 131,390 Total 517,800 Commercial Services & Supplies (1.4%) Nashua 10,000(b) 68,500 Republic Services 2,000 72,460 Waste Management 7,000 192,010 Total 332,970 Computers & Peripherals (1.8%) Storage Technology 10,000(b) 369,500 UNOVA 2,000(b) 58,020 Total 427,520 Containers & Packaging (0.3%) Greif Cl A 1,000 58,850 Distributors (0.6%) Genuine Parts 3,000 137,460 Diversified Telecommunication Services (1.5%) CenturyTel 1,000 35,900 Cincinnati Bell 10,000(b) 43,300 Citizens Communications 5,000 68,200 Common Stocks (continued) Issuer Shares Value(a) Diversified Telecommunication Services (cont.) Qwest Communications Intl 7,500(b) $29,250 Sprint 7,000 181,510 Total 358,160 Electric Utilities (2.3%) Allegheny Energy 2,500(b) 75,400 DPL 8,000 215,920 Duquesne Light Holdings 1,500 27,225 El Paso Electric 1,000(b) 20,960 FPL Group 2,000 86,180 Northeast Utilities 1,000 19,920 NSTAR 2,000 59,120 Unisource Energy 1,000 33,280 Total 538,005 Electrical Equipment (3.4%) Cooper Inds Cl A 5,000 332,200 GrafTech Intl 5,000(b) 29,700 Thomas & Betts 12,000(b) 426,480 Total 788,380 Electronic Equipment & Instruments (0.1%) Paxar 1,000(b) 18,810 Energy Equipment & Services (0.2%) RPC 2,000 46,400 Food & Staples Retailing (1.0%) Albertson's 7,000 140,910 Safeway 4,000 94,920 Total 235,830 Food Products (5.4%) Archer-Daniels-Midland 5,000 112,550 Cadbury Schweppes ADR 3,000(c) 119,640 Campbell Soup 1,000 29,400 Corn Products Intl 2,000 45,040 Del Monte Foods 2,000(b) 21,620 Dreyer's Grand Ice Cream Holdings 3,500 286,195 General Mills 9,000 415,080 Hershey 500 29,545 HJ Heinz 2,000 71,840 WM Wrigley Jr 2,000 142,100 Total 1,273,010 Health Care Equipment & Supplies (0.7%) Conmed 2,000(b) 58,520 INAMED 400(b) 29,000 Sybron Dental Specialties 2,000(b) 77,540 Total 165,060 Health Care Providers & Services (3.7%) Beverly Enterprises 10,000(b) 125,500 Chemed 1,600 64,736 Henry Schein 2,000(b) 83,380 Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (cont.) IMS Health 5,000 $136,000 Patterson Companies 2,000(b) 80,120 Priority Healthcare Cl B 10,000(b) 278,900 Renal Care Group 2,000(b) 94,180 Total 862,816 Hotels, Restaurants & Leisure (3.4%) Aztar 10,000(b) 334,000 Churchill Downs 4,000 157,160 Gaylord Entertainment 1,000(b) 42,600 Hilton Hotels 2,000 46,340 Kerzner Intl 500(b,c) 28,525 MGM Mirage 3,500(b) 147,910 Pinnacle Entertainment 2,000(b) 39,880 Total 796,415 Household Durables (3.7%) Cavalier Homes 12,000(b) 71,040 Cavco Inds 4,000(b) 134,120 Champion Enterprises 17,000(b) 226,610 Fleetwood Enterprises 10,000(b) 101,100 Palm Harbor Homes 5,000(b) 92,350 Skyline 6,000 236,220 Southern Energy Homes 2,000(b) 12,400 Total 873,840 Household Products (0.3%) Church & Dwight 750 28,620 Energizer Holdings 600(b) 38,940 Total 67,560 Industrial Conglomerates (1.0%) Tredegar 5,000 62,100 Tyco Intl 6,000(c) 166,980 Total 229,080 Internet & Catalog Retail (0.8%) Expedia 3,800(b) 84,588 IAC/InterActiveCorp 3,800(b) 93,290 Total 177,878 Internet Software & Services (0.9%) Yahoo! 6,400(b) 213,376 Machinery (5.0%) CIRCOR Intl 2,000 52,520 Clarcor 4,000 113,200 CNH Global 6,000(c) 130,020 Crane 5,000 148,050 Deere & Co 2,000 130,760 ITT Inds 4,500 491,040 Watts Water Technologies Cl A 3,000 101,580 Total 1,167,170 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 208 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Select Value Fund Common Stocks (continued) Issuer Shares Value(a) Media (18.1%) Cablevision Systems Cl A 18,000(b) $561,600 Comcast Cl A 2,000(b) 61,500 DIRECTV Group 3,500(b) 55,685 Discovery Holding Cl A 1,500(b) 22,710 Dow Jones & Co 1,000 40,850 EchoStar Communications Cl A 9,000 269,370 EW Scripps Cl A 6,000 300,000 Fisher Communications 3,500(b) 168,945 Gemstar-TV Guide Intl 32,000(b) 91,840 Gray Television 2,000 24,600 Grupo Televisa ADR 1,000(c) 62,800 Knight-Ridder 1,200 76,896 Liberty Global Cl A 4,000(b) 203,000 Liberty Media Cl A 15,000(b) 124,650 LIN TV Cl A 5,000(b) 75,550 Media General Cl A 1,800 118,422 New York Times Cl A 500 15,965 News Corp Cl A 16,120 261,305 Paxson Communications 2,000(b) 1,220 Reader's Digest Assn 2,000 32,520 Sinclair Broadcast Group Cl A 16,000 150,240 Time Warner 18,000 322,560 Tribune 8,000 300,560 Viacom Cl A 10,000 340,800 Vivendi Universal ADR 10,000(c) 315,500 Walt Disney 10,000 251,900 Young Broadcasting Cl A 7,000(b) 30,590 Total 4,281,578 Common Stocks (continued) Issuer Shares Value(a) Multi-Utilities & Unregulated Power (0.3%) Aquila 12,000(b) $48,240 Energy East 1,000 26,220 Total 74,460 Multiline Retail (1.3%) Neiman Marcus Group Cl A 3,000 296,700 Oil & Gas (2.9%) Chevron 5,858 359,695 ConocoPhillips 1,000 65,940 El Paso 3,000 34,800 Exxon Mobil 1,000 59,900 Royal Dutch Shell Cl A ADR 2,500(c) 162,400 Total 682,735 Pharmaceuticals (2.7%) Bristol-Myers Squibb 2,000 48,940 Eli Lilly & Co 5,000 275,100 Pfizer 12,000 305,640 Total 629,680 Semiconductors & Semiconductor Equipment (0.7%) Texas Instruments 5,000 163,400 Specialty Retail (1.1%) AutoNation 2,000(b) 41,620 CSK Auto 10,000(b) 167,500 Rent-A-Center 2,000(b) 40,400 Total 249,520 Thrifts & Mortgage Finance (1.6%) Commercial Federal 10,800 366,228 Common Stocks (continued) Issuer Shares Value(a) Trading Companies & Distributors (0.3%) GATX 2,000 $81,060 Wireless Telecommunication Services (2.5%) Telephone & Data Systems 1,500 61,275 Telephone & Data Systems Special Shares 1,500 57,750 US Cellular 8,700(b) 477,456 Total 596,481 Total Common Stocks (Cost: $17,074,240) $18,562,668 Short-Term Securities (21.3%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agencies (18.7%) Federal Home Loan Mtge Corp Disc Nt 09-20-05 3.45% $2,500,000 $2,495,222 Federal Natl Mtge Assn Disc Nt 09-14-05 3.42 1,900,000 1,897,473 Total 4,392,695 Commercial Paper (2.6%) General Electric Capital 09-01-05 3.56 600,000 599,941 Total Short-Term Securities (Cost: $4,993,115) $4,992,636 Total Investments in Securities (Cost: $22,067,355)(d) $23,555,304 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 5.1% of net assets. (d) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $22,067,355 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $2,040,036 Unrealized depreciation (552,087) -------- Net unrealized appreciation $1,487,949 ---------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 209 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Short Duration U.S. Government Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Bonds (98.8%) Issuer Coupon Principal Value(a) rate amount U.S. Government Obligations & Agencies (47.5%) Federal Farm Credit Bank 07-17-06 2.13% $3,200,000 $3,148,288 10-02-06 2.38 3,000,000 2,949,354 04-05-07 2.15 6,600,000 6,410,513 06-19-07 6.75 2,565,000 2,684,319 10-10-08 4.25 4,040,000 4,063,105 Federal Home Loan Bank 03-13-06 2.50 3,750,000 3,722,843 05-15-06 3.00 5,000,000 4,968,310 05-15-06 5.38 3,500,000 3,534,038 05-22-06 2.88 31,040,000 30,809,993 09-15-06 3.50 6,035,000 6,004,312 04-18-08 4.13 8,290,000 8,307,607 Federal Home Loan Mtge Corp 01-30-07 3.00 2,500,000 2,460,578 12-20-07 3.53 450,000 444,990 10-15-08 5.13 4,010,000 4,131,796 Federal Natl Mtge Assn 02-15-06 5.50 3,650,000 3,677,583 04-13-06 2.15 4,650,000 4,598,915 03-02-07 3.00 3,855,000 3,799,288 05-15-07 3.88 5,000,000 4,989,100 11-17-08 3.88 150,000 148,601 U.S. Treasury 01-31-06 1.88 23,795,000 23,618,393 11-30-06 2.88 11,155,000 11,028,636 01-31-07 3.13 5,585,000 5,531,334 02-15-07 2.25 18,585,000 18,175,554 02-28-07 3.38 10,900,000 10,828,474 05-15-07 3.13 2,350,000 2,322,921 08-15-07 2.75 6,325,000(j) 6,196,773 08-15-07 3.25 17,035,000(j) 16,849,353 02-15-08 3.38 12,225,000 12,091,283 10-15-08 3.13 4,960,000 4,856,148 04-15-09 3.13 5,000,000 4,878,320 08-15-14 4.25 3,700,000 3,762,293 05-15-15 4.13 4,055,000 4,081,134 U.S. Treasury Inflation-Indexed Bond 01-15-15 1.63 5,006,419(m) 5,000,454 Total 230,074,603 Asset-Backed (4.8%) AmeriCredit Automobile Receivables Trust Series 2004-CA Cl A3 (AMBAC) 03-06-09 3.00 2,750,000(n) 2,719,492 Capital Auto Receivables Asset Trust Series 2005-1 Cl A4 07-15-09 4.05 2,500,000 2,503,800 Chase Funding Mtge Loan Series 2004-2 Cl 2A1 01-25-25 3.77 404,948(i) 404,948 Federal Natl Mtge Assn 11-25-33 2.91 530,356 528,533 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Asset-Backed (cont.) Franklin Auto Trust Series 2004-2 Cl A4 (MBIA) 08-15-12 3.93% $5,000,000(n) $4,950,699 Honda Auto Receivables Owner Trust Series 2005-1 Cl A3 10-21-08 3.53 1,500,000 1,484,580 Morgan Stanley Auto Loan Trust Series 2004-HB2 Cl A3 03-16-09 2.94 2,500,000 2,463,085 Nissan Auto Receivables Owner Trust Series 2005-A Cl A3 10-15-08 3.54 1,750,000 1,731,923 Residential Asset Securities Series 2002-KS1 Cl AI4 (AMBAC) 11-25-29 5.86 550,142(n) 548,943 Small Business Administration Participation Ctfs Series 2001-10B Cl 1 09-10-11 5.89 465,615 488,491 Series 2001-20H Cl 1 08-01-21 6.34 352,366 378,309 Student Loan Mtge Assn Series 2003-4 Cl 45A 03-15-33 2.16 5,200,000(d) 5,157,568 Total 23,360,371 Commercial Mortgage-Backed (2.2%)(f) Citigroup Commercial Mtge Trust Series 2005-C3 Cl A1 05-15-43 4.39 4,903,628 4,907,532 Federal Natl Mtge Assn #360800 01-01-09 5.74 909,521 944,516 Federal Natl Mtge Assn #381990 10-01-09 7.11 472,594 517,458 LB-UBS Commercial Mtge Trust Series 2004-C6 Cl A2 08-15-29 4.19 1,500,000 1,488,270 Morgan Stanley Capital I Series 2004-IQ8 Cl A2 06-15-40 3.96 2,769,212 2,744,591 Total 10,602,367 Mortgage-Backed (43.4%)(f,k) Bear Stearns Alternative Trust Series 2005-5 Cl 1A1 07-25-35 3.86 2,234,936(i) 2,237,618 Countrywide Alternative Loan Trust Series 2005-6CB Cl 1A1 04-25-35 7.50 1,167,821 1,224,070 Countrywide Home Loans Series 2005-R2 Cl 2A1 06-25-35 7.00 2,852,108(d) 3,024,126 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Home Loan Mtge Corp 01-15-18 5.00% $1,603,064 $1,620,913 Collateralized Mtge Obligation 06-15-16 7.00 1,711,887 1,801,911 08-15-22 3.50 397,164 396,262 12-15-28 5.50 1,180,000 1,211,759 Interest Only 02-15-14 7.40 1,274,922(e) 79,122 07-15-17 0.92 1,599,380(e) 164,739 08-01-20 8.00 2,079,438(e) 358,682 10-15-22 14.56 827,901(e) 47,334 03-15-25 0.00 2,228,607(e) 145,561 Interest Only/Inverse Floater 11-15-19 0.00 2,510,606(e,l) 214,733 Principal Only 08-01-20 4.60 2,079,438(g) 1,708,425 Federal Home Loan Mtge Corp #782436 10-01-34 4.99 1,523,720(h) 1,538,516 Federal Home Loan Mtge Corp #A18107 01-01-34 5.50 2,466,518 2,494,570 Federal Home Loan Mtge Corp #B10776 11-01-13 5.00 143,608 145,296 Federal Home Loan Mtge Corp #B16408 09-01-19 5.50 1,862,513 1,903,754 Federal Home Loan Mtge Corp #C73304 11-01-32 7.00 385,839 403,721 Federal Home Loan Mtge Corp #D95319 03-01-22 6.00 189,803 195,579 Federal Home Loan Mtge Corp #E00489 06-01-12 7.00 12,553 13,128 Federal Home Loan Mtge Corp #E00678 06-01-14 6.50 112,681 116,718 Federal Home Loan Mtge Corp #E81240 06-01-15 7.50 1,643,568 1,758,020 Federal Home Loan Mtge Corp #E92454 11-01-17 5.00 1,047,890 1,056,938 Federal Home Loan Mtge Corp #E93465 11-01-17 5.50 1,245,419 1,273,082 Federal Home Loan Mtge Corp #E95188 03-01-18 6.00 695,274 719,791 Federal Home Loan Mtge Corp #E96579 06-01-13 4.50 876,051 868,190 Federal Home Loan Mtge Corp #G01790 09-01-34 6.50 4,097,518 4,233,566 Federal Home Loan Mtge Corp #G10669 03-01-12 7.50 720,887 766,437 Federal Home Loan Mtge Corp #G11243 04-01-17 6.50 1,840,089 1,911,231 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 210 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Natl Mtge Assn 10-01-35 6.00% $11,400,000(b) $11,649,376 Collateralized Mtge Obligation 07-25-23 5.50 3,275,618 3,310,536 12-25-26 8.00 579,390 615,575 06-25-33 5.72 178,038(h) 179,781 04-25-34 5.50 2,397,201 2,440,212 05-25-34 3.50 34,543 34,398 Interest Only 12-25-12 13.29 1,065,315(e) 44,334 11-25-13 10.08 1,700,000(e) 128,890 12-25-22 8.27 599,979(e) 77,423 03-25-23 7.94 907,866(e) 138,159 12-25-31 1.19 777,049(e) 127,171 Federal Natl Mtge Assn #252211 01-01-29 6.00 148,850 152,817 Federal Natl Mtge Assn #252409 03-01-29 6.50 1,947,741 2,035,111 Federal Natl Mtge Assn #254369 06-01-12 6.00 1,613,019 1,673,583 Federal Natl Mtge Assn #254384 06-01-17 7.00 511,323 535,566 Federal Natl Mtge Assn #254723 05-01-23 5.50 4,648,314 4,730,643 Federal Natl Mtge Assn #254748 04-01-13 5.50 1,435,441 1,467,289 Federal Natl Mtge Assn #254757 05-01-13 5.00 1,400,926 1,414,736 Federal Natl Mtge Assn #254774 05-01-13 5.50 1,159,658 1,187,049 Federal Natl Mtge Assn #254864 08-01-13 4.50 1,769,832 1,765,134 Federal Natl Mtge Assn #255488 10-01-14 5.50 1,791,964 1,835,097 Federal Natl Mtge Assn #255501 09-01-14 6.00 1,689,585 1,753,576 Federal Natl Mtge Assn #313470 08-01-10 7.50 548,076 573,402 Federal Natl Mtge Assn #323133 04-01-13 5.50 61,501 62,853 Federal Natl Mtge Assn #323788 06-01-14 6.50 88,917 92,235 Federal Natl Mtge Assn #323980 04-01-14 6.00 317,670 328,057 Federal Natl Mtge Assn #357485 02-01-34 5.50 5,691,587 5,755,391 Federal Natl Mtge Assn #507182 07-01-14 6.00 129,537 133,794 Federal Natl Mtge Assn #512232 05-01-29 7.00 48,248 50,784 Federal Natl Mtge Assn #533431 01-01-15 6.50 61,139 63,416 Federal Natl Mtge Assn #535168 12-01-14 5.50 211,304 215,994 Federal Natl Mtge Assn #545818 07-01-17 6.00 1,795,190 1,860,401 Federal Natl Mtge Assn #545864 08-01-17 5.50 2,315,525 2,371,146 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Natl Mtge Assn #545910 08-01-17 6.00% $2,096,081 $2,170,380 Federal Natl Mtge Assn #555063 11-01-17 5.50 2,785,877 2,853,072 Federal Natl Mtge Assn #555343 08-01-17 6.00 829,706 857,009 Federal Natl Mtge Assn #555367 03-01-33 6.00 3,897,707 3,993,399 Federal Natl Mtge Assn #555375 04-01-33 6.00 190,437 196,361 Federal Natl Mtge Assn #555387 04-01-33 4.63 2,730,432(h) 2,772,699 Federal Natl Mtge Assn #555740 08-01-18 4.50 230,032 228,370 Federal Natl Mtge Assn #602630 10-01-31 7.00 257,123 269,776 Federal Natl Mtge Assn #626720 01-01-17 6.00 615,656 635,866 Federal Natl Mtge Assn #630992 09-01-31 7.00 1,109,883 1,177,138 Federal Natl Mtge Assn #630993 09-01-31 7.50 959,091 1,018,963 Federal Natl Mtge Assn #633672 06-01-17 6.00 443,775 459,482 Federal Natl Mtge Assn #636720 05-01-17 5.50 159,644 163,196 Federal Natl Mtge Assn #638210 05-01-32 6.50 184,434 192,509 Federal Natl Mtge Assn #648040 06-01-32 6.50 903,872 936,089 Federal Natl Mtge Assn #648349 06-01-17 6.00 1,566,452 1,623,323 Federal Natl Mtge Assn #648679 07-01-32 6.00 3,407,157 3,490,805 Federal Natl Mtge Assn #650501 06-01-17 6.50 3,220,823 3,338,878 Federal Natl Mtge Assn #654413 09-01-32 7.00 195,621 205,179 Federal Natl Mtge Assn #656562 02-01-33 7.00 398,149 419,802 Federal Natl Mtge Assn #665752 09-01-32 6.50 744,232 770,759 Federal Natl Mtge Assn #668412 02-01-18 5.50 796,036 814,737 Federal Natl Mtge Assn #670387 08-01-32 7.00 25,415 26,665 Federal Natl Mtge Assn #671054 01-01-33 7.00 34,017 35,679 Federal Natl Mtge Assn #671174 02-01-33 4.63 761,062(h) 758,478 Federal Natl Mtge Assn #675692 02-01-18 6.00 555,515 573,795 Federal Natl Mtge Assn #678940 02-01-18 5.50 1,183,062 1,211,032 Federal Natl Mtge Assn #679183 02-01-18 5.50 1,226,809 1,256,378 Federal Natl Mtge Assn #684588 03-01-33 6.50 342,839 356,601 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Federal Natl Mtge Assn #688181 03-01-33 6.00% $2,031,023 $2,080,886 Federal Natl Mtge Assn #695838 04-01-18 5.50 336,351 344,461 Federal Natl Mtge Assn #696154 04-01-33 4.57 2,030,173(h) 2,019,170 Federal Natl Mtge Assn #696711 05-01-18 5.50 1,308,138 1,342,791 Federal Natl Mtge Assn #696714 05-01-18 5.50 755,326 775,330 Federal Natl Mtge Assn #701937 04-01-33 6.00 201,447 206,389 Federal Natl Mtge Assn #704610 06-01-33 5.50 4,465,939 4,516,002 Federal Natl Mtge Assn #705655 05-01-33 5.00 1,881,766 1,874,295 Federal Natl Mtge Assn #720378 06-01-18 4.50 1,845,791 1,833,056 Federal Natl Mtge Assn #722325 07-01-33 4.97 795,009(h) 793,389 Federal Natl Mtge Assn #723448 07-01-13 5.00 1,077,178 1,094,238 Federal Natl Mtge Assn #725232 03-01-34 5.00 4,361,895 4,344,578 Federal Natl Mtge Assn #725431 08-01-15 5.50 3,143,139 3,212,284 Federal Natl Mtge Assn #725558 06-01-34 4.58 1,978,891(h) 1,969,584 Federal Natl Mtge Assn #725737 08-01-34 4.53 1,054,651(h) 1,055,305 Federal Natl Mtge Assn #740843 11-01-18 5.00 163,971 165,250 Federal Natl Mtge Assn #744010 07-01-13 5.00 2,155,234 2,185,618 Federal Natl Mtge Assn #747536 11-01-33 5.00 2,471,057 2,461,247 Federal Natl Mtge Assn #754297 12-01-33 4.74 112,276(h) 112,040 Federal Natl Mtge Assn #755891 03-01-13 5.00 551,285 559,485 Federal Natl Mtge Assn #790382 09-01-34 4.85 1,538,710(h) 1,548,257 Federal Natl Mtge Assn #790759 09-01-34 4.84 2,354,861(h) 2,363,626 Federal Natl Mtge Assn #791447 10-01-34 6.00 961,578 984,418 Federal Natl Mtge Assn #797044 07-01-34 5.50 3,759,564 3,799,552 Federal Natl Mtge Assn #797168 02-01-35 4.65 2,135,348(h) 2,145,626 Federal Natl Mtge Assn #799769 11-01-34 5.07 1,540,708(h) 1,556,115 Federal Natl Mtge Assn #801344 10-01-34 5.07 1,628,183(h) 1,651,238 Federal Natl Mtge Assn #815264 05-01-35 5.25 2,321,178(h) 2,348,501 Federal Natl Mtge Assn #815463 02-01-35 5.50 1,204,787 1,217,601 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 211 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) First Horizon Alternative Mtge Securities Series 2004-AA4 Cl A1 10-25-34 5.42% $966,517(i) $985,876 Series 2005-AA3 Cl 3A1 05-25-35 5.42 2,211,357(i) 2,235,350 GMAC Mtge Corporation Loan Trust Series 2004-AR2 Cl 3A 08-19-34 4.42 1,649,997(h) 1,643,871 Govt Natl Mtge Assn Collateralized Mtge Obligation 10-16-13 4.54 162,925 163,355 10-16-27 5.00 125,000 127,106 04-16-31 6.00 2,182,618 2,196,622 03-20-34 4.50 1,663,089 1,665,994 Govt Natl Mtge Assn #485336 03-15-31 8.00 56,671 60,840 Govt Natl Mtge Assn #498182 05-15-16 6.00 1,118,283 1,160,204 Govt Natl Mtge Assn #605970 03-15-33 6.00 457,778 472,448 Govt Natl Mtge Assn #615738 03-15-18 7.00 1,272,818 1,338,812 Govt Natl Mtge Assn #615740 08-15-13 6.00 2,793,846 2,898,544 Govt Natl Mtge Assn #780758 04-15-13 7.00 276,590 290,647 Govt Natl Mtge Assn #781507 09-15-14 6.00 1,346,553 1,396,965 GSR Mtge Loan Trust Series 2005-AR2 Cl 2A1 04-25-35 4.89 1,899,934(h) 1,897,749 Harborview Mtge Loan Trust Series 2004-4 Cl 3A 06-19-34 2.98 2,004,661(h) 1,964,180 Bonds (continued) Issuer Coupon Principal Value(a) rate amount Mortgage-Backed (cont.) Morgan Stanley Mtge Loan Trust Series 2004-10AR Cl 2A1 11-25-34 5.14% $815,937(h) $827,899 Series 2004-2AR Cl 3A 02-25-34 5.03 1,555,762(h) 1,555,653 Structured Adj Rate Mtge Loan Trust Series 2005-15 Cl 4A1 07-25-35 5.54 3,545,209(h) 3,539,670 Structured Asset Securities Series 2004-12H Cl 2A 04-25-34 5.55 1,285,401(h) 1,292,472 Vendee Mtge Trust Series 2003-1 Cl D 12-15-25 5.75 5,000,000 5,041,901 Series 2003-2 Cl C 07-15-20 5.00 2,400,000 2,404,812 Series 2003-2 Cl D 11-15-23 5.00 100,000 100,946 Washington Mutual Series 2002-AR15 Cl A5 12-25-32 4.38 840,033(h) 833,932 Series 2005-AR3 Cl A2 03-25-35 4.65 2,351,799(h) 2,389,381 Wells Fargo Mtge Backed Securities Trust Series 2005 10-25-35 5.00 2,300,000(b) 2,311,859 Series 2005-5 Cl 2A1 05-25-35 5.50 1,941,619 1,968,874 Series 2005-AR2 03-25-35 4.56 1,155,578(h) 1,147,131 Total 209,717,566 Supranational (1.0%) Intl Bank for Reconstruction & Development 11-04-05 5.00 5,000,000(c) 5,008,135 Total Bonds (Cost: $481,140,692) $478,763,042 Short-Term Securities (3.6%) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (1.2%) Federal Natl Mtge Assn Disc Nt 09-14-05 3.42% $5,700,000 $5,692,419 Commercial Paper (2.4%) General Electric Capital 09-01-05 3.56 11,900,000 11,898,823 Total Short-Term Securities (Cost: $17,592,962) $17,591,242 Total Investments in Securities (Cost: $498,733,654)(o) $496,354,284 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) At Aug. 31, 2005, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $13,921,642. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Aug. 31, 2005, the value of foreign securities represented 1.0% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $8,181,694 or 1.7% of net assets. (e) Interest only represents securities that entitle holders to receive only interest payments on the underlying mortgages. The yield to maturity of an interest only is extremely sensitive to the rate of principal payments on the underlying mortgage assets. A rapid (slow) rate of principal repayments may have an adverse (positive) effect on yield to maturity. The principal amount shown is the notional amount of the underlying mortgages. Interest rate disclosed represents yield based upon the estimated timing and amount of future cash flows at Aug. 31, 2005. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. - -------------------------------------------------------------------------------- 212 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Short Duration U.S. Government Fund Notes to Investments in Securities (continued) (g) Principal only represents securities that entitle holders to receive only principal payments on the underlying mortgages. The yield to maturity of a principal only is sensitive to the rate of principal payments on the underlying mortgage assets. A slow (rapid) rate of principal repayments may have an adverse (positive) effect on yield to maturity. Interest rate disclosed represents yield based upon the estimated timing of future cash flows at Aug. 31, 2005. (h) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Aug. 31, 2005. (j) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 7 to the financial statements): Type of security Notional amount Purchase contracts U.S. Treasury Note, Dec. 2005, 2-year $18,800,000 Sale contracts U.S. Treasury Note, Sept. 2005, 5-year 2,300,000 U.S. Treasury Note, Dec. 2005, 5-year 7,500,000 (k) Comparable securities are held to satisfy future delivery requirements of the following open forward sale commitments at Aug. 31, 2005: Security Principal Settlement Proceeds Value amount date receivable Federal Natl Mtge Assn 09-01-35 5.00% $ 1,300,000 09-14-05 $1,271,969 $ 1,291,062 09-01-35 5.50 10,000,000 09-14-05 9,982,500 10,100,000 09-01-35 6.50 2,900,000 09-14-05 2,993,004 2,996,063 (l) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or in a multiple of, a decline (increase) in the LIBOR (London InterBank Offering Rate) Index. Interest rate disclosed is the rate in effect on Aug. 31, 2005. (m) U.S. Treasury inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. (n) The following abbreviations are used in the portfolio security descriptions to identify the insurer of the issue: AMBAC -- Ambac Assurance Corporation MBIA -- MBIA Insurance Corporation (o) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $499,150,773 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 1,103,464 Unrealized depreciation (3,899,953) ---------- Net unrealized depreciation $(2,796,489) ----------- How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 213 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Small Cap Advantage Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (97.7%) Issuer Shares Value(a) Aerospace & Defense (2.0%) AAR 22,000(b) $387,200 Armor Holdings 22,000(b) 933,020 B/E Aerospace 5,400(b) 85,644 DRS Technologies 13,300 684,285 GenCorp 8,550(b) 161,168 Innovative Solutions & Support 11,500(b) 193,890 Kaman Cl A 12,500 299,875 Moog Cl A 24,706(b) 778,486 Teledyne Technologies 29,800(b) 1,151,174 Total 4,674,742 Air Freight & Logistics (0.2%) Forward Air 13,300 469,224 Hub Group Cl A 1,700(b) 54,825 Total 524,049 Airlines (0.3%) Continental Airlines Cl B 7,000(b) 93,590 ExpressJet Holdings 11,844(b) 112,636 SkyWest 22,900 542,959 Total 749,185 Auto Components (0.7%) American Axle & Mfg Holdings 22,300 578,907 ArvinMeritor 30,366 563,289 Bandag 2,513 108,813 Cooper Tire & Rubber 7,035 118,892 Modine Mfg 5,000 175,800 Superior Inds Intl 6,303 140,242 Total 1,685,943 Beverages (0.2%) Hansen Natural 10,800(b) 536,220 Biotechnology (3.5%) Albany Molecular Research 22,800(b) 380,304 Alkermes 6,000(b) 112,680 Applera - Celera Genomics Group 37,700(b,d) 442,598 Cepheid 38,000(b) 285,000 CV Therapeutics 29,000(b) 787,930 deCODE genetics 61,700(b,c) 599,107 Encysive Pharmaceuticals 43,300(b) 536,054 Exelixis 36,000(b) 269,640 Human Genome Sciences 29,300(b) 378,263 ICOS 8,000(b) 209,040 Incyte 65,100(b) 479,136 Lexicon Genetics 57,600(b) 256,320 Martek Biosciences 2,000(b) 102,000 Medarex 49,300(b) 495,465 Myriad Genetics 10,400(b) 205,608 Nabi Biopharmaceuticals 28,300(b) 381,201 Orchid Cellmark 18,000(b) 162,000 Pharmion 8,000(b) 198,800 Common Stocks (continued) Issuer Shares Value(a) Biotechnology (cont.) Regeneron Pharmaceuticals 22,000(b) $164,340 Savient Pharmaceuticals 25,400(b) 102,616 Serologicals 20,910(b) 497,449 Tanox 24,400(b) 321,836 United Therapeutics 10,300(b) 723,163 Vertex Pharmaceuticals 11,000(b) 202,400 Total 8,292,950 Building Products (0.9%) Ameron Intl 3,607 153,153 Lennox Intl 30,200 736,578 USG 6,897(b) 433,476 Water Pik Technologies 22,000(b) 433,400 YORK Intl 7,694 441,482 Total 2,198,089 Capital Markets (0.7%) Investment Technology Group 31,471(b) 863,879 Jefferies Group 12,400 489,552 Knight Capital Group Cl A 16,973(b) 142,913 MCG Capital 3,096 56,409 Waddell & Reed Financial Cl A 4,100 79,458 Total 1,632,211 Chemicals (1.2%) Albemarle 11,800 428,458 Cambrex 4,693 89,261 Chemtura 15,226 261,278 FMC 7,828(b) 445,883 HB Fuller 17,940 588,612 Hercules 39,900(b) 508,725 Kronos Worldwide 9 274 Octel 6,021(c) 103,441 Sensient Technologies 11,847 222,368 WR Grace & Co 14,175(b) 149,546 Total 2,797,846 Commercial Banks (5.2%) Amcore Financial 5,448 168,234 AmericanWest Bancorp 3,191(b) 72,914 BancorpSouth 49,852 1,121,171 Bank of Hawaii 17,000 862,750 Bank of the Ozarks 17,000 566,950 BOK Financial 14,000 657,860 Camden Natl 1,625 61,766 Cathay General Bancorp 13,500 454,545 Chemical Financial 5,314 173,343 Chittenden 6,519 175,752 Citizens Banking 4,275 129,490 City Holding 12,600 462,672 Colonial BancGroup 35,200 818,752 Community Trust Bancorp 3,430 110,240 East-West Bancorp 16,400 556,616 First BanCorp Puerto Rico 2,400(c) 44,304 First Citizens BancShares Cl A 671 110,715 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (cont.) First Community Bancshares 1,545 $45,361 First Financial Bancorp 3,862 69,516 First Midwest Bancorp 18,031 684,096 First Republic Bank 22,600 813,600 Greater Bay Bancorp 21,300 536,760 Hanmi Financial 36,800 675,280 Hudson United Bancorp 2,600 109,850 Irwin Financial 3,304 69,384 Old Natl Bancorp 3,012 67,499 Oriental Financial Group 5,917(c) 80,294 Prosperity Bancshares 17,000 496,740 Republic Bancorp 4,789 70,303 S&T Bancorp 3,092 117,898 Southwest Bancorp 3,216 74,322 Sterling Bancshares 20,000 299,800 Susquehanna Bancshares 2,815 70,938 Tompkins Trustco 1,449 61,322 Trustmark 9,446 260,332 UMB Financial 1,970 129,725 Wintrust Financial 15,900 819,486 Total 12,100,580 Commercial Services & Supplies (3.6%) Administaff 1,800 64,746 Banta 3,362 164,570 Brady Cl A 21,000 655,410 Bright Horizons Family Solutions 9,000(b) 353,880 FTI Consulting 26,523(b) 660,423 G&K Services Cl A 11,700 502,749 GEO Group 2,353(b) 65,649 IKON Office Solutions 7,800 78,702 Jackson Hewitt Tax Service 24,000 614,160 John H Harland 19,000 797,050 Korn/Ferry Intl 34,050(b) 674,871 Labor Ready 20,700(b) 470,304 NCO Group 4,000(b) 83,920 PHH 13,100(b) 396,144 Portfolio Recovery Associates 11,100(b) 443,667 Pre-Paid Legal Services 1,780 72,072 Resources Connection 22,000(b) 638,000 Sotheby's Holdings Cl A 27,000(b) 469,530 SOURCECORP 3,620(b) 74,174 United Stationers 5,412(b) 253,823 Viad 2,200 63,954 Waste Connections 24,000(b) 848,159 Total 8,445,957 Communications Equipment (2.7%) ADTRAN 16,000 413,120 ARRIS Group 78,900(b) 827,661 Black Box 6,574 282,485 CommScope 34,200(b) 639,540 Comtech Telecommunications 1,900(b) 66,690 Digi Intl 45,600(b) 483,816 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 214 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Communications Equipment (cont.) Ditech Communications 39,900(b) $293,664 Endwave 1,700(b) 52,734 F5 Networks 14,661(b) 605,353 Ixia 13,113(b) 235,509 NETGEAR 38,800(b) 860,196 Plantronics 14,390 469,114 Sycamore Networks 62,700(b) 234,498 Tekelec 27,000(b) 532,170 UTStarcom 29,800(b) 229,460 Westell Technologies Cl A 31,000(b) 115,630 Total 6,341,640 Computers & Peripherals (1.3%) Emulex 30,900(b) 665,895 Imation 10,497 442,029 Iomega 40,800(b) 130,152 Komag 21,900(b) 730,584 Maxtor 134,000(b) 651,240 Palm 15,900(b) 543,462 Total 3,163,362 Construction & Engineering (1.4%) Comfort Systems USA 54,800(b) 451,004 EMCOR Group 1,448(b) 79,843 Granite Construction 1,953 72,808 Perini 37,200(b) 721,308 Quanta Services 35,000(b) 420,000 Shaw Group 16,113(b) 339,984 URS 18,700(b) 704,616 Washington Group Intl 11,500(b) 607,660 Total 3,397,223 Construction Materials (1.0%) Eagle Materials 8,600 968,704 Headwaters 16,300(b) 627,550 Texas Inds 12,000 717,720 Total 2,313,974 Consumer Finance (1.4%) AmeriCredit 19,200(b) 478,848 CompuCredit 19,969(b) 835,902 Metris Companies 16,329(b) 238,730 MoneyGram Intl 42,600 884,376 WFS Financial 6,000(b) 401,520 World Acceptance 21,220(b) 543,020 Total 3,382,396 Containers & Packaging (0.5%) Crown Holdings 21,088(b) 356,176 Greif Cl A 1,200 70,620 Rock-Tenn Cl A 4,786 72,939 Silgan Holdings 12,200 734,684 Total 1,234,419 Distributors (0.3%) Building Material Holding 7,127 666,232 Handleman 6,417 89,774 Total 756,006 Common Stocks (continued) Issuer Shares Value(a) Diversified Financial Services (0.9%) iShares Russell 2000 Small Cap Index Fund 29,000(e) $1,925,310 NASDAQ Stock Market 9,400(b) 220,900 Total 2,146,210 Diversified Telecommunication Services (0.8%) Commonwealth Telephone Enterprises 18,500 744,440 General Communication Cl A 40,770(b) 439,501 Premiere Global Services 78,000(b) 711,360 Talk America Holdings 10,700(b) 98,119 Total 1,993,420 Electric Utilities (1.2%) Allete 3,000 135,750 Black Hills 1,557 64,849 CH Energy Group 972 46,753 Cleco 5,934 136,482 Duquesne Light Holdings 34,046 617,935 El Paso Electric 34,519(b) 723,518 Idacorp 28,276 868,073 Otter Tail 2,725 81,750 PNM Resources 2,860 84,599 Sierra Pacific Resources 5,000(b) 72,900 Total 2,832,609 Electrical Equipment (0.8%) Artesyn Technologies 57,100(b) 524,178 Energy Conversion Devices 6,000(b) 208,260 General Cable 11,609(b) 182,145 Genlyte Group 14,000(b) 688,940 Global Power Equipment Group 37,900(b) 295,620 Total 1,899,143 Electronic Equipment & Instruments (2.1%) Aeroflex 51,474(b) 478,193 Agilysys 10,900 195,655 Anixter Intl 9,700(b) 370,346 Benchmark Electronics 18,275(b) 531,985 Checkpoint Systems 14,000(b) 305,900 Itron 2,600(b) 120,302 Lexar Media 42,500(b) 266,050 Methode Electronics 12,000 147,840 Metrologic Instruments 17,600(b) 294,800 MTS Systems 10,800 445,176 Paxar 9,893(b) 186,087 RadiSys 42,500(b) 793,476 SYNNEX 9,997(b) 165,850 Technitrol 19,800 290,466 Trimble Navigation 8,000(b) 292,160 Total 4,884,286 Energy Equipment & Services (3.4%) Atwood Oceanics 8,000(b) 601,840 Cal Dive Intl 18,800(b) 1,174,248 Grey Wolf 118,200(b) 925,506 GulfMark Offshore 2,581(b) 76,888 Helmerich & Payne 3,000 178,260 Hydril 12,500(b) 856,250 Common Stocks (continued) Issuer Shares Value(a) Energy Equipment & Services (cont.) Lufkin Inds 1,700 $78,438 Maverick Tube 24,500(b) 780,325 NS Group 12,835(b) 534,193 Oil States Intl 37,400(b) 1,296,284 Parker Drilling 6,700(b) 54,069 Pioneer Drilling 5,900(b) 92,040 Superior Energy Services 9,536(b) 209,029 TODCO Cl A 17,000 590,240 Unit 12,900(b) 671,574 Total 8,119,184 Food & Staples Retailing (0.9%) 7-Eleven 20,300(b) 575,302 Central European Distribution 1,400(b) 58,450 Great Atlantic & Pacific Tea 4,700(b) 119,286 Longs Drug Stores 3,000 127,200 Nash Finch 20,125 845,249 Ruddick 6,410 149,802 Spartan Stores 7,200(b) 73,728 Weis Markets 3,294 124,250 Total 2,073,267 Food Products (1.3%) American Italian Pasta Cl A 3,824 42,179 Chiquita Brands Intl 18,400 463,680 Corn Products Intl 41,500 934,579 Farmer Brothers 1,872 39,200 Lancaster Colony 3,469 158,707 Lance 36,000 612,000 Ralcorp Holdings 14,900 660,815 Seaboard 145 186,180 Total 3,097,340 Gas Utilities (1.5%) Energen 19,272 738,503 Nicor 4,418 182,949 ONEOK 22,500 765,000 Peoples Energy 4,826 200,617 South Jersey Inds 29,200 860,232 UGI 22,178 613,222 WGL Holdings 4,638 152,451 Total 3,512,974 Health Care Equipment & Supplies (2.8%) Biosite 7,400(b) 442,446 EPIX Pharmaceuticals 44,900(b) 382,997 Gen-Probe 11,000(b) 500,720 Haemonetics 30,800(b) 1,368,752 Hologic 4,700(b) 226,681 Illumina 12,200(b) 148,840 Immucor 24,984(b) 591,371 Intermagnetics General 17,000(b) 496,570 Intuitive Surgical 3,503(b) 260,623 Invacare 1,300 54,080 Kyphon 2,000(b) 88,580 Mentor 5,000 263,000 Nektar Therapeutics 21,000(b) 358,680 Sybron Dental Specialties 22,000(b) 852,940 Thoratec 3,400(b) 55,658 Varian 10,000(b) 356,000 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 215 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Health Care Equipment & Supplies (cont.) Ventana Medical Systems 4,530(b) $183,420 Vital Signs 1,658 74,560 Total 6,705,918 Health Care Providers & Services (6.2%) Advisory Board 13,500(b) 705,105 Alliance Imaging 50,637(b) 467,380 Allscripts Healthcare Solutions 24,300(b) 432,054 Amedisys 18,300(b) 715,896 American Retirement 8,100(b) 147,825 AMERIGROUP 17,249(b) 589,226 Apria Healthcare Group 31,700(b) 1,085,092 Centene 33,467(b) 1,020,074 Chemed 1,600 64,736 Dendrite Intl 21,100(b) 382,121 Genesis HealthCare 17,700(b) 709,770 HealthExtras 50,500(b) 1,047,875 Horizon Health 2,200(b) 55,000 Kindred Healthcare 14,800(b) 452,880 LCA-Vision 2,800 114,940 LifePoint Hospitals 2,300(b) 104,604 Magellan Health Services 26,000(b) 921,700 Matria Healthcare 2,449(b) 88,776 MedCath 3,700(b) 91,797 Option Care 48,150 650,988 PSS World Medical 56,900(b) 824,481 Psychiatric Solutions 18,783(b) 897,827 Radiation Therapy Services 28,000(b) 752,080 RehabCare Group 4,836(b) 108,665 Sierra Health Services 10,100(b) 679,730 Stewart Enterprises Cl A 6,105 42,369 Sunrise Senior Living 2,308(b) 137,072 TriZetto Group 3,800(b) 59,622 United Surgical Partners Intl 2,000(b) 76,620 Ventiv Health 40,186(b) 912,222 Total 14,338,527 Hotels, Restaurants & Leisure (3.2%) Ameristar Casinos 29,846 685,563 Bluegreen 35,800(b) 631,512 Bob Evans Farms 7,753 187,545 Boyd Gaming 5,173 240,700 Domino's Pizza 31,900 733,699 Jack in the Box 22,332(b) 787,649 Lone Star Steakhouse & Saloon 17,300 456,547 Monarch Casino & Resort 32,000(b) 607,680 Panera Bread Cl A 10,700(b) 596,418 Penn Natl Gaming 18,470(b) 629,458 PF Chang's China Bistro 7,400(b) 378,732 Ryan's Restaurant Group 9,854(b) 126,230 Scientific Games Cl A 17,700(b) 533,478 SONIC 13,600(b) 416,024 Vail Resorts 19,200(b) 551,040 Total 7,562,275 Common Stocks (continued) Issuer Shares Value(a) Household Durables (2.0%) Beazer Homes USA 7,106 $443,699 Blyth 2,903 72,140 Brookfield Homes 10,100 517,120 Ethan Allen Interiors 6,448 207,755 Furniture Brands Intl 12,145 232,091 Jarden 30,650(b) 1,216,498 La-Z-Boy 11,370 163,614 M/I Homes 2,485 140,030 Meritage Homes 1,963(b) 153,683 Tupperware 25,941 568,626 WCI Communities 17,648(b) 532,440 Yankee Candle 14,000 384,580 Total 4,632,276 Household Products (0.5%) Central Garden & Pet 16,800(b) 832,272 Spectrum Brands 12,900(b) 363,135 Total 1,195,407 Industrial Conglomerates (0.4%) Standex Intl 2,809 74,832 Walter Inds 18,023 790,669 Total 865,501 Insurance (4.8%) Alfa 9,740 148,535 AmerUs Group 15,282 845,400 Commerce Group 3,892 226,981 Delphi Financial Group Cl A 29,293 1,379,701 FBL Financial Group Cl A 3,600 107,892 FPIC Insurance Group 13,000(b) 454,870 Horace Mann Educators 37,078 725,987 Infinity Property & Casualty 2,515 81,788 LandAmerica Financial Group 14,794 874,621 Navigators Group 11,800(b) 437,308 Odyssey Re Holdings 18,900(e) 477,225 Ohio Casualty 48,800 1,232,689 ProAssurance 27,500(b) 1,211,376 RLI 15,000 691,500 Safety Insurance Group 13,373 469,125 Selective Insurance Group 20,000 946,800 Stewart Information Services 3,721 178,868 Triad Guaranty 2,600(b) 109,798 United Fire & Casualty 3,725 153,507 Universal American Financial 9,086(b) 208,524 Total 10,962,495 Internet & Catalog Retail (0.4%) Blair 483 19,320 Coldwater Creek 4,232(b) 129,711 Insight Enterprises 7,179(b) 135,181 NetFlix 29,000(b) 625,239 NutriSystem 4,600(b) 100,786 Total 1,010,237 Common Stocks (continued) Issuer Shares Value(a) Internet Software & Services (1.9%) aQuantive 8,300(b) $149,898 CNET Networks 6,800(b) 90,984 Digital River 15,661(b) 594,805 Digitas 69,040(b) 809,148 EarthLink 25,900(b) 252,784 j2 Global Communications 21,418(b) 803,818 United Online 20,050 261,252 ValueClick 55,800(b) 805,751 Websense 15,366(b) 766,610 Total 4,535,050 IT Services (1.8%) Anteon Intl 13,000(b) 597,350 BISYS Group 6,385(b) 95,328 CACI Intl Cl A 6,900(b) 432,216 CSG Systems Intl 54,293(b) 1,107,034 MAXIMUS 9,615 362,101 Perot Systems Cl A 39,800(b) 573,120 SRA Intl Cl A 21,446(b) 719,942 TALX 11,000 392,260 Total 4,279,351 Leisure Equipment & Products (0.6%) Callaway Golf 12,029 179,352 JAKKS Pacific 6,531(b) 108,480 Nautilus 3,212 82,645 Oakley 4,800 83,952 RC2 11,000(b) 427,350 SCP Pool 16,825 615,795 Total 1,497,574 Machinery (2.6%) Badger Meter 950 41,610 Barnes Group 9,000 310,500 Cascade 2,895 131,375 CIRCOR Intl 20,000 525,200 Clarcor 22,800 645,240 Crane 3,400 100,674 EnPro Inds 12,000(b) 412,800 ESCO Technologies 3,400(b) 352,512 Gardner Denver 17,600(b) 736,032 JLG Inds 3,700 121,323 Joy Global 10,209 487,990 Kennametal 16,700 778,888 Lincoln Electric Holdings 3,872 145,897 Middleby 7,600(b) 499,472 Mueller Inds 3,998 104,788 Tecumseh Products Cl A 2,364 62,906 Wabtec 24,900 647,400 Total 6,104,607 Media (1.8%) Arbitron 11,000 462,000 Entercom Communications 14,000(b) 468,300 Entravision Communications Cl A 33,000(b) 268,620 Gray Television 26,200 322,260 Martha Stewart Living Omnimedia Cl A 2,837(b) 91,635 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 216 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Media (cont.) Mediacom Communications Cl A 43,000(b) $313,900 PRIMEDIA 34,693(b) 144,323 Radio One Cl D 55,000(b) 768,900 Reader's Digest Assn 4,582 74,503 Scholastic 11,800(b) 430,346 Valassis Communications 22,015(b) 868,052 Total 4,212,839 Metals & Mining (2.1%) AK Steel Holding 14,730(b) 116,367 Carpenter Technology 10,100 562,570 Century Aluminum 20,000(b) 484,000 Cleveland-Cliffs 9,627 684,287 Commercial Metals 7,637 228,575 Compass Minerals Intl 20,600 506,966 Metal Management 17,400 426,300 Oregon Steel Mills 27,163(b) 610,624 Quanex 11,410 701,830 Reliance Steel & Aluminum 13,000 624,000 Titanium Metals 1,800(b) 119,106 Total 5,064,625 Multi-Utilities & Unregulated Power (0.5%) Aquila 68,183(b) 274,096 NorthWestern Energy 26,000 810,680 Total 1,084,776 Oil & Gas (3.5%) ATP Oil & Gas 2,300(b) 72,818 Berry Petroleum Cl A 11,350 701,771 Carrizo Oil and Gas 25,300(b) 598,345 Cheniere Energy 6,748(b) 263,509 Cimarex Energy 24,494(b) 1,046,873 Energy Partners 28,106(b) 674,544 Frontier Oil 7,200 263,880 Holly 2,778 156,513 Houston Exploration 1,675(b) 98,658 Overseas Shipholding Group 8,578 524,545 Plains Exploration & Production 3,300(b) 122,265 Remington Oil & Gas 10,000(b) 385,300 Southwestern Energy 5,638(b) 326,440 St. Mary Land & Exploration 35,000 1,206,449 Swift Energy 13,800(b) 633,834 Tesoro 13,961 806,946 Vintage Petroleum 7,034 270,317 Total 8,153,007 Paper & Forest Products (0.3%) Potlatch 12,200 658,800 Schweitzer-Mauduit Intl 4,563 105,040 Total 763,840 Personal Products (0.4%) Chattem 14,200(b) 550,108 Nu Skin Enterprises Cl A 16,000 341,440 Playtex Products 7,900(b) 85,478 Revlon Cl A 15,700(b) 55,578 Total 1,032,604 Common Stocks (continued) Issuer Shares Value(a) Pharmaceuticals (0.7%) CNS 2,100 $55,251 First Horizon Pharmaceutical 37,800(b) 781,326 Kos Pharmaceuticals 3,000(b) 204,360 MGI PHARMA 7,000(b) 188,720 Perrigo 32,500 465,725 Total 1,695,382 Real Estate (0.3%) Jones Lang LaSalle 10,000(b) 493,300 Trammell Crow 4,839(b) 131,476 Total 624,776 Real Estate Investment Trust (3.4%) American Home Mortgage Investment 24,822 794,057 Anthracite Capital 15,492 182,961 Anworth Mtge Asset 17,575 155,890 Bedford Property Investors 4,989 114,996 Capstead Mtge 5,800 46,168 CBL & Associates Properties 13,500 572,670 EastGroup Properties 14,200 612,588 IMPAC Mtge Holdings 19,413 271,005 Innkeepers USA Trust 44,000 690,800 MFA Mtge Investments 34,856 234,929 New Century Financial 3,666 157,601 Novastar Financial 2,233 76,458 Omega Healthcare Investors 39,000 517,920 Pan Pacific Retail Properties 9,000 596,430 RAIT Investment Trust 26,063 779,023 Redwood Trust 14,952 752,235 Saxon Capital 6,700 84,889 Town & Country Trust 13,900 389,200 Universal Health Realty Income Trust 16,616 573,086 Ventas 15,400 479,710 Total 8,082,616 Road & Rail (1.1%) Amerco 2,774(b) 166,024 Arkansas Best 2,554 85,993 Dollar Thrifty Automotive Group 2,248(b) 68,024 Florida East Coast Inds 11,000 473,660 Genesee & Wyoming Cl A 15,700(b) 459,539 Landstar System 17,400 631,969 Old Dominion Freight Line 17,900(b) 572,442 Werner Enterprises 4,200 74,970 Total 2,532,621 Semiconductors & Semiconductor Equipment (4.4%) Atheros Communications 44,150(b) 459,160 Axcelis Technologies 26,000(b) 153,400 Cypress Semiconductor 20,000(b) 312,600 DSP Group 20,700(b) 527,229 Entegris 22,973(b) 240,527 ESS Technology 57,725(b) 220,510 FormFactor 20,800(b) 565,136 Genesis Microchip 2,400(b) 63,096 IXYS 14,000(b) 145,180 Microsemi 68,700(b) 1,654,982 MKS Instruments 21,000(b) 372,960 Common Stocks (continued) Issuer Shares Value(a) Semiconductors & Semiconductor Equipment (cont.) OmniVision Technologies 34,000(b) $498,440 ON Semiconductor 149,300(b) 858,475 Photronics 24,600(b) 510,942 Pixelworks 51,000(b) 375,870 PMC-Sierra 28,000(b) 237,440 PortalPlayer 20,000(b) 530,600 Silicon Image 23,600(b) 243,788 Silicon Storage Technology 87,300(b) 424,278 Skyworks Solutions 43,140(b) 325,276 Tessera Technologies 12,000(b) 398,160 Trident Microsystems 3,400(b) 119,408 Varian Semiconductor Equipment Associates 17,600(b) 797,456 Total 10,034,913 Software (3.5%) ANSYS 29,822(b) 1,125,781 Epicor Software 57,500(b) 767,050 FileNet 17,200(b) 457,004 Hyperion Solutions 6,100(b) 264,557 Informatica 49,400(b) 564,148 Internet Security Systems 19,500(b) 443,040 MICROS Systems 21,104(b) 941,027 Parametric Technology 122,700(b) 743,562 Progress Software 13,200(b) 404,712 Quality Systems 1,800 117,000 Take-Two Interactive Software 1(b) 12 THQ 1,900(b) 63,859 Transaction Systems Architects 34,300(b) 918,554 Ultimate Software Group 38,700(b) 706,275 VASCO Data Security Intl 78,300(b) 822,150 Total 8,338,731 Specialty Retail (3.0%) bebe stores 6,633 156,008 Blockbuster Cl A 11,000 72,270 Burlington Coat Factory Warehouse 7,205 276,384 Cato Cl A 24,625 477,725 Children's Place Retail Stores 12,000(b) 490,920 Finish Line Cl A 16,100 232,162 GameStop Cl B 2,700(b) 81,378 Genesco 13,900(b) 551,969 Group 1 Automotive 4,954(b) 146,638 Guitar Center 10,300(b) 591,220 Jos A Bank Clothiers 7,300(b) 288,715 Linens `N Things 9,035(b) 213,226 Lithia Motors Cl A 2,100 62,349 Men's Wearhouse 12,000(b) 365,760 Movie Gallery 4,505 81,045 Pantry 24,900(b) 893,660 Payless ShoeSource 5,872(b) 108,867 Pier 1 Imports 7,300 90,885 Sonic Automotive 27,539 645,790 Stage Stores 19,050(b) 529,781 Talbots 3,000 92,100 Zale 25,559(b) 713,096 Total 7,161,948 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 217 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Advantage Fund Common Stocks (continued) Issuer Shares Value(a) Textiles, Apparel & Luxury Goods (1.8%) Brown Shoe 4,493 $160,849 Hartmarx 83,900(b) 745,032 K-Swiss Cl A 2,800 85,792 Kellwood 3,712 90,870 Phillips-Van Heusen 23,600 790,363 Quiksilver 38,000(b) 579,500 Russell 6,282 114,270 Steven Madden 2,700(b) 63,315 Stride Rite 7,044 90,868 Warnaco Group 31,400(b) 785,000 Wolverine World Wide 35,500 747,985 Total 4,253,844 Thrifts & Mortgage Finance (2.0%) Anchor BanCorp Wisconsin 2,526 76,967 BankAtlantic Bancorp Cl A 28,000 477,400 CharterMac LP 4,800 105,840 Commercial Federal 5,610 190,235 Doral Financial 9,300(c) 133,362 Downey Financial 8,029 508,878 FirstFed Financial 16,092(b) 926,094 Flagstar Bancorp 3,939 67,948 Fremont General 5,000 114,100 ITLA Capital 929(b) 49,934 Common Stocks (continued) Issuer Shares Value(a) Thrifts & Mortgage Finance (cont.) Ocwen Financial 83,500(b,e) $573,645 R-G Financial Cl B 3,683(c) 55,724 Sterling Financial 20,216 779,731 W Holding 7,800(c) 77,064 WSFS Financial 11,500 668,265 Total 4,805,187 Tobacco (0.1%) Universal 6,289 261,748 Trading Companies & Distributors (0.9%) GATX 24,053 974,869 United Rentals 4,783(b) 86,333 Watsco 2,500 121,900 WESCO Intl 24,912(b) 864,446 Total 2,047,548 Wireless Telecommunication Services (0.6%) Centennial Communications 13,700(b) 164,263 Leap Wireless Intl 13,000(b) 444,080 SBA Communications Cl A 20,187(b) 303,814 UbiquiTel 65,800(b) 570,486 Total 1,482,643 Total Common Stocks (Cost: $201,848,717) $230,108,091 Short-Term Securities (2.9%)(f) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency(2.1%) Federal Natl Mtge Assn Disc Nt 09-12-05 3.26% $5,000,000 $4,994,573 Commercial Paper (0.8%) Old Line Funding 09-01-05 3.56 2,000,000(g) 1,999,802 Total Short-Term Securities (Cost: $6,995,004) $6,994,375 Total Investments in Securities (Cost: $208,843,721)(h) $237,102,466 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 0.5% of net assets. (d) Shareholders of tracking stocks have a financial interest only in a unit or division of the company. Unlike the common stock of the company itself, a tracking stock usually has limited or no voting rights. In the event of a company's liquidation, tracking stock shareholders typically do not have a legal claim on the company's assets. (e) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (f) Cash collateral received from security lending activity is invested in short-term securities and represents 0.9% of net assets. See Note 6 to the financial statements. 2.1% of net assets is the Fund's cash equivalent position. (g) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $1,999,802 or 0.8% of net assets. (h) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $209,311,014 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $34,347,859 Unrealized depreciation (6,556,407) ---------- Net unrealized appreciation $27,791,452 ----------- The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 218 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Small Cap Value Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (87.2%) Issuer Shares Value(a) Aerospace & Defense (0.5%) AAR 11,300(b) $198,880 Curtiss-Wright 8,300 535,848 DRS Technologies 5,700 293,265 Ducommun 13,640(b) 283,030 EDO 10,405 292,276 MTC Technologies 17,642(b) 602,651 Total 2,205,950 Air Freight & Logistics (--%) Forward Air 4,773 168,391 Airlines (1.3%) Air France-KLM ADR 56,650(c) 929,627 AirTran Holdings 51,695(b) 534,009 Alaska Air Group 39,000(b) 1,315,079 America West Holdings Cl B 62,000(b) 436,480 Continental Airlines Cl B 71,300(b) 953,281 ExpressJet Holdings 36,800(b) 349,968 Frontier Airlines 11,163(b) 121,119 SkyWest Airlines 38,600 915,206 Total 5,554,769 Auto Components (1.6%) American Axle & Mfg Holdings 13,481 349,967 Drew Inds 16,200(b) 726,570 Goodyear Tire & Rubber 44,300(b) 744,240 Lear 58,400 2,201,680 STRATTEC SECURITY 11,900(b) 615,468 Tenneco Automotive 26,003(b) 471,434 Visteon 159,000 1,570,920 Total 6,680,279 Automobiles (0.4%) Monaco Coach 19,000 292,030 Thor Inds 18,800 624,160 Winnebago Inds 19,100 581,977 Total 1,498,167 Beverages (0.2%) Boston Beer Cl A 31,300(b) 735,550 Biotechnology (0.2%) Albany Molecular Research 21,300(b) 355,284 Lexicon Genetics 30,300(b) 134,835 Medarex 20,679(b) 207,824 United Therapeutics 3,639(b) 255,494 Total 953,437 Building Products (2.0%) Aaon 22,600(b) 409,512 American Woodmark 15,688 588,300 ElkCorp 8,113 288,823 Lennox Intl 13,378 326,289 Royal Group Technologies 464,700(b,c) 4,568,002 Simpson Mfg 25,000 930,750 Common Stocks (continued) Issuer Shares Value(a) Building Products (continued) Trex 1,412(b) $34,043 Universal Forest Products 8,866 482,576 USG 12,700(b) 798,195 Total 8,426,490 Capital Markets (1.2%) Affiliated Managers Group 9,040(b) 656,394 Apollo Investment 21,876 420,675 Cohen & Steers 12,300 252,150 Gladstone Capital 4,900 115,248 Investment Technology Group 18,900(b) 518,805 Investors Financial Services 6,635 233,021 Knight Capital Group Cl A 247,637(b) 2,085,105 optionsXpress Holdings 5,902 101,219 SWS Group 11,800 192,222 Total 4,574,839 Chemicals (1.5%) Agrium 22,514(c) 484,051 Albemarle 16,435 596,755 American Vanguard 285 5,700 HB Fuller 9,000 295,290 Minerals Technologies 7,981 486,442 NL Inds 9,700 137,449 Penford 10,913 158,239 PolyOne 321,500(b) 2,182,984 Sensient Technologies 51,104 959,222 Terra Inds 71,300(b) 520,490 Wellman 27,000 187,650 Total 6,014,272 Commercial Banks (4.5%) Alabama Natl BanCorporation 8,950 587,926 Alliance Bankshares 5,841(b) 95,500 Bancorp 26,085(b) 434,837 Bank of Hawaii 44,600 2,263,449 Boston Private Financial Holdings 9,200 244,444 Cardinal Financial 22,254(b) 222,317 Central Pacific Financial 23,435 810,382 Citizens Banking 26,918 815,346 City Holding 10,400 381,888 Community Bancorp 2,600(b) 89,050 Community Banks 2,700 76,545 Cullen/Frost Bankers 45,100 2,204,037 First BanCorp Puerto Rico 28,100(c) 518,726 First Community Bancorp 7,500 354,000 First Financial Bancorp 17,700 318,600 First Midwest Bancorp 18,000 682,920 First Oak Brook Bancshares 4,297 130,543 First Republic Bank 12,650 455,400 Hanmi Financial 12,200 223,870 IBERIABANK 10,865 548,657 Independent Bank 8,300 251,324 Interchange Financial Services 3,268 57,419 Common Stocks (continued) Issuer Shares Value(a) Commercial Banks (continued) Irwin Financial 19,538 $410,298 Main Street Banks 16,301 436,704 MainSource Financial Group 6,600 120,186 Mercantile Bank 4,420 200,668 Midwest Banc Holdings 13,153 314,620 Millennium Bankshares 18,249(b) 140,700 National Penn Bancshares 2,900 76,415 Pacific Capital Bancorp 17,000 532,780 Placer Sierra Bancshares 9,191 245,675 Prosperity Bancshares 5,062 147,912 Provident Bankshares 10,400 355,160 Provident Financial Services 14,800 263,144 Republic Bancorp 36,800 540,224 Santander BanCorp 4,390(c) 113,877 Seacoast Banking Corporation of Florida 3,700 81,733 Signature Bank 13,488(b) 404,505 Southcoast Financial 7,050(b) 160,740 Sterling Bancorp 6,153 136,350 Sterling Bancshares 33,600 503,664 Sterling Financial 3,600 76,536 Sun Bancorp 3,109(b) 66,844 Susquehanna Bancshares 9,600 241,920 SVB Financial Group 5,200(b) 244,608 Texas United Bancshares 6,128 120,722 UMB Financial 444 29,237 Umpqua Holdings 14,600 355,510 United Community Banks 14,228 389,847 West Coast Bancorp 1,359 35,185 Total 18,512,944 Commercial Services & Supplies (1.9%) Brady Cl A 85,600 2,671,575 Central Parking 20,200 320,978 Ennis 5,200 90,480 FTI Consulting 16,800(b) 418,320 Healthcare Services Group 29,275 540,124 Heidrick & Struggles Intl 11,100(b) 366,522 ITT Educational Services 9,588(b) 487,454 John H Harland 16,900 708,955 LECG 7,696(b) 177,239 Resources Connection 5,113(b) 148,277 School Specialty 4,761(b) 228,100 TRC Companies 5,255(b) 78,825 Waste Connections 11,709(b) 413,796 West 33,262(b) 1,288,570 Total 7,939,215 Communications Equipment (2.1%) 3Com 1,131,000(b) 3,845,401 Anaren 12,600(b) 174,132 Audiovox Cl A 40,000(b) 723,200 Black Box 2,057 88,389 CommScope 36,700(b) 686,290 Comtech Telecommunications 2,500(b) 87,750 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 219 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Communications Equipment (continued) Digi Intl 10,800(b) $114,588 Ditech Communications 23,709(b) 174,498 Foundry Networks 86,100(b) 1,007,370 Powerwave Technologies 25,948(b) 271,935 Redback Networks 66,400(b) 600,256 Sycamore Networks 195,300(b) 730,422 Total 8,504,231 Computers & Peripherals (1.2%) Emulex 34,000(b) 732,700 Hutchinson Technology 40,980(b) 1,081,871 Imation 7,591 319,657 Intergraph 20,100(b) 820,281 Komag 10,500(b) 350,280 McDATA Cl A 42,762(b) 230,060 Mobility Electronics 23,466(b) 256,953 Neoware Systems 25,200(b) 275,688 Palm 4,512(b) 154,220 Rimage 23,200(b) 560,048 Total 4,781,758 Construction & Engineering (0.7%) Comfort Systems USA 27,767(b) 228,522 Dycom Inds 7,000(b) 124,040 Infrasource Services 13,047(b) 195,705 Insituform Technologies Cl A 105,700(b) 2,187,991 Modtech Holdings 14,140(b) 128,108 Total 2,864,366 Construction Materials (0.4%) Eagle Materials 2,800 315,392 Florida Rock Inds 18,075 1,023,045 Texas Inds 3,567 213,342 Total 1,551,779 Consumer Finance (0.4%) Advanta Cl B 9,800 282,730 CompuCredit 17,500(b) 732,550 Metris Companies 45,100(b) 659,362 Total 1,674,642 Containers & Packaging (0.8%) AptarGroup 11,300 561,949 Caraustar Inds 69,644(b) 808,567 Chesapeake 83,106 1,620,567 Rock-Tenn Cl A 12,300 187,452 Total 3,178,535 Distributors (0.2%) Earle M Jorgensen 34,104(b) 348,543 Handleman 11,900 166,481 Prestige Brands Holdings 17,798(b) 229,060 Total 744,084 Diversified Financial Services (0.4%) CapitalSource 6,101(b) 120,800 Financial Federal 13,952 544,826 iShares Russell 2000 Value Index Fund 13,440 892,819 Total 1,558,445 Common Stocks (continued) Issuer Shares Value(a) Diversified Telecommunication Services (0.4%) Alaska Communications Systems Group 17,496 $189,482 Cincinnati Bell 22,165(b) 95,974 Commonwealth Telephone Enterprises 16,300 655,913 Golden Telecom 12,300(c) 362,850 Iowa Telecommunications Services 7,871 146,479 Talk America Holdings 16,000(b) 146,720 Valor Communications Group 12,484 173,902 Total 1,771,320 Electric Utilities (2.2%) Black Hills 3,500 145,775 Central Vermont Public Service 2,874 54,893 CH Energy Group 6,200 298,220 Cleco 41,840 962,320 El Paso Electric 63,299(b) 1,326,747 MGE Energy 1,996 74,231 Otter Tail 7,300 219,000 Reliant Energy 324,000(b) 4,050,001 Sierra Pacific Resources 115,040(b) 1,677,283 Unisource Energy 471 15,675 Westar Energy 15,288 367,218 Total 9,191,363 Electrical Equipment (0.9%) AO Smith 11,500 323,610 Baldor Electric 9,252 228,247 Franklin Electric 7,130 301,243 General Cable 5,600(b) 87,864 GrafTech Intl 119,798(b) 711,600 LSI Inds 13,700 210,158 Regal-Beloit 18,200 607,334 Thomas & Betts 20,100(b) 714,353 Woodward Governor 7,200 587,160 Total 3,771,569 Electronic Equipment & Instruments (4.1%) Aeroflex 42,604(b) 395,791 Agilysys 30,500 547,475 Anixter Intl 23,270(b) 888,449 Bell Microproducts 31,700(b) 321,121 Coherent 8,600(b) 273,394 CTS 17,500 217,700 CyberOptics 12,093(b) 166,400 KEMET 11,400(b) 92,568 Littelfuse 71,500(b) 1,989,130 LoJack 14,621(b) 308,357 Methode Electronics 17,100 210,672 MTS Systems 6,449 265,828 Nu Horizons Electronics 49,100(b) 299,510 Plexus 151,200(b) 2,582,496 Rofin-Sinar Technologies 23,900(b) 863,985 ScanSource 6,124(b) 273,498 SYNNEX 970(b) 16,092 Tech Data 104,000(b) 3,807,439 Tektronix 36,400 919,828 TTM Technologies 41,100(b) 318,114 Common Stocks (continued) Issuer Shares Value(a) Electronic Equipment & Instruments (continued) Viisage Technology 40,778(b) $176,161 Vishay Intertechnology 165,200(b) 2,131,080 Total 17,065,088 Energy Equipment & Services (2.8%) Dril-Quip 4,000(b) 168,080 Ensign Energy Services 34,200(c) 1,077,755 Hydril 3,658(b) 250,573 Lone Star Technologies 2,500(b) 138,250 NS Group 10,300(b) 428,686 Oil States Intl 24,104(b) 835,445 Patterson-UTI Energy 13,600 462,672 RPC 30,550 708,760 SEACOR Holdings 4,400(b) 314,600 Superior Energy Services 26,500(b) 580,880 Superior Well Services 7,223(b) 158,906 TETRA Technologies 23,175(b) 660,488 Tidewater 83,600 3,723,543 Trican Well Service 16,600(b,c) 555,292 Unit 21,800(b) 1,134,908 W-H Energy Services 8,658(b) 280,952 Willbros Group 8,393(b,c) 145,031 Total 11,624,821 Food & Staples Retailing (0.2%) Longs Drug Stores 4,400 186,560 Weis Markets 20,500 773,260 Total 959,820 Food Products (0.8%) American Italian Pasta Cl A 86,109 949,782 Chiquita Brands Intl 29,800 750,960 Corn Products Intl 9,538 214,796 Gold Kist 30,400(b) 561,792 Hain Celestial Group 2,220(b) 41,891 Lancaster Colony 20,100 919,575 Total 3,438,796 Gas Utilities (0.5%) Nicor 3,600 149,076 Northwest Natural Gas 21,585 793,897 South Jersey Inds 7,616 224,367 Southern Union 1,705(b) 41,983 Southwest Gas 8,217 225,310 WGL Holdings 23,000 756,010 Total 2,190,643 Health Care Equipment & Supplies (1.0%) Abaxis 13,011(b) 149,236 Conceptus 18,263(b) 191,396 Greatbatch 9,100(b) 227,500 Haemonetics 36,500(b) 1,622,060 Intuitive Surgical 6,300(b) 468,720 Molecular Devices 6,000(b) 125,160 Nutraceutical Intl 32,200(b) 474,950 ThermoGenesis 30,782(b) 166,531 Viasys Healthcare 17,200(b) 463,196 Vital Signs 9,600 431,712 Total 4,320,461 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 220 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Health Care Providers & Services (2.1%) AMERIGROUP 22,500(b) $768,600 AMN Healthcare Services 12,527(b) 193,667 Cross Country Healthcare 20,200(b) 391,880 Genesis HealthCare 90,400(b) 3,625,041 Hooper Holmes 78,600 331,692 Horizon Health 13,500(b) 337,500 Kindred Healthcare 8,200(b) 250,920 Medical Staffing Network Holdings 5,422(b) 31,339 Molina Healthcare 21,500(b) 585,445 NDCHealth 16,615 312,528 PAREXEL Intl 13,241(b) 256,611 PSS World Medical 28,372(b) 411,110 Psychiatric Solutions 2,328(b) 111,278 Radiologix 54,111(b) 219,150 U.S. Physical Therapy 36,600(b) 691,008 United Surgical Partners Intl 3,488(b) 133,625 Total 8,651,394 Hotels, Restaurants & Leisure (3.0%) Aztar 16,274(b) 543,552 Bluegreen 15,600(b) 275,184 Buca 29,621(b) 162,916 California Pizza Kitchen 9,596(b) 283,946 CBRL Group 18,300 661,728 CEC Entertainment 33,295(b) 1,141,686 Dover Downs Gaming & Entertainment 44,400 591,408 Fox & Hound Restaurant Group 22,320(b) 263,153 IHOP 6,000 240,960 Jack in the Box 21,100(b) 744,197 Kerzner Intl 48,300(b,c) 2,755,514 La Quinta 91,700(b) 774,865 Lodgian 149,300(b) 1,563,170 Lone Star Steakhouse & Saloon 6,200 163,618 Multimedia Games 34,000(b) 343,060 O`Charley's 15,200(b) 249,128 Ruby Tuesday 30,700 678,470 Ryan's Restaurant Group 41,800(b) 535,458 Sunterra 42,000(b) 531,300 Total 12,503,313 Household Durables (2.4%) Beazer Homes USA 4,767 297,651 Blount Intl 4,100(b) 73,800 Blyth 4,800 119,280 Brookfield Homes 8,800 450,560 Champion Enterprises 77,649(b) 1,035,061 Department 56 16,100(b) 209,139 Ethan Allen Interiors 26,100 840,942 Fleetwood Enterprises 73,700(b) 745,107 Furniture Brands Intl 27,700 529,347 Helen of Troy 55,698(b,c) 1,267,687 Hooker Furniture 45,700 828,084 Oneida 28,929(b) 57,858 Stanley Furniture 30,200 809,662 Technical Olympic USA 27,350 797,526 Common Stocks (continued) Issuer Shares Value(a) Household Durables (continued) Tupperware 25,500 $558,960 WCI Communities 15,383(b) 464,105 Yankee Candle 23,300 640,051 Total 9,724,820 Industrial Conglomerates (0.1%) Alleghany 728(b) 216,762 Tredegar 18,800 233,496 Total 450,258 Insurance (4.8%) American Natl Insurance 11,000 1,221,220 American Physicians Capital 14,900(b) 658,729 AmerUs Group 17,600 973,632 Arch Capital Group 3,100(b,c) 134,695 Argonaut Group 24,200(b) 602,822 Aspen Insurance Holdings 41,979(c) 1,139,730 Assured Guaranty 37,900(c) 848,960 CNA Surety 27,300(b) 341,250 Commerce Group 2,000 116,640 Donegal Group Cl A 6,993 159,161 Endurance Specialty Holdings 22,800(c) 836,760 Erie Indemnity Cl A 3,900 203,346 FBL Financial Group Cl A 37,000 1,108,890 Horace Mann Educators 10,000 195,800 LandAmerica Financial Group 1,800 106,416 Natl Atlantic Holdings 10,715(b) 117,758 Navigators Group 6,562(b) 243,188 NYMAGIC 5,487 133,060 Ohio Casualty 33,800 853,788 Phoenix Companies 61,600 738,584 Presidential Life 8,400 147,756 ProAssurance 23,304(b) 1,026,541 ProCentury 26,163 261,630 PXRE Group 83,472(c) 1,944,062 Quanta Capital Holdings 69,000(b,c) 435,390 Reinsurance Group of America 3,000 128,730 Republic Companies Group 16,761(b) 228,788 RLI 28,346 1,306,750 Safety Insurance Group 13,800 484,104 Scottish Re Group 33,400(c) 803,604 StanCorp Financial Group 4,263 344,664 UICI 26,900 830,134 United Fire & Casualty 22,989 947,377 Total 19,623,959 Internet & Catalog Retail (0.2%) Insight Enterprises 37,463(b) 705,428 Internet Software & Services (0.5%) Autobytel 66,849(b) 334,245 EarthLink 55,800(b) 544,608 iPass 97,700(b) 545,166 United Online 49,500 644,985 Vignette 8,600(b) 130,634 Total 2,199,638 Common Stocks (continued) Issuer Shares Value(a) IT Services (1.5%) BearingPoint 24,283(b) $198,635 Ciber 32,700(b) 256,368 CSG Systems Intl 9,400(b) 191,666 eFunds 46,100(b) 898,950 Kanbay Intl 144(b) 3,210 Keane 26,800(b) 308,200 Lionbridge Technologies 105,594(b) 709,592 ManTech Intl Cl A 8,800(b) 272,888 MAXIMUS 26,246 988,424 Perot Systems Cl A 103,600(b) 1,491,840 SM&A 56,900(b) 505,272 Sykes Enterprises 52,000(b) 553,800 Total 6,378,845 Leisure Equipment & Products (1.4%) Arctic Cat 32,700 705,339 Brunswick 60,000 2,640,000 Callaway Golf 12,800 190,848 Head 139,000(b,c) 433,680 JAKKS Pacific 29,500(b) 489,995 K2 34,184(b) 425,591 Radica Games 28,100(c) 247,280 RC2 17,900(b) 695,415 Total 5,828,148 Machinery (5.6%) Actuant Cl A 10,658(b) 451,899 Commercial Vehicle Group 33,545(b) 695,388 Flowserve 103,700(b) 3,851,418 Gardner Denver 18,800(b) 786,216 Harsco 48,300 2,832,795 IDEX 66,200 2,879,700 Kaydon 100,700 2,911,237 Key Technology 52,000(b) 658,840 Lincoln Electric Holdings 25,100 945,768 Lydall 33,201(b) 291,173 Mueller Inds 19,359 507,399 Tennant 6,395 242,626 Terex 90,477(b) 4,413,469 Titan Intl 23,700 323,742 Wabash Natl 69,585 1,448,760 Total 23,240,430 Marine (0.8%) Kirby 70,200(b) 3,299,400 Media (1.4%) ADVO 13,655 447,065 Arbitron 4,400 184,800 Citadel Broadcasting 20,700(b) 279,450 Courier 10,950 404,165 Cumulus Media Cl A 14,300(b) 182,611 Entravision Communications Cl A 20,700(b) 168,498 Gray Television 25,200 309,960 Journal Register 17,916(b) 335,925 Liberty 4,600 220,754 LIN TV Cl A 14,500(b) 219,095 LodgeNet Entertainment 7,200(b) 108,720 RCN 5,400(b) 129,060 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 221 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Media (continued) Sinclair Broadcast Group Cl A 17,500 $164,325 Valassis Communications 65,800(b) 2,594,493 Total 5,748,921 Metals & Mining (3.6%) Agnico-Eagle Mines 25,900(c) 338,772 AK Steel Holding 211,200(b) 1,668,480 Apex Silver Mines 8,100(b) 106,272 Century Aluminum 90,100(b) 2,180,420 Commercial Metals 20,677 618,863 Eldorado Gold 51,900(b,c) 156,219 Gibraltar Inds 35,200 753,984 Glamis Gold 21,800(b,c) 414,636 Goldcorp 12,400(c) 223,944 Hecla Mining 66,200(b) 235,672 IPSCO 11,800(c) 757,442 Meridian Gold 26,900(b,c) 508,141 Minefinders 22,100(b,c) 81,770 Oregon Steel Mills 16,778(b) 377,169 Quanex 7,900 485,929 Reliance Steel & Aluminum 15,200 729,600 Roanoke Electric Steel 3,900 73,593 Ryerson Tull 34,100 700,414 Schnitzer Steel Inds Cl A 3,128 89,461 Steel Dynamics 13,600 428,808 Steel Technologies 27,000 632,070 Stillwater Mining 222,800(b) 1,789,084 USEC 129,400 1,523,038 Total 14,873,781 Multi-Utilities & Unregulated Power (0.2%) Avista 8,505 165,337 CMS Energy 36,800(b) 592,480 Total 757,817 Multiline Retail (1.7%) Big Lots 50,681(b) 598,543 Bon-Ton Stores 6,400 129,728 Conn's 16,500(b) 412,995 Dillard's Cl A 193,700 4,360,187 Dollar General 74,000 1,410,440 Tuesday Morning 5,826 168,604 Total 7,080,497 Oil & Gas (4.0%) Callon Petroleum 25,300(b) 467,544 Chesapeake Energy 95,700 3,025,077 Cimarex Energy 47,813(b) 2,043,528 Edge Petroleum 31,100(b) 612,359 Encore Acquisition 90,400(b) 3,049,191 Energy Partners 5,800(b) 139,200 Frontier Oil 6,164 225,911 Giant Inds 3,400(b) 167,450 Harvest Natural Resources 19,400(b) 197,686 Nordic American Tanker Shipping 12,700(c) 526,161 OMI 6,708 128,324 Parallel Petroleum 17,929(b) 231,822 Petroleum Development 3,127(b) 118,826 Range Resources 33,071 1,151,863 Common Stocks (continued) Issuer Shares Value(a) Oil & Gas (continued) Remington Oil and Gas 16,200(b) $624,186 St. Mary Land & Exploration 34,000 1,171,980 Swift Energy 22,200(b) 1,019,646 Tesoro 4,400 254,320 TransMontaigne 15,300(b) 144,891 Whiting Petroleum 23,286(b) 1,008,750 Total 16,308,715 Paper & Forest Products (0.1%) Louisiana-Pacific 11,300 285,777 Personal Products (0.6%) Chattem 2,769(b) 107,271 Elizabeth Arden 31,724(b) 704,907 Inter Parfums 28,500 527,535 Nu Skin Enterprises Cl A 38,400 819,457 Playtex Products 43,110(b) 466,450 Total 2,625,620 Pharmaceuticals (0.7%) Alpharma Cl A 38,100 1,014,222 Endo Pharmaceuticals Holdings 17,900(b) 537,000 First Horizon Pharmaceutical 25,500(b) 527,085 Perrigo 45,000 644,850 Salix Pharmaceuticals 8,411(b) 171,416 Total 2,894,573 Real Estate (1.0%) MI Developments Cl A 100,500(c) 3,321,524 Wellsford Real Properties 50,300(b) 952,682 Total 4,274,206 Real Estate Investment Trust (4.1%) Acadia Realty Trust 11,834 209,462 Agree Realty 9,474 280,430 American Campus Communities 3,288 77,432 Arbor Realty Trust 25,100 713,844 Ashford Hospitality Trust 21,800 250,482 Bedford Property Investors 4,300 99,115 BioMed Realty Trust 15,441 381,856 Boykin Lodging 29,600(b) 389,536 Brandywine Realty Trust 18,105 577,550 Capital Automotive 36,852 1,321,881 Capital Trust Cl A 4,300 141,513 Commercial Net Lease Realty 42,304 844,811 Corporate Office Properties Trust 3,453 120,303 Correctional Properties Trust 14,200 415,492 Cousins Properties 20,600 624,386 CRIIMI MAE 3,900(b) 72,150 Digital Realty Trust 5,626 107,007 Entertainment Properties Trust 17,908 815,888 Equity Inns 54,200 696,470 Equity One 13,500 314,280 FelCor Lodging Trust 46,900(b) 715,225 Getty Realty 9,800 283,808 Hersha Hospitality Trust 8,377 84,775 Common Stocks (continued) Issuer Shares Value(a) Real Estate Investment Trust (continued) HomeBanc 14,300 $113,971 Innkeepers USA Trust 31,700 497,690 Investors Real Estate Trust 11,700 115,947 KKR Financial 6,136 143,521 LaSalle Hotel Properties 11,076 374,037 Lexington Corporate Properties Trust 16,112 370,576 LTC Properties 15,400 311,542 Luminent Mtge Capital 23,300 211,098 MFA Mtge Investments 45,809 308,753 Natl Health Investors 11,600 336,052 New Century Financial 8,400 361,116 Omega Healthcare Investors 59,632 791,913 Parkway Properties 12,325 595,791 Post Properties 5,445 202,010 Prentiss Properties Trust 14,463 555,958 RAIT Investment Trust 21,136 631,755 Redwood Trust 3,100 155,961 Senior Housing Properties Trust 25,700 488,300 Spirit Finance 7,188 76,624 Town & Country Trust 6,665 186,620 Trustreet Properties 8,600 141,814 U-Store-It Trust 11,990 246,514 Winston Hotels 7,400 80,364 Total 16,835,623 Road & Rail (0.4%) Covenant Transport Cl A 57,500(b) 722,775 Heartland Express 10,865 216,431 SCS Transportation 17,164(b) 275,482 Swift Transportation 12,800(b) 255,232 Total 1,469,920 Semiconductors & Semiconductor Equipment (2.2%) Brooks Automation 14,000(b) 198,800 Catalyst Semiconductor 128,300(b) 619,689 Cymer 17,800(b) 596,300 Entegris 43,800(b) 458,586 Fairchild Semiconductor Intl 36,995(b) 623,366 Integrated Device Technology 66,522(b) 711,785 Integrated Silicon Solution 182,800(b) 1,619,607 IXYS 21,100(b) 218,807 OmniVision Technologies 52,500(b) 769,650 Photronics 4,000(b) 83,080 Power Integrations 1,463(b) 32,362 Semitool 46,200(b) 372,834 SigmaTel 36,600(b) 708,210 Skyworks Solutions 40,818(b) 307,768 Tessera Technologies 18,439(b) 611,806 TriQuint Semiconductor 321,600(b) 1,241,376 Total 9,174,026 Software (1.9%) Atari 145,652(b) 184,978 Catapult Communications 34,400(b) 547,648 Citadel Security Software 41,855(b) 36,414 Epicor Software 19,690(b) 262,665 Hyperion Solutions 3,002(b) 130,197 InterVideo 39,100(b) 391,391 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 222 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Common Stocks (continued) Issuer Shares Value(a) Software (continued) Intervoice 33,200(b) $311,084 MapInfo 8,800(b) 99,616 Mentor Graphics 212,600(b) 1,813,478 Pervasive Software 137,700(b) 626,535 Reynolds & Reynolds Cl A 78,100 2,228,973 Take-Two Interactive Software 17,930(b) 426,734 Transaction Systems Architects 20,300(b) 543,634 Ulticom 9,500(b) 101,080 Ultimate Software Group 9,521(b) 173,758 Total 7,878,185 Specialty Retail (3.7%) Aaron Rents 28,937 640,955 AnnTaylor Stores 2,800(b) 71,680 Asbury Automotive Group 24,100(b) 411,146 Brookstone 73,879(b) 1,458,371 Buckle 21,900 859,794 Build-A-Bear Workshop 5,100(b) 113,118 Cato Cl A 46,400 900,160 Claire's Stores 28,000 657,440 Cost Plus 53,200(b) 1,144,332 Deb Shops 36,000 871,920 Dress Barn 15,478(b) 371,472 Finish Line Cl A 6,600 95,172 Gymboree 34,849(b) 535,629 Linens `N Things 29,800(b) 703,280 Lithia Motors Cl A 12,200 362,218 Men's Wearhouse 75,300(b) 2,295,144 Payless ShoeSource 20,100(b) 372,654 Pier 1 Imports 42,200 525,390 Select Comfort 13,895(b) 268,590 Sharper Image 16,953(b) 227,848 Sonic Automotive 21,100 494,795 Talbots 9,800 300,860 Too 29,100(b) 775,806 Trans World Entertainment 14,700(b) 109,662 United Auto Group 5,700 192,375 Zale 12,384(b) 345,514 Total 15,105,325 Textiles, Apparel & Luxury Goods (1.4%) Cherokee 3,600 120,024 Columbia Sportswear 4,800(b) 222,720 Cutter & Buck 33,500 462,300 Fossil 24,482(b) 538,359 K-Swiss Cl A 45,872 1,405,519 Kellwood 8,551 209,328 Kenneth Cole Productions Cl A 27,300 782,145 Polo Ralph Lauren 9,000 445,950 Steven Madden 11,000(b) 257,950 Stride Rite 60,000 774,000 Wolverine World Wide 17,900 377,153 Total 5,595,448 Common Stocks (continued) Issuer Shares Value(a) Thrifts & Mortgage Finance (2.1%) Accredited Home Lenders Holding 27,149(b) $1,087,589 Anchor BanCorp Wisconsin 8,200 249,854 Bank Mutual 26,000 284,700 BankAtlantic Bancorp Cl A 43,700 745,085 BankUnited Financial Cl A 19,449 458,996 Berkshire Hills Bancorp 8,429 271,835 Brookline Bancorp 22,169 342,289 Commercial Capital Bancorp 14,000 251,020 Corus Bankshares 10,700 622,633 Doral Financial 7,500(c) 107,550 Downey Financial 1,300 82,394 Federal Agricultural Mtge Cl C 8,200 191,552 Fidelity Bankshares 18,788 565,707 First Financial Holdings 4,100 127,141 First Niagara Financial Group 106,969 1,515,752 Flagstar Bancorp 5,700 98,325 KNBT Bancorp 11,100 185,925 NetBank 25,820 223,601 PFF Bancorp 35,658 1,060,112 TierOne 8,800 248,336 Total 8,720,396 Tobacco (0.1%) Vector Group 10,300 206,000 Trading Companies & Distributors (0.7%) Applied Industrial Technologies 15,109 542,564 GATX 23,700 960,561 Hughes Supply 28,557 903,829 Lawson Products 2,200 85,580 NuCO2 8,088(b) 202,524 Total 2,695,058 Transportation Infrastructure (0.2%) Sea Containers Cl A 61,000(c) 658,800 Wireless Telecommunication Services (0.3%) Alamosa Holdings 12,931(b) 223,706 Leap Wireless Intl 7,943(b) 271,333 Price Communications 25,000(b) 417,501 UbiquiTel 21,614(b) 187,393 Total 1,099,933 Total Common Stocks (Cost: $323,189,687) $359,350,278 Other (--%) Issuer Shares Value(a) Air France ADR Warrants 51,500(b,c,e) $20,600 Total Other (Cost: $--) $20,600 Short-Term Securities (12.8%) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper Alpine Securitization 09-01-05 3.56% $8,500,000(d) $8,499,159 Chariot Funding LLC 09-21-05 3.54 10,000,000(d) 9,979,409 CIESCO LLC 10-04-05 3.62 10,000,000(d) 9,965,906 Citibank Credit Card Dakota Nts 09-19-05 3.54 5,000,000(d) 4,990,685 General Electric Capital 09-01-05 3.56 4,400,000 4,399,565 Morgan Stanley & Co 09-01-05 3.57 6,100,000 6,099,395 Thunder Bay Funding LLC 09-01-05 3.55 8,800,000(d) 8,799,132 Total Short-Term Securities (Cost: $52,738,472) $52,733,251 Total Investments in Securities (Cost: $375,928,159)(f) $412,104,129 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 223 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Small Cap Value Fund Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 6.5% of net assets. (d) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $42,234,291 or 10.2% of net assets. (e) Identifies issues considered to be illiquid as to their marketability (see Note 1 to the financial statements). These securities are valued at fair value according to methods selected in good faith by the Fund's Board of Directors. Information concerning such security holdings at Aug. 31, 2005, is as follows: Security Acquisition Cost dates Air France ADR Warrants 05-05-04 $-- (f) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $376,897,534 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $ 48,913,082 Unrealized depreciation (13,706,487) ----------- Net unrealized appreciation $ 35,206,595 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 224 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Investments in Securities RiverSource VP - Strategy Aggressive Fund Aug. 31, 2005 (Percentages represent value of investments compared to net assets) Common Stocks (96.5%) Issuer Shares Value(a) Aerospace & Defense (2.6%) Precision Castparts 82,500 $7,976,100 Rockwell Collins 210,100 10,112,113 Total 18,088,213 Air Freight & Logistics (2.2%) CH Robinson Worldwide 123,000 7,595,250 UTI Worldwide 104,000(c) 7,847,840 Total 15,443,090 Biotechnology (8.3%) Amylin Pharmaceuticals 222,100(b,d) 7,273,775 Genzyme 178,900(b) 12,732,313 Gilead Sciences 408,300(b) 17,556,900 Invitrogen 161,355(b) 13,671,609 OSI Pharmaceuticals 159,000(b) 5,215,200 Total 56,449,797 Capital Markets (1.4%) Green Hill & Co LLC 96,900 3,897,318 Investors Financial Services 169,300 5,945,816 Total 9,843,134 Chemicals (1.5%) Rohm & Haas 229,400 9,958,254 Commercial Services & Supplies (5.3%) ChoicePoint 84,300(b) 3,618,999 Cintas 113,200 4,669,500 Corporate Executive Board 159,702 12,899,131 ITT Educational Services 68,000(b) 3,457,120 Manpower 263,939 11,893,091 Total 36,537,841 Communications Equipment (1.3%) Juniper Networks 394,312(b) 8,966,655 Computers & Peripherals (4.7%) NCR 234,600(b) 8,028,012 Network Appliance 651,700(b) 15,471,358 SanDisk 229,737(b) 8,920,688 Total 32,420,058 Diversified Financial Services (1.3%) CapitalSource 450,460(b,d) 8,919,108 Energy Equipment & Services (4.6%) BJ Services 75,600 4,768,848 Nabors Inds 129,500(b,c) 8,676,500 Natl Oilwell Varco 78,900(b) 5,066,169 Precision Drilling 212,833(b,c) 10,035,076 Tidewater 74,850 3,333,819 Total 31,880,412 Common Stocks (continued) Issuer Shares Value(a) Health Care Equipment & Supplies (7.7%) Beckman Coulter 107,000 $5,969,530 Cooper Companies 73,400 5,033,038 CR Bard 231,100 14,866,663 Foxhollow Technologies 88,900(b,d) 4,080,510 Gen-Probe 147,400(b) 6,709,648 Kinetic Concepts 109,300(b) 5,989,640 St. Jude Medical 229,500(b) 10,534,050 Total 53,183,079 Health Care Providers & Services (8.4%) Caremark Rx 443,100(b) 20,706,062 Community Health Systems 353,800(b) 13,030,454 PacifiCare Health Systems 30,900(b) 2,329,242 Quest Diagnostics 78,200 3,908,436 WellChoice 245,800(b) 17,476,380 Total 57,450,574 Hotels, Restaurants & Leisure (2.9%) GTECH Holdings 335,100 9,577,158 Starbucks 206,400(b) 10,121,856 Total 19,699,014 Household Durables (1.5%) Harman Intl Inds 64,000 6,617,600 Lennar Cl A 64,600 4,011,660 Total 10,629,260 Household Products (1.7%) Church & Dwight 302,600 11,547,216 Insurance (2.0%) Assurant 161,600 6,032,528 IPC Holdings 101,100(c) 3,972,219 United America Indemnity Cl A 222,100(b,c) 3,986,695 Total 13,991,442 Internet Software & Services (1.6%) Akamai Technologies 137,400(b) 1,901,616 VeriSign 414,900(b) 9,044,820 Total 10,946,436 IT Services (5.1%) Affiliated Computer Services Cl A 205,500(b) 10,675,725 Alliance Data Systems 267,200(b) 11,241,104 DST Systems 75,300(b) 4,043,610 Paychex 119,100 4,064,883 VeriFone Holdings 215,700(b) 4,734,615 Total 34,759,937 Machinery (1.6%) Danaher 202,600 10,851,256 Common Stocks (continued) Issuer Shares Value(a) Media (2.2%) EW Scripps Cl A 144,200 $7,210,000 Univision Communications Cl A 186,400(b) 5,014,160 XM Satellite Radio Holdings Cl A 77,400(b) 2,728,350 Total 14,952,510 Metals & Mining (2.0%) Peabody Energy 191,000 13,688,970 Oil & Gas (7.6%) Apache 121,400 8,694,668 Chesapeake Energy 242,400 7,662,264 EOG Resources 213,000 13,595,790 Pioneer Natural Resources 172,900 8,541,260 XTO Energy 343,100 13,655,380 Total 52,149,362 Pharmaceuticals (2.0%) Barr Pharmaceuticals 78,000(b) 3,557,580 MGI PHARMA 118,200(b) 3,186,672 Sepracor 144,700(b) 7,263,940 Total 14,008,192 Semiconductors & Semiconductor Equipment (7.9%) ASML Holding 382,100(b,c) 6,457,490 Broadcom Cl A 110,600(b) 4,811,100 KLA-Tencor 176,900 8,979,444 Marvell Technology Group 414,800(b,c) 19,574,412 Microchip Technology 135,800 4,226,096 Photronics 137,340(b) 2,852,552 Skyworks Solutions 566,600(b) 4,272,164 Xilinx 115,700 3,250,013 Total 54,423,271 Software (4.0%) Autodesk 207,900 8,981,280 Fair Isaac 189,800 7,757,126 Mercury Interactive 184,425(b) 6,762,865 NAVTEQ 78,500(b) 3,653,390 Total 27,154,661 Specialty Retail (1.7%) Advance Auto Parts 96,200(b) 5,861,466 Chico's FAS 165,200(b) 5,734,092 Total 11,595,558 Textiles, Apparel & Luxury Goods (1.5%) Coach 303,300(b) 10,066,527 Trading Companies & Distributors (1.9%) Fastenal 217,800 13,194,324 Total Common Stocks (Cost: $484,470,317) $662,798,151 See accompanying notes to investments in securities. - -------------------------------------------------------------------------------- 225 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource VP - Strategy Aggressive Fund Bond (0.3%) Issuer Coupon Principal Value(a) rate amount Federal Farm Credit Bank 03-15-06 2.50% $2,000,000 $1,985,358 Total Bond (Cost: $1,999,422) $1,985,358 Short-Term Securities (6.2%)(e) Issuer Effective Amount Value(a) yield payable at maturity U.S. Government Agency (2.8%) Federal Natl Mtge Assn Disc Nt 09-07-05 3.25% $18,900,000 $18,888,057 Short-Term Securities (continued) Issuer Effective Amount Value(a) yield payable at maturity Commercial Paper (3.4%) Alpine Securitization 09-01-05 3.56% $4,000,000(f) $3,999,604 Rabobank USA Financial 09-09-05 3.50 15,000,000 14,986,875 Thunder Bay Funding LLC 09-01-05 3.47 5,000,000(f) 4,999,518 Total 23,985,997 Total Short-Term Securities (Cost: $42,878,096) $42,874,054 Total Investments in Securities (Cost: $529,347,835)(g) $707,657,563 Notes to Investments in Securities (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Aug. 31, 2005, the value of foreign securities represented 8.8% of net assets. (d) At Aug. 31, 2005, security was partially or fully on loan. See Note 6 to the financial statements. (e) Cash collateral received from security lending activity is invested in short-term securities and represents 2.6% of net assets. See Note 6 to the financial statements. 3.6% of net assets is the Fund's cash equivalent position. (f) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Aug. 31, 2005, the value of these securities amounted to $8,999,122 or 1.3% of net assets. (g) At Aug. 31, 2005, the cost of securities for federal income tax purposes was $529,615,824 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $192,478,501 Unrealized depreciation (14,436,762) ----------- Net unrealized appreciation $178,041,739 ------------ The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. How to find information about the Fund's portfolio holdings (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as disclosed in its annual and semiannual shareholder reports and in its filings on Form N-Q, can be found at www.riversource.com/investments. - -------------------------------------------------------------------------------- 226 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT Fund Expenses Examples (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Aug. 31, 2005. Actual Expenses The first line of each table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The second line of each table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare each 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in each table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of each table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
RiverSource VP - Balanced Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,016.50 $4.22(c) .83% Hypothetical (5% return before expenses) $1,000 $1,021.02 $4.23(c) .83%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +1.65% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.32 and the hypothetical expenses paid would have been $4.33.
RiverSource VP - Cash Management Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,012.30 $3.55(c) .70% Hypothetical (5% return before expenses) $1,000 $1,021.68 $3.57(c) .70%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +1.23% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $3.70 and the hypothetical expenses paid would have been $3.72. - -------------------------------------------------------------------------------- 227 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
RiverSource VP - Core Bond Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,022.10 $4.84(c) .95% Hypothetical (5% return before expenses) $1,000 $1,020.42 $4.84(c) .95%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +2.21% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses will not exceed 0.95%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above.
RiverSource VP - Diversified Bond Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,022.90 $4.18(c) .82% Hypothetical (5% return before expenses) $1,000 $1,021.07 $4.18(c) .82%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +2.29% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.28 and the hypothetical expenses paid would have been $4.28.
RiverSource VP - Diversified Equity Income Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,055.20 $4.35(c) .84% Hypothetical (5% return before expenses) $1,000 $1,020.97 $4.28(c) .84%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +5.52% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.45 and the hypothetical expenses paid would have been $4.38.
RiverSource VP - Emerging Markets Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,045.30 $8.09(c) 1.57% Hypothetical (5% return before expenses) $1,000 $1,017.29 $7.98(c) 1.57%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +4.53% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.75%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $7.99 and the hypothetical expenses paid would have been $7.88. - -------------------------------------------------------------------------------- 228 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
RiverSource VP - Global Bond Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $989.40 $5.42(c) 1.08% Hypothetical (5% return before expenses) $1,000 $1,019.76 $5.50(c) 1.08%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of -1.06% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $5.52 and the hypothetical expenses paid would have been $5.60.
RiverSource VP - Global Inflation Protected Securities Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,027.60 $3.83(c) .75% Hypothetical (5% return before expenses) $1,000 $1,021.42 $3.82(c) .75%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +2.76% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses will not exceed 0.75%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those expenses presented in the table above.
RiverSource VP - Growth Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,072.50 $4.91(c) .94% Hypothetical (5% return before expenses) $1,000 $1,020.47 $4.79(c) .94%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +7.25% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.96 and the hypothetical expenses paid would have been $4.84.
RiverSource VP - High Yield Bond Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,015.70 $4.22(c) .83% Hypothetical (5% return before expenses) $1,000 $1,021.02 $4.23(c) .83%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +1.57% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.32 and the hypothetical expenses paid would have been $4.33. - -------------------------------------------------------------------------------- 229 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
RiverSource VP - Income Opportunities Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,013.90 $5.03(c) .99% Hypothetical (5% return before expenses) $1,000 $1,020.21 $5.04(c) .99%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +1.39% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses will not exceed 0.99%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those expenses presented in the table above.
RiverSource VP - International Opportunity Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,030.80 $5.43(c) 1.06% Hypothetical (5% return before expenses) $1,000 $1,019.86 $5.40(c) 1.06%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +3.08% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $5.53 and the hypothetical expenses paid would have been $5.50.
RiverSource VP - Large Cap Equity Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,033.00 $4.25(c) .83% Hypothetical (5% return before expenses) $1,000 $1,021.02 $4.23(c) .83%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +3.30% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.30 and the hypothetical expenses paid would have been $4.28.
RiverSource VP - Large Cap Value Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,011.50 $5.32(c) 1.05% Hypothetical (5% return before expenses) $1,000 $1,019.91 $5.35(c) 1.05%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +1.15% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.05%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above. - -------------------------------------------------------------------------------- 230 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
RiverSource VP - Mid Cap Growth Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,104.80 $4.35(c) .82% Hypothetical (5% return before expenses) $1,000 $1,021.07 $4.18(c) .82%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +10.48% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.10%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above.
RiverSource VP - Mid Cap Value Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period expense ratio Actual(a) N/A N/A N/A N/A Hypothetical (5% return before expenses) N/A N/A N/A N/A
(a) The values and expenses paid are not presented because the Fund does not have a full six months of history. The inception date for the Fund is May 2, 2005.
RiverSource VP - New Dimensions Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,009.60 $3.70(c) .73% Hypothetical (5% return before expenses) $1,000 $1,021.53 $3.72(c) .73%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +0.96% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $3.75 and the hypothetical expenses paid would have been $3.77.
RiverSource VP - S&P 500 Index Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,020.70 $2.55(c) .50% Hypothetical (5% return before expenses) $1,000 $1,022.68 $2.55(c) .50%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +2.07% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses will not exceed 0.50%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above. - -------------------------------------------------------------------------------- 231 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
RiverSource VP - Select Value Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,032.90 $5.89(c) 1.15% Hypothetical (5% return before expenses) $1,000 $1,019.41 $5.85(c) 1.15%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +3.29% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.15%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above.
RiverSource VP - Short Duration U.S. Government Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,013.80 $4.21(c) .83% Hypothetical (5% return before expenses) $1,000 $1,021.02 $4.23(c) .83%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +1.38% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $4.31 and the hypothetical expenses paid would have been $4.33.
RiverSource VP - Small Cap Advantage Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,044.70 $4.95(c) .96% Hypothetical (5% return before expenses) $1,000 $1,020.37 $4.89(c) .96%
(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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +4.47% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual expenses paid would have been $5.05 and the hypothetical expenses paid would have been $4.99.
RiverSource VP - Small Cap Value Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,035.10 $6.51(c) 1.27% Hypothetical (5% return before expenses) $1,000 $1,018.80 $6.46(c) 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 184/365 (to reflect the one-half year period). (b) Based on the actual return of +3.51% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. Ameriprise Financial and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until Aug. 31, 2006, unless sooner terminated at the discretion of the Board. Under this expense cap/fee waiver agreement, net expenses, before giving effect to any performance incentive adjustment, will not exceed 1.30%. If the revised fee schedule under the Administrative Services Agreement and the cap/fee waiver agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above. - -------------------------------------------------------------------------------- 232 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT
RiverSource VP - Strategy Aggressive Fund Beginning Ending Expenses account value account value paid during Annualized March 1, 2005 Aug. 31, 2005 the period(a) expense ratio Actual(b) $1,000 $1,053.90 $4.30(c) .83% Hypothetical (5% return before expenses) $1,000 $1,021.02 $4.23(c) .83%
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +5.39% for the six months ended Aug. 31, 2005. (c) Effective Oct. 1, 2005, the Fund's Board of Directors approved a change to the fee schedule under the Administrative Services Agreement between Ameriprise Financial and the Fund. If the revised fee schedule under the Administrative Services Agreement had been in place for the entire six-month period ended Aug. 31, 2005, the actual and hypothetical expenses paid would have been the same as those presented in the table above. - -------------------------------------------------------------------------------- 233 RIVERSOURCE VARIABLE PORTFOLIO FUNDS -- ANNUAL REPORT RiverSource Variable Portfolio Funds 70100 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Distributed by IDS Life Insurance Company. Member NASD. Insurance and Annuities are issued by IDS Life Insurance Company. S-6466 Y (10/05) Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Livio D. DeSimone and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services Fund - Related Fees* (a) Audit Fees. The fees paid for the years ended Aug. 31, to KPMG LLP for professional services rendered for the audits of the annual financial statements for AXP Variable Portfolio Money Market Series, Inc. were as follows: 2005 - $19,450; 2004 - $18,689 (b) Audit - Related Fees. The fees paid for the years ended Aug. 31, to KPMG LLP for additional professional services rendered in connection with the registrant's security count pursuant to Rule 17f-2 for AXP Variable Portfolio Money Market Series, Inc. were as follows: 2005 - $162; 2004 - $149 (c) Tax Fees. The fees paid for the years ended Aug. 31, to KPMG LLP for tax compliance related services for AXP Variable Portfolio Money Market Series, Inc. were as follows: 2005 - $1,700; 2004 - $1,480 (d) All Other Fees. The fees paid for the years ended Aug. 31, to KPMG LLP for additional professional services rendered in connection to proxy filing for AXP Variable Portfolio Money Market Series, Inc. were as follows: 2005 - 1,335; 2004 - None (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by KPMG LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2005 and 2004 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees paid for the years ended Aug. 31, by the registrant for non-audit services to KPMG LLP were as follows: 2005 - None; 2004 - None The fees paid for the years ended Aug. 31, to KPMG LLP by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2005 - $87,000; 2004 - $126,900 (h) 100% of the services performed in item (g) above during 2005 and 2004 were pre-approved by the audit committee. *2004 represents bills paid 9/1/03 - 8/31/04 2005 represents bills paid 9/1/04 - 8/31/05 Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) AXP Variable Portfolio - Money Market Series, Inc. By /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Principal Executive Officer Date November 1, 2005 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 November 1, 2005 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date November 1, 2005 EX-99.CODE ETH 2 code-ethics.txt CODE OF ETHICS AMERICAN EXPRESS FUNDS PREFERRED MASTER TRUST GROUP (THE AXP FUNDS) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Purpose of the Code; Covered Officers This code of ethics ("Code") for the AXP Funds (collectively, "Funds," and each, "Fund") applies to the Funds' Principal Executive Officer and Principal Financial Officer (the "Covered Officers," each of whom is identified in Exhibit A) for the purpose of promoting, in connection with his or her duties: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Funds; o compliance with laws and governmental rules and regulations applicable to the conduct of the Funds' business and their financial reporting; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Funds. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Funds. Certain conflicts of interest arise out of the relationships between Covered Officers and the Funds and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions, such as the purchase or sale of securities or other property, with the Funds because of their status as "affiliated persons" of the Funds. The compliance programs and -1- procedures of the Funds and of American Express Financial Corporation ("AEFC"), the investment adviser to the Funds, are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Funds and AEFC, of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties, whether formally for the Funds or for AEFC, or for both, be involved in establishing policies and implementing decisions that will have different effects on AEFC and the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Funds and AEFC and is consistent with the performance by the Covered Officers of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Funds. Each Covered Officer must: o not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; o not cause the Funds to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; III. Disclosure and Compliance o Each Covered Officer should familiarize himself or herself with the disclosure requirements generally applicable to the Funds; o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Funds, including to the Funds' directors and auditors, and to governmental regulators and self-regulatory organizations; o Each Covered Officer should, to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Funds and AEFC with the goal of promoting full, fair, accurate, timely, and understandable disclosure in the reports -2- and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules, and regulations. IV. Reporting and Accountability Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he or she has received, read, and understands the Code; o annually thereafter affirm to the Board that he or she has complied with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of AEFC or its affiliated persons for reports of potential violations that are made in good faith; and o notify the general counsel of the Funds ("Funds General Counsel") promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. The Funds General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers sought by a Covered Officers will be considered by the Board Effectiveness Committees (the "Committees"). The Funds will follow these procedures in investigating and enforcing this Code: o The Funds General Counsel will take all appropriate action to investigate any potential violations reported to him; o If, after such investigation, the Funds General Counsel believes that no violation has occurred, he or she is not required to take any further action; o Any matter that the Funds General Counsel believes is a violation will be reported to the Committees; o If the Committees concur that a violation has occurred, they will inform the Board, and the Board will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o The Committees will be responsible for granting waivers, as appropriate; and o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, AEFC, or any -3- affiliate of AEFC govern or purport to govern the activities of the Covered Officers, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. AEFC's code of ethics under Rule 17j-1 under the Investment Company Act is a separate requirement applying to the Covered Officers and others, and is not part of this Code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of each Fund's Board, including a majority of its independent directors. Date: July, 2003 -4- Exhibit A Persons Covered by this Code of Ethics Paula R. Meyer President Jeffrey P. Fox Treasurer -5- EX-99.CERT 3 ex99-cert.txt CERTIFICATION PURSUANT TO 270.30A-2 OF THE INVESTMENT COMPANY ACT OF 1940 Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Paula Meyer, certify that: 1. I have reviewed this report on Form N-CSR of AXP Variable Portfolio - Money Market Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 26, 2005 /s/ Paula R. Meyer -------------------------------- Name: Paula R. Meyer Title: President and Chief Executive Officer Certification Pursuant to 270.30a-2 of the Investment Company Act of 1940 I, Jeffrey Fox, certify that: 1. I have reviewed this report on Form N-CSR of AXP Variable Portfolio - Money Market Series, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of a date within 90 days prior to the filing date of this report based on such evaluation; d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: October 26, 2005 /s/ Jeffrey P. Fox -------------------------------- Name: Jeffrey P. Fox Title: Treasurer and Chief Financial Officer EX-99.906 CERT 4 ex99-906cert.txt CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION AXP Variable Portfolio - Money Market Series, Inc. (the Registrant) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that 1. This report on Form N-CSR of the Registrant (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: October 26, 2005 /s/ Paula R. Meyer ------------------ Paula R. Meyer President and Chief Executive Officer Date: October 26, 2005 /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Chief Financial Officer A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----